Compensation includes agricultural production on the basis of an agreement between the buyer and the producers. Sometimes it is a matter of leaving the buyer with the required quality and price, with the farmer agreeing to deliver at a later date. However, contracts more often describe the conditions of production and delivery of agricultural products to the buyer`s premises.  The farmer undertakes to supply the agreed quantities to a farm or livestock based on the buyer`s quality standards and delivery requirements. In return, the buyer, usually a business, agrees to buy the product, often at a price set in advance. The company also often declares itself ready to support the farmer. B for example by providing inputs, helping with soil preparation, producing advice and transporting products to its farms. The term “outgrower scheme” is sometimes used in a way that is synonymous with contract farming, most often in eastern and southern Africa. Wage moderation can be used for many agricultural products, although it is rarer in developing countries for basic necessities such as rice and maize. With regard to the issue of secondary selling, the FAO publication advocates a combination of favourable incentives and explicit sanctions for farmers. It also notes that, in certain circumstances, the cost of total infringement prevention may be much higher than losses resulting from incidental sales and that, as a result, businesses can learn to live with ancillary sales. It depends on the size of the business and the amount invested in farmers.
On the basis of the case studies, the publication again stresses the importance of an appropriate environment. However, it also concludes that, in some cases, the absence of such an environment does not necessarily constitute a binding restriction on contractual attitude, particularly where flexibility and unconventional contractual clauses can be used. While a supportive environment is important, publishers caution against incentives and government subsidies to promote inclusion, as they can misrepresent profitability and jeopardize sustainability. They also note that proponents of the concept will rarely consider the cost to the company of adopting an inclusive strategy. Prowse (2012) provides an accessible and comprehensive overview of current agricultural issues under contract in developing countries.  Several studies have given a positive message about the inclusion of small farmers and the benefits they bring to participation. For example, in a study published in 2014, Wang, Wang and Delgado study a large number of empirical studies on contract agriculture. They conclude that controlled agriculture has had a significant impact on improving the efficiency and productivity of farms and farmers` incomes.  In a summary review of econometric studies, Minot and Ronchi (2015) indicate that participants` incomes increase by 25-75%.  A more specific approach is being adopted as part of the systematic review of contract agriculture by Ton et al.
(2017). Although their study concludes that contract farming can significantly increase farmers` incomes, Ton et al. say these figures must take into account the bias of the publication and survivors. In other words, such estimates need to be revised downwards to accept that studies that show negative or no effects are less likely to be published and that the calculation of the impact of contract farming may neglect systems that do not improve or collapse the incomes of small farmers and are therefore not available for evaluation.  As with any contract, there are a number of risks associated with contract farming. Common problems are farmers who sell to a buyer other than the one with whom they contract (known as ancillary sales, out-of-contract marketing or, in the Philippines, “perch jumping”), or the use of inputs provided by the company for purposes other than those intended.