New Model of Contract Farming

Dalat Gap Ltd. has been able to get a network of small farmers to produce vegetables meeting the high quality requirements of the markets in Far East by introducing a new model of contract farming with certification. It is an innovation that is expected to be replicated by other fruit and vegetable processors in Vietnam.

Even though Vietnam, with its more than 1.5 million hectares under cultivation, is the fifth largest producer of fruit and vegetables, most of the produce goes to the domestic market, and only a small proportion is exported as low-value processed products with very little going for the high-value fresh produce market. The major cause for not being successful in the export market is the unstable production and the low quality, especially farmers’ inability to meet the food safety requirements.

With a plan to reach high-value export markets for fresh vegetables, Mr. Le Van Cuong, Director of Dalat Gap Ltd. in Lam Dong province approached Danida for support under the Business Sector Programme Support (BSPS) to introduce contract farming. Contract farming is a new mode of cooperation wherein the small farmers are provided with training, technical assistance and certification support in return for supply of vegetables that meet the strict requirements of the export markets in Japan and Taiwan at an agreed upon uniform price.

The learning experiences from the successful new business model of reaching high-end export markets for fresh produce with mutual benefits to the small farmers and the exporter was shared with the members of Vietnam Fruit and Vegetable Association at a workshop discussing the challenges of making the industry globally competitive. 70 senior managers representing 50 enterprises and cooperatives from the provinces of the Mekong Delta benefited from the workshop and participated in intense focus-group discussions about the challenges and possible solutions for the fruit and vegetable producers in the export markets.

Reflecting on the focus-group discussions, Mr. Huynh Hong Ung from Thanh Long Cooperative in Tien Giang Province said: “We are inspired by the experiences of Dalat Gap and plan to introduce similar systems for our members to ensure that they can produce vegetables with uniform quality for export markets without waiting for assistance from the extension services of the government, as both the exporter and our famers can benefit from this system”.

Most of the participants were inspired by the discussions at the workshop and got convinced that innovative solutions are available to overcome the challenges they are facing in reaching the high-value export markets.


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