Human rights criteria for making contract farming and other business models inclusive of small-scale farmers 2011, para. 29
Paragraph- Paragraph text
- The pricing mechanisms should be clear and transparent and show how prices incorporate production costs, risks and returns. While a variety of price models exist (e.g. spot market-based pricing, split pricing, fixed prices and flexible price model), in the view of the Special Rapporteur, the ideal pricing mechanism is one replicating the formula used in fair trade schemes. The producer should be guaranteed a fixed minimum price based on the need to meet production costs and to ensure a living wage for all the workers concerned (including family members, where applicable) (see A/HRC/13/33, paras. 14-17), but the prices paid by the buyer should be higher if market prices increase. This is the price-setting mechanism used, for instance, by MBSA for the acquisition of jatropha produced by smallholders in Mali. The farmers, represented by a union of cooperatives, are guaranteed a minimum price, which may increase relative to the price of diesel at the pump. This eliminates the temptation for the producer to sell goods outside the terms of the contract, and thus the need for the buyer to closely monitor the producer's operations. It therefore guarantees a stable supply for the buyer, while simultaneously reducing transaction costs linked with the contracting of a large number of small-scale suppliers. Pricing mechanisms should be subject to an independent arbitration mechanism, and farmers should be provided with the market prices of internationally traded commodities to reduce the risks associated with the asymmetry of information between the parties.
- Legal status
- Non-negotiated soft law
- Body
- Special Rapporteur on the right to food
- Document type
- Special Procedures' report
- Means of adoption
- N.A.
- Topic(s)
- Governance & Rule of Law
- Person(s) affected
- Families
- Year
- 2011
- Paragraph type
- Other
- Reference
- SR Food, Report to the UNGA (2011), A/66/262, para. 29.
- Paragraph number
- 29
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