How contract farming reshapes lives of tomato farmers

It was a chilly, fog-laden morning in Godagari upazila, Rajshahi district, in the northern region of Bangladesh. The sky remained overcast well into the day, with no sign of sunlight breaking through. The biting cold was palpable. Yet, in the midst of this subdued atmosphere, a hive of activity was taking place.

Iftekhar Ahmed, a 46-year-old farmer, stood among 30 day labourers, busy harvesting tomatoes from his fields. This is peak tomato harvest season, and Ahmed was in high spirits. On this particular day, he and his team were collecting around 10 tonnes of tomatoes from 75 bigha lease land.

Ahmed is optimistic about the fruits of his labour - quite literally. This season, he expects to earn a staggering Tk1 crore from tomato sales. After deducting expenses, his net profit is projected to be Tk25 lakh. It's a remarkable feat, considering the short timeline of just three months - from planting seeds to harvesting - and the fact that the average annual per capita income in Bangladesh hovers around Tk3 lakh ($2,500).

But this success story wasn't written overnight. Not too long ago, Ahmed and hundreds of other farmers in the region were grappling with severe losses.

"Before 2010, many of us couldn't even sell our tomatoes at production cost," Ahmed recalled. "I remember taking my tomatoes to wholesalers in Dhaka, only to have them rejected. I had no choice but to bring them back and leave them to rot by the roadside."

So, what changed?

The turning point came in 2010 when PRAN-RFL Group, Bangladesh's largest agro-processing company, introduced contract farming for tomatoes in the area. The initiative was a game-changer.

"PRAN provided us with training through the World Bank's IFC (International Finance Corporation) on how to produce high-quality tomatoes with minimal waste," Ahmed explained. "The biggest relief, however, was having a guaranteed buyer for our produce. That made all the difference."

Today, PRAN works with 10,500 contract farmers for tomatoes alone, ensuring a steady supply for its agro-processing operations and a stable income for farmers like Ahmed.

Farmer-friendly arrangement

In the same Godagari upazila, Md Hasanuzzaman Masum and Md Tariq Aziz, like Iftekhar Ahmed, were busy with the season's harvest. Masum has cultivated tomatoes on 15 bighas of land, while Aziz has planted his crop over 12 bighas. The two farmers, along with their teams, were hard at work harvesting tomatoes and preparing them for delivery to PRAN's tomato processing factory, located just 5km away.

Both Masum and Aziz credit PRAN-RFL Group's contract farming model for their success. "PRAN provides us with everything we need, from seeds to fertiliser, and ensures that they buy our produce," said Aziz.

The arrangement is flexible and farmer-friendly, allowing them to benefit from market dynamics while maintaining stability, he said.

"When tomato prices are very high at the beginning of the harvesting season, we can sell to the open market," Masum explained. "But when prices drop during peak harvesting time, PRAN steps in and buys from us at the agreed rate. This ensures we never face losses."

Iftekhar said they sold tomatoes at Tk100 a kg at the beginning of the season, but now the price has gone down to Tk10-12.

PRAN's contract farmers in Bangladesh harvest 5-6 tonnes of tomatoes per bigha, selling their produce in phases at prevailing market prices. On average, each farmer earns Tk60,000-Tk70,000 per bigha, while their production costs range from Tk25,000-Tk30,000. This translates into a profit of at least Tk30,000 per bigha - a substantial return for their efforts.

Infographic: TBS

This contract farming model not only ensures a steady income for farmers but also provides a vital buffer against the volatility of the agricultural market, especially for a highly perishable crop like tomatoes.

Tomato target: 22,000 tonnes

A study by the Food and Agriculture Organization (FAO) of the United Nations found the challenges faced by farmers in Bangladesh, revealing that 30%-35% of vegetables and fruits are lost annually due to inadequate storage and processing facilities. This lack of infrastructure often leaves farmers unable to secure fair prices for their produce. Tomatoes, in particular, have been a challenging crop, with many farmers incurring losses due to the absence of proper preservation and processing.

Recognising this issue, PRAN Group stepped in. According to AKM Moinul Islam Moin, deputy managing director of PRAN Group, the company has been producing various food products from tomatoes since 2002 to expand business that will ultimately minimise agricultural waste. In 2010, PRAN introduced contract farming for tomatoes, offering farmers both training and a guaranteed market for their produce.

"This year, approximately 10,500 contract farmers have cultivated tomatoes on 2,800 bighas of land," Moin said. "Our target is to collect 22,000 tonnes of tomatoes this season, a 10% increase from the previous year." Of this total, 18,000 tonnes are expected to come from Godagari alone.

PRAN operates two main processing facilities - the Barind Industrial Park in Rajshahi and the PRAN Agro Natore factory - where tomatoes are collected and processed into pulp. This season, the tomato collection and pulping began on 15 January and will continue as long as tomatoes are available in the fields. Around 500 local workers are directly employed in these facilities, while an additional 2,500 people are involved in related activities such as transportation and supply chain logistics.

The processing itself is a meticulous operation, said Md Kawser Ali, production head at the Barind Industrial Park in Godagari. Tomatoes are first washed using automated systems before being sent to crushing plants to produce tomato paste, he said. The paste is preserved using aseptic technology, which keeps it fresh for up to two years. This paste is later used to make products like ketchup and sauces, which are in high demand both locally and internationally.

Tk600cr market

The market for tomato-based products in Bangladesh is valued at around Tk600 crore, with PRAN holding over 40% share. PRAN's sauces and ketchup are exported to 20 countries, including the US, UK, Italy, France, and Malaysia, catering largely to Bangladeshi expatriates. The market is growing at a steady rate of 10% annually.

The demand for tomato ketchup has rapidly increased in Bangladesh, driven by urban consumers' changing tastes and dietary habits. Consequently, tomato production has grown steadily, with private sector companies establishing processing plants and adopting contract farming to boost production and reduce waste.

International organisations like the IFC and DFID have partnered with local companies to support these efforts. For instance, the Business Innovation Facility, a five-year DFID-funded market systems development project (2014–2019), implemented a sustainable contract farming model. This initiative engaged low-income, landless farmers as tomato producers and ensured a consistent supply of high-quality, affordable crops for ACI.

According to BBS data, Bangladesh's total tomato production reached nearly 4.70 lakh tonnes in FY23, with per-acre production exceeding 6 tonnes.

Challenges

However, recent changes in government policy threaten to disrupt this growth. A hike in tax on tomato, mango, pineapple, guava, and banana pulp - from 5% to 15% - could increase production costs and result in higher retail prices, potentially reducing demand, industry insiders said.

Even Iftekhar Ahmed, a farmer with an HSC-level education, understands the potential repercussions. "If consumption falls due to price hikes, production will decrease. This will hurt not just farmers but also day labourers who depend on this sector for their livelihood, earning Tk500 a day," he explained.

Godagari has transformed into a hub of year-round agricultural activity, with farmers cultivating not only paddy but also tomatoes, mangoes, beans, peanuts, guava and other crops under contract farming models. "There's hardly any unemployment here," Iftekhar proudly shared. "Our work ensures temporary jobs throughout the year, bringing hope and stability to our community."