Growing demand for high-value food commodities is opening up opportunities for farmers, especially smallholders to diversify towards commodities that have strong potential for higher returns to land, labour and capital. But, there is an apprehension about the capability of smallholders to participate in the market-oriented production due to their lack of access to markets, capital, inputs, and technology and extension services.

Contract farming is emerging as an important form of vertical coordination in agri-food markets in India, and its economic and social consequences are attracting considerable attention in the food policy debates. In this paper the authors have examined the effects of contract farming on milk on productivity, production and costs, prices and profitability.