A contract farming regulation that sets up four types of agreements between contractor and producer was ratified by Parliamentarians last week, along with a wave of reforms to seed variety ownership and use.

The new law states all contracts will need to be in writing and include the type of agricultural produce, pricing mechanism for both input and produce, size of the production site and set the quantity and units of measurement along with customary requirements of other contractual standards.

Contract farming will occur in out-grower, centralised, multipartite and intermediary modalities, while the number of parties and how the production takes place differs depending on the type of contract.

Experts hope the decision is expected to reform the agricultural sector dealing with production issues that the previous law failed to address.

A comprehensive legal framework has not existed despite beer companies such as Heinkien having already employed some form of contract farming modalities to source malt from local farmers.

Taye Taddesse (PhD), a researcher and scientist in the agricultural sector for over two decades, underscored the necessity of creating awareness for farmers, recalling that informal agreements have been subject to default by both parties.

He observes that creating a legal framework around contractual farming is integral to increasing yield for farmers and the country.

"Capital investment risk needs to be hedged by a predictable legal framework," Taye told Fortune.

Despite averaging a GDP growth rate of around 8.9pc for the last 11 years, Ethiopia's agricultural sector has only had a 5.4pc growth rate. According to data from Ethiopian Statistical Services, Teff, Maize, Barley and Wheat account for nearly three fourth of crop production in the country.

A study by  Yifru Tafesse in March of last year indicated that the agricultural sector is challenged by the limitation of mechanization, declining soil fertility, increasing diseases and absence of robust policies.

The seed policy, which also got unanimous approval from the Parliament last week, prohibits supplying seed to local or foreign markets without receiving a certification assuring its quality from the Ethiopian Agricultural Authority (EAA).

The Authority was established two years ago to register varieties after they pass a Distinctiveness, Uniformity and Stability (DUS) standard report and fulfilment of biodiversity and quarantine requirements.

The law ushers in a provision that allows the production of foreign registered varieties with particular national interests without undergoing an adaptation trial.

Esayas Lemma, crop development head at the Ministry of Agriculture, says a series of directives and regulations are in the works to warrant breeder rights further. He observes how unregulated replication of seed variety has been off-putting to multinational corporations.