Delays in payment adversely affect the contract seed production program for other field crops (OFC) conducted by the Department of Agriculture (DOA) Sri Lanka. This study focuses on assessing the financial viability of advancing payments for contract farmers who produces groundnut (Arachis hypogaea L.) seeds. The average price payable to contract growers for the Seed and Planting Material Development Centre(SPMDC), to be break even between the current practices of paying after the processing is over and advancing payment, was estimated using an Expected Value Model (EVM). Proportions of grade I and grade II seed and the price payable for each seed lot were estimated incorporating parameter estimates of “A” reports in a regression model. The average price payable was estimated as Rs. 119.16/kg using EVM. The percentage of ungerminated seeds, and seeds with insect and mechanical damage were significantly related (p<0.05) with grade I and grade II seed percentages. A 1% increase in the ungerminated seeds increased the payable price by Rs 0.23/kg whereas, the same level of increase of insect and mechanical damages to the seed reduced the price by Rs 2.39/kg. The results revealed that either EVM or regression model could be used in decision making on early payments for the contract growers. The estimated premium for insurance per hectare estimated with the EVM ( Rs 11,726/ha), decreased to Rs 4,920/ha in regression model.


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