Finding Default? Understanding the drivers of default on contracts with farmers’ organizations under the World Food Programme Purchase for Progress Pilot

During the past two decades food assistance policy has shifted toward local or regional food purchases for in-kind delivery and away from purchases from donor countries. While recent research and policy interest has focused on whether and when local purchases can have positive impacts in developing countries and, in particular, on smallholder farmer suppliers, the primary mandate of food assistance remains the predictable, safe, and cost effective acquisition of food for needy populations. Yet, to date, little is known about what drives successful contracting with farmers’ organizations (FOs). We utilize data from the World Food Programme Purchase for Progress pilot in three East African countries to examine what features of organizations, contracts, and contexts best predict successful purchases. Drawing on related literature, we examine four possible explanations: FO characteristics, repeated experience or relationships, contract modalities and how they relate to local market price dynamics, and country contexts, We find that, across countries, local price dynamics and contracting experience are consistently important; an increase in market price between contract approval and delivery is associated with a greater likelihood of default, and the more that FOs engage in contracts the less likely they are to default. The relative importance of these features varies across countries, however, and within certain contexts some FO characteristics also play a role. Our investigation hence yields both generalizable and context-specific insights, informing an ongoing debate in the food assistance community about whether – and when - procuring from smallholder farmers results in tradeoffs or synergies.