Does Contract Farming Improve Smallholder Farmers Income? The Case of Avocado Farming in Kenya
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Contract farming is seen by its proponents as a tool for creating new market opportunities as well as for providing credit and training, leading to increased incomes of smallholder farmers. Critics, however, argue that contract farming encourages unequal bargaining relationships with agribusiness firms and is likely to pass risks to farmers, thus favouring large scale farmers at the expense of smallholders. Another school of thought contends that the effect of contract farming on the livelihoods of smallholder farmers is context specific and depends on the enterprise in question. Yet, there is a dearth of empirical evidence from such studies in Sub-Saharan Africa. We use data collected in 2012 from 100 smallholder avocado farmers in Kandara district in Kenya, obtained using multistage sampling technique, to examine the effect of contract farming on household income. Because of lack of pre-treatment data and the possibility of selection bias due to observable characteristics, we use propensity score matching technique to construct controls for the treatment group. The results indicate that contract farming has a positive and significant effect on avocado income. However, further analysis reveals that contract farming does not have any significant effect on the total household income of smallholder avocado farmers. Instead, support services such as interlinked credit and provision of information should be taken into consideration in contract farming because of their potential benefits for smallholders.Keywords:
Contract farming
Agribusiness
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This master thesis analyzes the effects of smallholder participation in contract farming on profits and adoption of new farming techniques in a tropical African context. We use a unique panel data set collected by the Danish Institute for International Studies to identify the effects of continued scheme participation for a group of smallholder coffee farmers relative to a control group of non-scheme farmers. Our results show that participation in the contract farming scheme between 2005 and 2008 has no statistically significant effect on profits from coffee production. However, project farmers respond to scheme trainings by applying more good agricultural practices in coffee production.
Contract farming
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Purpose – Contract farming (CF) is seen as a tool for creating new market opportunities hence increasing incomes for smallholder farmers. Critics, however, argue that CF is likely to pass risks to small scale farmers, thus favouring large scale farmers at the expense of smallholder farmers. The purpose of this paper is to examine the effect of CF on smallholder farmers’ income using a case study of avocado farmers in Kandara district in Kenya. Design/methodology/approach – The study uses data collected from 100 smallholder avocado farmers in Kandara district in Kenya and employs an instrumental variable model (Probit-2SLS) to control for endogeneity in participation in the contract and examine the effect of CF on household, farm and avocado income. Findings – The results indicate that participation in CF is not sufficient to improve household, farm and avocado income. Question remains regarding efficient implementation of CF arrangements to promote spill over effects on other household enterprises. Research limitations/implications – The research was carried out using farmers in Kandara district in Kenya as a case study, findings might therefore not reflect the status of CF in all countries. Originality/value – The paper contributes to the growing debate on the effect of value chain upgrading strategies such as contracting on smallholder farmers’ welfare. The form of contracting studied in this paper differs from the standard contracts in that the key stakeholders (producers) are loosely enjoined in the contract through officials of their groups.
Contract farming
Endogeneity
Multivariate probit model
Household income
Value (mathematics)
Probit
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Purpose The purpose of this paper is to examine the effect of input credit on smallholder farmers’ output and income using Masara N’Arziki support project in Northern Ghana. Design/methodology/approach A cross-sectional primary data set was used to estimate the effect of project participation on farm output, yield and income using propensity score matching (PSM) methods. Findings The findings are that project participation is skewed towards experienced farmers with big-sized households and farms. The effect of project on outcomes is somewhat unsatisfactory in the sense that participation only raises output and yield, but not income. Research limitations/implications The paper only examined the project effect on farm outcomes among smallholder farmers participating in the programme in just one operational area in the Northern region. Future research should consider all the operational areas for an informed generalisation of findings. Practical implications Greater benefits to farmers from programme participation would require project management to review the contractual arrangement so that the high cost of input credit is significantly reduced. Originality/value The paper applied the PSM to estimate the effect of project participation on farm output, yield and income among smallholder farmers which is non-existent in the literature on the study area, at least as far as we know. This paper can inform future policy on the direction and nature of support for smallholder farmers in Northern Ghana.
Value (mathematics)
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Smallholder commercialisation may be broadly defined as the situation where farmers of small individual and family farms have greater engagement with markets, either for inputs, outputs, or both.A key premise of commercialization as a development strategy is that markets provide increased incomes to households who are able to maximize the returns to land and labor through market opportunities, using earned income for household consumption in ways that are more efficient than subsistence production. T his study assesses the characteristics of smallholder farmers in Ghana using tomato and pineapple production as a case study; analyses the relationship between commercialization and smallholder land holdings; assesses the determinants of commercialization of smallholder agriculture,as well as the benefits or otherwise of smallholder farmers from commercialization; and discusses how commercialization affects household food security among smallholder farmers. Descriptive statistics, correlations and regression analysis are used to describe the characteristics of smallholder farmers and determine the key factors
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The focus of this paper was on the determinants of contract farming adoption and its impact on productivity to smallholder cotton producers in Bunda District, Tanzania. A survey of 220 contract farmers and 194 non-contract farmers was done by the researcher through personally administered questionnaires. Results from the treatment effects model show that gender of household head, household head age, experience in cotton cultivation, obtaining loan from other sources, being wage-earner, owning cattle, and owning bicycle had influence on adopting contract farming. However, education of household head, household size, off farm activities, owning motorcycle and radio had no influence on adopting contract farming. With regard to impact of contract farming adoption to productivity of smallholder cotton farmers in the investigation region, findings show that there is insignificant impact due to late supply of inputs to farmers by ginners, sprayers were not given on loan basis to farmers for spraying their farms in order to control pests and cultivation service was provided at TShs. 30,000/= upfront which was not afforded by farmers. In this case, Tanzania Cotton Board (TCB) should launch major campaign to educate farmers and ginners on the advantages of contract farming, secondly, ginners should be instructed to supply inputs (cotton seed and pesticides) to farmers timely and lastly ginners should provide sprayers and cultivation services to farmers as agreed when signing contract. Otherwise, contract farming adoption for the purpose of increasing productivity will be a nightmare.
Contract farming
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Despite heavy investment made by various organizations in Sub-Saharan Africa, to promote conservation farming, the adoption of this technology remained low. Therefore, this study was carried out to estimate the factors determining the adoption of conservation farming by smallholder farmers in Zimbabwe. The study was guided by theory of adoption. The data used in the study was collected from a survey done by ICRISAT between March and April 2010. The survey covered 416 smallholder farmers randomly selected from 15 districts where different non-governmental organizations had promoted conservation farming from 2006 to 2010.
The logit model and the maximum likelihood estimation procedures were used to analyze the data. Results from the study showed that CF was adopted by 77.4% of the participating households. Further, farming experience, access to output market, experience with conservation farming and asset ownership were found to significantly influence the adoption of conservation farming. Farming experience had adverse effects on CF adoption while access to output market and asset ownership had positive influence on the rate of adoption of conservation farming. Their elasticities were 0.956, 0.819, 1.570 and 1.326 respectively. Gender, age, education level, extension visits, family labor availability and access to input markets had no statistical significance on CF adoption. Given these results, the study recommends policy support in the creation of output markets, strengthening of existing markets, and linking farmers to output markets. In addition, promoters of conservation farming may consider targeting inexperienced farmers to practice conservation farming. This will lead to an increase in the rate of adoption of conservation farming holding everything else equal.,DAAD
Conservation Agriculture
Market access
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Determinants of smallholder tobacco contract farming participation were considered in this study. The study was motivated by the shift in Zimbabwe’s tobacco production base that used to be almost entirely large-scale commercial before the Fast Track Land Reform Programme to almost 50% now being produced by smallholder farmers. In the study, a self-administered questionnaire was used to collect data from 36 tobacco producing districts for the 2012/2013 tobacco season. Primary data was collected through visits to four of the main tobacco provinces namely Mashonaland East, Mashonaland Central, Mashonaland West and Manicaland.Data for the remaining provinces was then collected from contracted farmers selling their crop at their merchant’s premises in Harare and from non-contracted farmers selling their crop at auction floors namely Boka, FSF and Premier. Stratified random sampling technique was employed to select 140 contracted and 117 non-contract farmers from the two strata. After theoretical and empirical review on literature, data was collected on socio-economic characteristics such as age, education, off-farm income, gender, household size, farm size, experience, credit accessibility, extension services, ecological region, and distance from main road as well as asset specificity. The logistic regression model was then employed to determine the variables that influence smallholder tobacco farmers’ decision. The results indicated that among the included variables only age, household size, distance from main road, experience, access to credit, extension services and asset specificity significantly influence contract farming participation by smallholder farmers. From the results, the negative relationship between contract farming participation and access to credit, experience and distance from the main road could suggested that most smallholder farmers participate in contract farming because they lack alternatives. The policies in the study are then drawn bearing in mind that smallholder farmer may participate in contract farming only because they lack alternatives and the specific nature of tobacco producing assets. Also the study recommends for tailor-made policies that consider, for instance, geographical and ecological region differences. It is also suggested that provision of farmers with alternative sources of finance and information, help reduce farmer exploitation by large agri-business firms and possibly increase returns to farmers, thus, in turn help reduce poverty levels.,African Economic Research Consortium (AERC)
Stratified Sampling
Contract farming
Cultivation of tobacco
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This paper explores the market participation decision of smallholder farmers in Bangladesh and tries to sort out the most important factors that influence smallholder farmers' decision to participate in the output market to sell their produce in Bangladesh. To examine the relationship between the smallholder farmers' decision to participate in the market and the factors that affect these farmers' decision, a Probit regression model is employed. For this purpose this study uses primary data collected from 100 smallholder farmers of Durgapur Upazila under Rajshahi District. Main findings of this study indicate that there is moderate level of market participation by the households who decide to participate in the market with 57% sales of their produced crops. It is found that farm size, household labour, income from livestock and farm income might be the main factors that affect the smallholder farmers' decision to participate in the output market. These findings also suggest that the smallholder farmers would participate more and more in the output market, if farm size, household labour and farm income are increased in one hand and income from livestock is decreased on the other hand. The originality of this paper is that it examines the phenomenon of smallholder farmers' commercialization in Bangladesh from the perspectives of market participation, which may create an opportunity for further constructive debate. Finally, development market infrastructure, provision of marketing incentives to smallholder farmers and development of an institutionalized marketing information service are recommended to enhance commercialization of agriculture in Bangladesh.
Household income
Market system
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Contract farming is seen as one of the measures to facilitate participation of farmers in commercial agriculture, adding more value to agricultural products. Vietnam, however, shows mixed evidence on the well-known advantages of contract farming to small farmers such as reduced cost of accessing the market; access to credit information on market opportunities or new technologies, inputs, and product markets; and reduced price fluctuations. This study analyzed the impact of contract farming on farmers and identified policies that may facilitate farmers’ entry into beneficial contractual relationships. In addition to the literature review, an intensive case study of cassava contract farming was conducted. Data were analyzed using a dual-method approach—governance and institutional analysis and a pro-poor analysis. Factors found to be important to contract farming are extension services, farmer empowerment (technical and managerial), and capacity building of the farmer organization. The results from the study have direct relevanc
Contract farming
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Smallholder farmers face numerous constraints that restrict their access to markets and prevent them from taking advantage of market opportunities. This research aimed to examine the factors affecting the market participation of smallholder farmers and find ways to improve the income and livelihood of smallholder farmers, focusing on Myothit Township in Magway Region, Central Dry Zone of Myanmar. For the primary data, we surveyed 150 smallholder rice farmers which were selected using a random sampling technique. Using the Heckman two-stage selection model, we analyzed the factors influencing smallholder rice farmers’ decisions regarding participation in the agricultural market. This study revealed that the decision to participate in the rice market was dependent on different factors such as the household head age, education status, household size, total produce of rice, price of rice, household income, ownership of livestock, membership of farmer organization, access to roads, distance to market, access to extension services, and market information. The results of this study have implications as to what factors need to be addressed to encourage smallholder rice farmers to participate in the market. We suggest that Myanmar government and policymakers need to establish balanced policies for small-scale farmers and manage them in an appropriate way so that agricultural development can be induced, contributing to poverty reduction, food security, and economic development.
Market access
Household income
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