Contract farming and smallholder incentives to produce high quality: experimental evidence from the Vietnamese dairy sector

Saenger, Christoph; Qaim, Matin; Torero, Máximo; Viceisza, Angelino

doi:10.1111/agec.12012

Cited by 95 publications

(100 citation statements)

References 46 publications

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“…This is difficult to analyze with purely observational data since variations in contractual design rarely occur in the same setting. A few recent studies used randomized field experiments to analyze the effects of changing the contract designs in existing schemes (Saenger et al, 2013;Saenger et al, 2014). Field experiments are costly and hence, implementing a larger number of experimental treatmentswhich would be required to evaluate changes in multiple contract design attributes -is hardly possible.…”

Section: Introductionmentioning

confidence: 99%

Farmers’ preferences for supermarket contracts in Kenya

Ochieng

Veettil²,

Qaim

2017

Food Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWith the modernization of global agri-food systems, the role of contract farming is increasing. This also involves smallholder farmers in developing countries. While previous studies have looked at economic impacts of contract schemes on smallholder farmers, little is known about farmers' preferences for contracting in general, and for specific contract design attributes in particular. Better understanding farmers' preferences and constraints is important to make smallholder contract schemes more viable and beneficial. This article builds on a choice experiment to analyze farmers' preferences and preference heterogeneity for contracts in Kenya. In the study region, supermarkets use contracts to source for fresh vegetables directly from preferred suppliers. However, farmer dropout rates are high. Mixed logit models are estimated to examine farmers' attitudes towards critical contract design attributes. Having to deliver their harvest to urban supermarkets is costly; hence farmers require a significant output price markup. Farmers also dislike delayed payments that are commonplace in contract schemes. The most problematic contract attribute is related to unpredictable product rejection rates, which substantially add to farmers' risk. Designing contracts with lower transaction costs, more transparent quality grading, and fairer risk-sharing clauses could enhance smallholder participation in supermarket procurement channels.

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Section: Introductionmentioning

confidence: 99%

Farmers’ preferences for supermarket contracts in Kenya

Ochieng

Veettil²,

Qaim

2017

Food Policy

Self Cite

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“…Second, CF is a strategy for fostering smallholder participation in restructured markets and value chains, thereby increasing and stabilising smallholder incomes (Bellemare, 2012). Third, contracts that allow prices of outputs as well as the terms to be decided in advance may reduce risks associated with price fluctuations (Baumann, 2000;Eaton and Shepherd, 2001), thereby providing incentive mechanisms for smallholders to allocate resources efficiently and maximize returns on factors of production (Du et al, 2013;Saenger et al, 2013).…”

mentioning

confidence: 99%

“…Information asymmetry may act as a disincentive and encourage farmers to renege on the contract (Saenger et al, 2013). The situation is exacerbated by the lack of proper enforcement mechanisms such as written contracts between the contractor and the producers.…”

mentioning

confidence: 99%

Does contract farming improve smallholder income? The case of avocado farmers in Kenya

Mwambi

Oduol

Mshenga

et al. 2016

Journal of Agribusiness in Developing and Emerging Economies

107

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.*Related content and download information correct at time of download. Mwanarusi SaidiDepartment of Crop, Horticulture and Soil Science, Egerton University, Nakuru, Kenya Abstract 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.

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“…Driven by profits, enterprises will swing, weigh, and balance on the investment level of quality and safety of the agricultural products [12]; (2) Although farmers cooperate with enterprises and accept high-level safety standards, at the initial stage, the product output will decline and the food quality is unstable [13]; (3) in contract agriculture, a certain degree of incentives and disincentives stimulate and propel both enterprises and farmers to enhance investment in products quality and safety. It can easily lead to the negative phenomena of squeezing the margins of farmers [14]; (4) many factors are also involved in whether farmers can adopt a green or organic agricultural production model, including how big the production area is; whether farmers participate in the training of agricultural products' quality and safety; whether they sign agricultural product purchases and sale contracts with agricultural industrialization organizations; whether they have received technical instruction on agricultural production; how strict the government supervision and regulations are, together with individual characteristics such as the farmer's gender, age, ability to perceive chemical pesticide residue hazards, years of schooling, and understanding of organic foods [15,16]. The above research results show that the positive interaction and coordination between enterprises and farmers can improve the quality and safety of agricultural products, but it is limited by the high risks in the consumer market of green agricultural products, which stems from the failure to foster the competition effect and contagion effect of the economies of scale and the credence goods market [17].…”

Section: Research On the Supply Of Green Agricultural Productsmentioning

confidence: 99%

The Effectiveness of the Multilateral Coalition to Develop a Green Agricultural Products Market in China Based on a TU Cooperative Game Analysis

2018

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Green agriculture can improve biodiversity, increase farmers' income, reduce agricultural non-point source pollution, solve food safety issues, and will be an important way to promote sustainable development in China. At present, the green transformation of China's agriculture has encountered a bottleneck in the development of a green agricultural product market. How to develop a green agricultural product market has become an issue worthy of in-depth study in the academia. Previous studies have already given persuasive explanations for the inability to form a green agricultural product market, but few have explored its development path from the angle of cooperation. By employing the method of a Transferable Utilities (TU) cooperative game, and based on theoretical analyses and hypothetical data, this thesis aims to prove the effectiveness of the multilateral coalition to develop the green agricultural product market in China. The results show the effectiveness of the developed model of the green agricultural product market in which producers, consumers, food safety inspection departments, and e-commerce platforms cooperate with each other. This model meets the objective needs of the times and that of the market economy. According to the marginal contribution value of participants in different coalition orders, this thesis finds 6 kinds of coalition orders. When producers and consumers of green agricultural products enter the coalition in the last place, the marginal contribution value is maximized, which reflects the importance of the supply side and demand side of green agricultural products. In other words, the development of the green agricultural product market is a dynamic process-determined by consumers and promoted by producers-in which both sides promote and restrict each other. Finally, this article presents two policy recommendations: at the national level, to clearly proposes a strategy to build a green agricultural product e-commerce platform in China and to launch a pilot application for the specialized e-commerce platform for green agricultural products in the Guizhou province.

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Contract farming and smallholder incentives to produce high quality: experimental evidence from the Vietnamese dairy sector

Cited by 95 publications

References 46 publications

Farmers’ preferences for supermarket contracts in Kenya

Farmers’ preferences for supermarket contracts in Kenya

Does contract farming improve smallholder income? The case of avocado farmers in Kenya

The Effectiveness of the Multilateral Coalition to Develop a Green Agricultural Products Market in China Based on a TU Cooperative Game Analysis

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