Reasons of engagement and impact of contract farming to smallhold farmers: A literature review
List of Authors
  • Helina Jean P. Dupa

Keyword
  • contract farming, smallhold farmers, rural farmers

Abstract
  • This paper is a review of books, journals, discussion papers, conference proceedings, and other related articles about the reason or reasons of the smallhold farmers in engaging in contract farming and evaluate its tangible and intangible impact to their socio-economic conditions. The literatures show that contracting generates more benefits and better income to farmers, especially the marginal and smallholders. It improves their productivity due to risk minimization, access to market and economies of scale. This means the farmers get effectively integrated into domestic and international markets. Contracting also gives farmers intangible and latent benefits. However, contract farming may pose the following problems like: contract biases, imperfections of the market world, input supply and crop failures, delayed produce delivery and payment, quality control and lack of negotiation power. However, the following gaps must be focused in the future studies: an in-depth evaluation on the outcomes of contract farming to rural development; accountable marketing contracts between small farmers and big firms; a systematic investigation on informal contracts and how it can be an efficient and effective market linkage for the smallholders; and, more empirical studies on contract farming in livestock and crop farming in the developing countries especially the Philippines.

Reference
  • 1. Bellemare, M. F., Lee, Y. N., & Novak, L. (2021). Contract farming as partial insurance. World Development [Online], 140(105274). doi: 10.1016/j.worlddev.2020.105274.

    2. Bijman, J. (2015). Contract farming for developing countries: an overview. A working paper written in the framework of two research projects: “Co-Innovation for Quality in African Food Chains (CoQA)”; “Competing Claims, Competing Models. Understanding (the benefits of) bio-fuel-based development models and their impact on resource use negotiations and rural livelihoods in southern Africa”.

    3. Cahyadi, E., & Waibel, H. (2013). Is contract farming in the Indonesian oil palm industry pro-poor? Journal of Southeast Asian Economies [Online], 30(1), 62-76.

    4. Costales, A., & Catelo, M. A. O. (2009). Contract farming as an institution for integrating rural smallholders in markets for livestock products in developing countries: ( II ) Results in case countries. Research Report (9), 1–11.

    5. Dupa, H. J. P. (2019). The influence of market structure on the socio-economic outcomes of the small-scale cassava farmers in Bukidnon, Philippines. PhD Thesis, Xavier University – Ateneo de Cagayan, Cagayan de Oro City.

    6. Miyata, S., Minot, N., & Hu, D. (2009). Impact of contract farming on income: linking small farmers, packers, and supermarkets in China. World Development [Online], 37(11): 1781-1790.

    7. Nguyen, A., Dzator, J., & Nadolny, A. (2015). Does contract farming improve productivity and income of farmers?: A review of theory and evidence. The Journal of Developing Areas (Special Issue) [Online], 49 (6): 532-536.

    8. Ramaswami, B., Birthal, P., & Joshi, P. K. (2009). Grower heterogeneity and the gains from contract farming: the case of Indian poultry. Indian Growth Development Review [Online], 2(1), 56-74.

    9. Rout, R. K., Mishra, R. K., Bar, N., & Mondal, D. (2013). Farmers perception on contract farming of sugarcane in Orissa: a village level study. Economic Affairs [Online], 58(4), 367-371.

    10. Singh, S. (2002). Multi-national corporations and agricultural development: a study of contract farming in the Indian Punjab. Journal of International Development [Online], 14(2): 181-193.

    11. Sriboonchitta, S., & Wiboonpoongse, A. (2008). Overview of contract farming in Thailand: lessons learned. Tokyo: Asian Development Bank Institute Discussion Paper No. 112.

    12. Swain, B. B. (2009). Contract farming and agricultural development: a case study of Orissa. The IUP Journal of Agricultural Economics, 55–70.

    13. Tacastacas, R. C. (2011). Value chain integration, cluster cooperation, and sustainable livelihoods: Bridging small farmers to high value markets. Proquest LLC.

    14. Torero, M. (2011). A framework for linking small farmers to markets. Paper presented at the International Fund for Agricultural Development Conference on new Directions for Smallholder Agriculture.

    15. Vaeth, S., Gobien, S., & Kirk, M. (2014). Life satisfaction, contract farming and property rights: evidence from Ghana. Joint Discussion Paper Series in Economics, No. 15-2014.

    16. Vidhya, P. P., & Mohana, S. M. (2015. Case study: Institutional and socio economic factors influencing the participation of Indian farmers in poultry farming. Advances in Management [Online], 8(7), 10-15.

    17. Wang, H. H., Zhang, Y., & Wu, L. (2011). Is contract farming a risk management instrument for Chinese farmers?: Evidence from a survey of vegetable farmers in Shandong. China Agricultural Economic Review [Online], 3(4), 489-504.