Contract farming configuration: Smallholders'preferences for contract design atrributes

G.K. Abebe, J. Bijman, R.G.M. Kemp, S.W.F. Omta, A. Tsegaye

Research output: Contribution to journalArticleAcademicpeer-review

73 Citations (Scopus)

Abstract

While Contract Farming (CF) can enhance smallholders’ income in developing countries, empirical research on the motivation of smallholders to participate in CF is scarce. This paper explores farmer preferences for particular contract design attributes. We combined analytical hierarchy process and discrete choice experiments to investigate the importance of contract design attributes. On the basis of data collected among potato farmers in Ethiopia, we found that input market uncertainty is more important than output market uncertainty in smallholders’ decision to participate. Farmers tend to minimize their risk by opting for the buyer firm above the state and NGOs as providers of seed, inputs, and technical assistance. The results imply that the success of a CF scheme depends on the willingness of the firm to incorporate the preferred contract design attributes. Institutional intervention in the input market could induce agribusiness firms to offer attractive contracts for smallholders.
Original languageEnglish
Pages (from-to)14-24
JournalFood Policy
Volume40
DOIs
Publication statusPublished - 2013

Keywords

  • agricultural extension
  • procurement practices
  • developing-countries
  • incentive contracts
  • farmers preferences
  • choice experiments
  • political-economy
  • rural-development
  • conjoint-analysis
  • formal contracts

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