EPAR TECHNICAL REPORT #60
Fri, 03/05/2010
AUTHORS: Jon Armah, Katie Schneider, Robert Plotnick, Mary Kay Gugerty
ABSTRACT:
In recent years, product supply chains for agricultural goods have become increasingly globalized. As a result, greater numbers of smallholder farmers in South Asia (SA) and Sub-Saharan Africa (SSA) participate in global supply chains, many of them through contract farming (CF). CF is an arrangement between a farmer and a processing or marketing firm for the production and supply of agricultural products, often at predetermined prices. This literature review finds empirical evidence that demonstrates that the economic and social benefits of CF for smallholder farmers are mixed. A number of studies suggest that CF may improve farmer productivity, reduce production risk and transaction costs, and increase farmer incomes. However, critics caution that CF may undermine farmers’ relative bargaining power and increase health, environmental, and financial risk through exposure to monopsonistic markets, weak contract environments, and unfamiliar agricultural technologies. There is consensus across the literature that CF has the best outcomes for farmers when farmers have more bargaining power to negotiate the terms of the contract. In reviewing the literature on CF, we find a number of challenges to comparing studies and evaluating outcomes across contracts. This literature review summarizes empirical findings and analyses regarding contract models and best practices to increase farmers’ bargaining power and decrease contract default.
TYPE OF RESEARCH: Literature Review
RESEARCH TOPIC CATEGORY: Sustainable Agriculture & Rural Livelihoods; Agricultural Inputs & Farm Management; Labor & Time Use
POPULATION(S): Smallholder Farmers
GEOGRAPHIC FOCUS: South Asia Region and Selected Countries; Sub-Saharan Africa
Downloadable Documents
Literature Review