Contract farming: opportunity cost and trade‐offs

An important literature has established that participation in contract farming leads to higher incomes and has a number of other beneficial effects on the welfare of participating households. Yet no one has looked at the opportunity cost of and the various trade‐offs involved in participating in contract farming. I look at the relationship between participation in contract farming and income from (i) livestock, (ii) labor markets, (iii) nonfarm businesses, and (iv) agricultural sources other than livestock and contract farming and (v) unearned income. Using data from Madagascar, I find that participation in contract farming is associated with a 79% decrease in how much income per capita the average household derives from labor markets and a 47% decrease in how much income per capita it derives from nonfarm businesses, but also with a 51% increase in how much income per capita the average household derives from agricultural sources other than livestock and contract farming, possibly due to technological spillovers. Thus, even though contract farming has been shown to improve welfare in multiple ways in this context, it looks as though those gains come at the cost of an “agricultural involution” on the part of participating households, who seem to turn away from non‐agricultural activities. This has important implications for structural transformation narratives.     

Formal and informal contract farming in Mozambique: Socially embedded relations of agricultural intensification

This paper explores the role of contract farming arrangements in agricultural intensification in sub-Saharan Africa, combining secondary literature and original case material from Mozambique. The paper extends the scope of “contract farming” beyond the formal contracts between large companies and small-scale producers to include less formal credit agreements between farmers and traders. It argues that such informal contract arrangements are evidence of farmers' agency in “real markets.” In the studied cases, farmers use contract farming opportunities to intensify agricultural production by investing in irrigation and inputs. While informal contracts typically concern locally consumed crops, thus with more possibilities for side selling than formal contracts for export crops with company-controlled markets, informal contract compliance reflects closely knit social ties between the contracting parties. In both formal and informal contracts, purchasers tend to seek out producers who are already irrigating, thus obtaining gains from farmers' earlier investments. This also implies contract farming as a mechanism for accelerating social differentiation arising from unequal access to irrigation. The paper argues that the significance of informal contracts in the studied cases raises the possibility that informal contract farming by local traders plays a more important role in agrarian transformation in Africa than formal contract farming by large companies.     

Contract Farming in Sub‐Saharan Africa: A Survey of Approaches,Debates and Issues

The paper provides a selective survey of the most significant literature on the rise of contract farming in developing countries, with a focus on sub‐Saharan Africa. The review of the literature illustrates ideological debates around the meaning and significance of contract farming and whether it is good or bad for small‐scale farmers. The paper then divides the review of the literature into three key themes. First, it addresses the quantitative significance of contract farming in Africa, which may not be as important as it is often portrayed. Second, the paper highlights the substantial diversity of contract farming in Africa and problems with excessive generalizations. Third, it discusses the various drivers fuelling the spread of contract farming, which reflect new production conditions and existing constraints, tendencies and counter‐tendencies, and both economic and political responses to changes in production and market conditions in the era of liberalization and globalization. The variety of drivers is substantial and defies generalizations about the emergence of contract farming. Finally, it briefly suggests research questions that tend to be absent in most of the literature on contract farming, and which are important in order to understand the current dynamics of agrarian change and transitions to capitalism in African countries.     

New Paths to Capitalist Agricultural Production in Africa: Experiences of Ghanaian Pineapple Producer–Exporters

With the global restructuring of agri‐food markets since the 1980s, an impressive amount of scholarship has examined its impacts in African countries. However, little has been written on the emergence of local medium and large‐scale commercial farmers selling to export companies or controlling their own export marketing arrangements. This article examines Ghanaian commercial farmers producing and exporting fresh pineapples to European markets. This group of pineapple producer–exporters represents a path to capitalist agricultural production that can be conceptualized as capitalism from outside: where capital flows into the countryside, rather than accumulation occurring from above or below within the agrarian economy. The emergence of this form of agrarian capitalism is stimulated by opportunities in new high‐value agricultural export markets, but its stabilization depends on country‐specific characteristics such as rural social structures, property rights and state support. The article documents the conditions of emergence of this new group of Ghanaian capitalist farmers, the period of destabilization caused by increasing international competition that resulted in a small number of large‐scale agribusiness firms surviving, and the challenges that these agribusiness firms faced in stabilizing their capitalist agricultural production.     

The Political Economy of Contract Farming in China's Agrarian Transition

How does rural China's political economy determine the motivations and constraints that drive small farmers and agribusiness companies into contract farming and shape its practice and impact? This paper identifies three distinctive features of contract farming in China – varied impact on rural inequality, unstable contractual relations and lack of competitiveness with other alternatives – and proposes tentative explanations linked to three features in rural China's political economy: strong collective institutions, active state support for agriculture and strong domestic markets. The recent turn in China's agrarian transition towards vertical integration of agriculture with industries is, however, undermining these conditions and may move China towards more convergence with other countries. Studying contract farming in China's unique political economy context shows not only how variations in the political economy can alter its practice and impact, but also how it needs to be evaluated in comparison with competing alternatives.     

订单农业研究综述

本文系统回顾与评论了有关订单农业的文献。订单农业中公司与农户的行为决策分析是当前研究的重点．而在订单农业的适用性、订单农业与市场环境、订单农业与生态环境的互动影响等方面，尚缺乏系统的研究。     

The fragmented politics of sugarcane contract farming in Uganda

In the last decade, contract farming has regained momentum among policymakers and global development agencies as a tool to promote inclusive rural development and responsible investments. Integrating smallholders within global, regional and national agricultural value chains, we are told, represents the sine qua non for alleviating rural poverty. In Uganda, under the label of out-grower schemes, contract farming is currently undergoing massive expansion, driven especially by the boom in sugarcane cultivation. Drawing from three case studies of sugarcane contract farming in Uganda, the paper re-politicizes the debate around contract farming by looking at the power relations within which these schemes are embedded. We argue, what is seen in Uganda's expansion is a political dynamic derived both from the major dislocations and dispossessions required to establish the plantation estate and its work force, as well as from the effort to bring many smallholders using unimproved methods on land with sometimes unclear tenure arrangements into contracted arrangements for supplying sugarcane. The result has been highly contentious politics around sugar's expansion, where struggles over land dispossession merge with those around exploitative wage labour, around the loss and transformation of livelihoods, and around debt, power inequalities and environmental harm, a matrix in which state violence and co-optation are ever-present.     

Potatoes,Petty Commodity Producers and Livelihoods: Contract farming and agrarian change in Maharashtra,India

This paper explores the implications of contract farming for patterns of agrarian change in India. The paper draws on a detailed analysis of primary qualitative data from a case study of potato contract farming in the state of Maharashtra. It argues that debates on contract farming are often ideological in nature, leading to overly simplified narratives of “win–win” or “win–lose.” Instead, by combining the strengths of agrarian political economy and rural livelihood analysis, the paper offers a concrete exploration of the intersections between contract farming, livelihoods, and agrarian change. It finds that contract farming activities in the case study villages are focused on a group of petty commodity producers. However, rather than sparking dynamic new processes of accumulation among contract farmers or leading to new forms of exploitation, the paper argues that contract farming is contributing to processes of agrarian change “already under way.” These processes are intimately connected to livelihood diversification and the struggles of new classes of fragmented labour.     

Private and state-led contract farming in Zimbabwe: Accumulation,social differentiation and rural politics

Contract farming schemes often amplify existing patterns of socio-economic differentiation. In Zimbabwe, processes of differentiation were underway before the current expansion of contract farming and they have deepened through the Fast Track Land Reform process. This article examines how pre-existing dynamics of differentiation shape the forms of contract farming adopted, as well as which groups of farmers gain access and on what terms. Social differentiation partly explains the outcomes of contract farming, even if contract farming in turn results in further differentiation. This article contrasts private sector-led contract farming of tobacco and state-led financing of maize production (the ‘command agriculture’ programme) in two high-potential sites and across different forms of land use. Unlike in many other settings, contract farming in Zimbabwe is highly influenced by the state, through the regulation of private sector arrangements and the establishment of a state-led contracting programme. The state-led programme boosted maize production amongst medium-scale farmers and resulted in an embedding of patronage relations. Meanwhile, the private-led contract farming has supported a widespread boom of tobacco production, mainly amongst smallholders. We find therefore that contract farming is highly dependent on the contingent, politically mediated processes of social differentiation.     

Risk pooling cooperative games in contract farming

Contract farming can be an effective measure to deal with agricultural production risks. This study provides a two‐stage stochastic programming model to analyze farmers’ cooperation in the context of contract farming under uncertainty. It provides a fair cost allocation policy for a coalition of farmers using a stochastic linear duality approach. A fair cost allocation implies that no subset of farmers has an incentive to leave the coalition. Thus, a fair allocation policy ensures the stability of a coalition. Meanwhile, the risk pooling game is shown to have population monotonicity, which means that, every time a coalition adds a new member, each farmer within the coalition will incur a smaller cost. Hence, the population monotonicity gives an incentive for coalition expansion. Our results not only provide a simple way to design fair cost allocation policies for collaboration strategies in contract farming, but also play an important role in the sustainable development of farmers’ coalitions.     

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

In emerging markets for high‐value food products in developing countries, processing companies search for efficient ways to source raw material of high quality. One widely embraced approach is contract farming. But relatively little is known about the appropriate design of financial incentives in a small farm context. We use the example of the Vietnamese dairy sector to analyze the effectiveness of existing contracts between a processor and smallholder farmers in terms of incentivizing the production of high quality milk. A framed field experiment is conducted to evaluate the impact of two incentive instruments, a price penalty for low quality and a bonus for consistent high quality milk, on farmers’ investment in quality‐improving inputs. Statistical analysis suggests that the penalty drives farmers into higher input use, resulting in better output quality. The bonus payment generates even higher quality milk. We also find that input choice levels depend on farmers’ socio‐economic characteristics such as wealth, while individual risk preferences seem to be less important. Implications for the design of contracts with smallholders are discussed.     

Chili Growers' Experience with Contract Farming in Malaysia

The objectives of the study were (a) to examine the perception of chili growers toward contract farming (CF) and (b) to ascertain the factors that motivate the growers to participate in CF. A total of 190 chili growers within East Coast Economic Region (ECER) were interviewed. The data were analyzed using SPSS to describe the respondents' profile and CF practices. At the present moment, the chili growers have a contract agreement with the Farmers' Organization Authority of Malaysia (FOAM) and FOAM, in turn, has a contract agreement with Nestle. Factor analysis was carried out to identify latent factors that influenced chili growers in their participation in CF. These factors are extension services, access to new markets, market assurance, protection for growers, skills transfer, and indirect benefits.     

The Post‐Privatization Role of Out‐growers' Associations in Rural Capital Accumulation: Contract Farming of Sugar Cane in Kilombero,Tanzania

Contract farming is widely promoted by multilateral agencies as an engine of economic growth in developing countries. The agencies often stress the need for governments to create strong farmers' organizations that can shoulder the risks associated with contractual relationships with large corporations. However, empirical studies of farmers' organizations in contractual schemes are few and tend to dismiss the performances of these organizations for not measuring up to donor expectations. This paper seeks to offer a more unbiased examination of what farmer's organizations actually do by recounting the development of out‐growers' associations in a contract farming scheme in central Tanzania. The paper explores the new space for social organization and business operations which emerged after privatization in 1998. It is argued that under certain conditions, out‐grower associations occupy a crucial position with regard to classic agrarian questions of land, labour and capital accumulation.     

Glyphosate—A love story. Ordinary thoughtlessness and response‐ability in industrial farming

More than 8.6 billion kilograms of glyphosate have been used worldwide since the 1970s. Herbicide tolerant crops became the lynchpin of the technological revolution for large‐scale farming first in the United States and Canada, and now in Europe. Zero‐till farming, as a production scheme and a world view, is based on simplifications promoted by a handful of transnational corporations with the complicity of politicians looking for easy solutions for problems, such as climate change, erosion and the hunger in the world. At the same time, the massive use of glyphosate is branded as an endocrine disrupter, causing cancer, male sterility and infertility. It interferes with soil bacteria and acts on the equilibrium of soil fungi. Glyphosate resistant crops connect farmers to far away consumers ingesting the food they grow together with the traces of chemicals. Farmers intra‐act with the myriads of life‐forms of the soil eco‐system. How do they perceive the life in the soil, when they spray chemicals? The article explores the political dimensions of the agency of both humans and non‐humans to understand the effects of the modernizing project of zero‐till, as well as to identify spaces and scales of possibility from where alternatives can emerge.     

The rise of peri-urban aquaculture in Nigeria

The development of fish farming in Nigeria is traced from the colonial period through decades of mostly subsistence farming to large-scale commercial catfish farming today. Most African countries have encountered difficulties breaking into profitable commercial fish farming; however, Nigeria's strongly growing population at some 150 million and its very high demand for fish positioned the country on a much more strongly market-driven path based on commercial production in peri-urban areas. With investment in good management, selection of the hardy catfish for farming, development of intensively managed fish hatcheries and use of high quality fish feeds, farmers established a new model for raising fish in concrete tanks, which greatly reduced poaching and allowed farmers to get full return on their investment within one year. The paper details costs and benefits. With prospects of good profits, a number of medium-scale investors, invested in farming fish in tanks in ‘fish farming villages’ (also called fish farm estates) located in peri-urban areas near large markets, where several hundred tanks were cooperatively managed. With high demand and market prices, they were able to obtain credit, using professional business plans and security documentation required by lenders.     

What kind of labour regime is contract farming? Contracting and sharecropping in Java compared

This article compares contract farming with share tenancy, another labour regime in which smallholder farmers are bound by contract to deliver produce to another, usually more powerful party. Based on research in the Javanese village of Kaliloro, we explore contracting and sharecropping as labour regimes, each with their own specific mechanisms of surplus transfer from producers to non-producers. The cases compared are sharecropping of irrigated rice, contract farming of watermelon, and contract farming of poultry. There are important differences in how labour inputs are organized, how decisions are made, how costs are divided between landowner/contractor and farmer, and in the mechanisms of surplus transfer between the contracting parties. Exploring these differences allows us to understand and compare the role of the two labour regimes in the penetration of capital into the rural economy. Neither contract farming nor share tenancy are in themselves “win-win” or “win-lose” relationships, good or bad for small-scale cultivators. The actual balance of burdens and benefits—often contravening the provisions of written contracts or state regulation—is determined by power relations between the contracting parties.     

Twenty-five years of Living Under Contract: Contract farming and agrarian change in the developing world

The expansion of contract farming schemes through regions of the developing world in the era of the globalization of agriculture raises questions that are central to the study of agrarian political economy. Contract farming has extended the footprint of commodity production and integrated land and labour not otherwise captured in forms of direct production and marketing. 25 years after the publication of Living Under Contract: Contract Farming and Agrarian Transformation in Sub-Saharan Africa, a foundational collection edited by Peter Little and Michael Watts, it is necessary to take stock of the most prominent developments in the practice of contract farming and in the political economy literature studying it. The ultimate contribution of Living Under Contract was framing contract farming as expressing the unevenness of power relations in agriculture and grounding it in specific political, historical and social contexts that were not examined in the mainstream accounts. This introduction to the special issue revisits the questions that have remained relevant or re-emerged in the political economy literature on contract farming; it raises new questions that reflect contemporary developments and it explains how the papers in this collection contribute to the expansion of the theoretical and empirical horizons of the research on contemporary contract farming in low and middle-income countries.     

Land and contract farming: Changes in the distribution and meanings of land in Kilombero,Tanzania

In the context of contract farming of sugarcane in an outgrower scheme in Tanzania, this paper explores how the scheme has fundamentally altered people's relationships with the land over the last 50 years, in particular, since 1999, when, after three decades, the sugar parastatal was privatized. The paper reviews the literature on the mutual relationship between contract farming and land ownership and examines the scheme with a focus on long-term changes in the forms of land acquisitions and land use. We argue that the meaning and importance of landownership in contract farming schemes needs to be reassessed if participation in contract farming entails a departure from previous forms of acquiring land, generates new spatial patterns of agricultural production, and necessitates additional economic and social resources in order to transform land into an economic asset.     

“Effectively organic”: Environmental gains on conventional farms through the market?

Qualitative field research in England identified a cohort of farmers practicing what they self-defined as ‘effectively organic’ or ‘semi-organic’ farming. Utilising Ajzen's theory of planned behaviour as a framework for analysis, reducing inputs was found to be primarily a response to financial pressures, also reflected in changing substantive norms towards balancing risks and potential returns against investment, rather than optimising production. However, despite the apparent ease of converting to organic farming from low input practice, formal conversion to organic farming was not found to be the automatic outcome of this trajectory: instead, organic farming was identified as only one of a number of options for increasing the financial viability of the farming operation, which included other niche markets, pluriactivity and contracting land to and from other farmers. The affiliation of low input farmers with organic production denotes positive attitudes towards both organic farming and environmental practices, but a lack of understanding about organic farming techniques. The author argues that due to declining returns/input ratios, future conversion to organic farming may reflect the value placed on other aspects of organic production, such as increased labour, risk reduction and environmental ideals, and highlights the environmental implications of the ongoing ‘cost price squeeze’ on farming households.     

Estimating Technical Efficiency and Production Risk under Contract Farming: A Bayesian Estimation and Stochastic Dominance Methodology

We investigate production risk, technical efficiency and risk attitudes amongst contract and independent farmers. We use a Bayesian parametric approach and stochastic dominance quantile regression methods to compare technical efficiency and risk attitude of smallholders in Nepal. Using farm‐level data, we find that contract farmers appear to show lower inefficiency and lower production risk. Additionally, contract and independent farmers can increase output by reducing the scale of operation. Regardless of the commodity produced and farming arrangement (contract or independent production), we find that labour, land and other inputs are risk‐augmenting, while the role of capital is mixed. We find a second order stochastic dominance (SSD) for lentils, and first order stochastic dominance (FSD) for tomatoes, ginger and HYV paddy seed commodities. Finally, contract farmers are more risk averse than independent farmers, regardless of the commodity produced.