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Can contract farming contribute to economic improvement to smallholder farmers

Introduced by Kun-Chan Tsai, FFTC

Contract farming, viewed as an preharvest option for farmers selling yield to buyers (process factory, business middleman, or wholesalers et al.), has been conucted for years in developing and under-developed countries. Under the globalization of agricultural trade and modernizaion of agricultural value chain, how and whether do the system of smallholder farmers' contract farming improve their livelihood?

Meemken & Bellemare (2020) analyzed and compared the economic situation between contact and non-contract farmers of chosen developing countries. The results indicated insignificant income difference between groups, seeming to be contrast to intuitive understanding. The same pattern can also be found in Myannmar, across various agricultural crop species, such as sesame , rice, and black gram

For the smallholder farmers in Myannmar, the subsistence farming activity including both livestock and crop cultivation is dominant and commonly seen in rural area. The percentage of contract farming in subsistence farming rural community constitutes a limited percentage in which may provide another perspective, in addition to study design, for the statistical insignificance between contract and non-contract farmers.

Considering the instability in climate change and between-company competitiveness, the close relationship between food companies and local agricultural buyers, through contract farming to guarantee the supply of raw agricultural material, may also be found and prevalent in developed countries with industrial farming activities characterized by less labor input and massive investment input. This is a totally different view from that in developing and under-developing countries.

Meemken & Bellemare (2020) PNAS.117(1):259-264