416
been the root cause of side selling in some countries (Eaton and Shepherd 2001;
Minot and Ngigi 2010; Mansur et al. 2009). In addition, there has been concern
regarding abrupt changes in demand or supply side factors that can cause a flourishing contract scheme to collapse, leading to a disruption in production (Reardon
and Barrett 2000). Other concerns relate to deliberate moves by some exporters to
use contracts as interim measures to stabilize supply while contemplating the
adoption of their own long-term measures to meet such an objective or contracting
large-scale producers (Minot and Ngigi 2010). Equally, sudden changes in standards may be detrimental to smallholder farmers who are incapable of upgrading
practices instantly to comply with new requirements (Minot and Ngigi 2010;
Narrod et al. 2009).
Moreover, selectivity bias has been noted across almost all contracts within
SSA. This is because buyers (processors and exporters) usually prefer to work
with medium- and large-scale farmers, and not smallholders who require more
support in terms of accessing credit, inputs and technical assistance. Socioeconomic characteristics of smallholder farmers have also been identified to influence agricultural contracts. Minten et al. (2009) found that contract growers in a
vegetable value chain in Madagascar were relatively better off than non-contracted
farmers in terms of their education and welfare levels, as well as income stability.
Maertens and Swinnen (2009) found that producers who were contracted to produce vegetables and fruits for export were either independent farmers or employed
within the export sector and had significantly higher incomes than those not working in the sector. Moreover, the literature also revealed that farmer contracts have
been effective in selected commodities (Abdulai and Birachi 2009; Barrett and
Bowne 1996).
Some scholars have identified that inclusion of smallholder farmers could be
achieved through intermediation involving a wide range of agencies such as cooperatives, village leaders and local traders, especially local buyers and sellers
(Coulter et al. 1999; Narrod et al. 2009). The rationale for this is that outsourcing
services such as input control, field visits and quality measurement can be more
effectively performed by an agent than by a foreign buyer. While possible, this
arrangement raises concerns with respect to the way agencies generate their revenues to finance contract-specific activities and the implications for farmers’
earnings.
An evaluation of contract farming involving grower schemes in Tanzania by
West (2017) reveals several challenges with respect to: (1) harmonizing the interests
and motives of actors in the public and private sector, (2) variation in levels of
investment and market set-ups, (3) variation in agroecosystems (e.g. rainfall amount
and distribution along with soil conditions) where commodities are farmed and (4)
differences between small- and large-scale producers with respect to their exposure
to risks, ability to hedge against such risks and rewards. Small producers’ incentives
to engage in these schemes seems to be diversifying and securing their livelihoods; this discourages long-term investment and commercialization in agricultural
enterprises and threatens the sustainability of contract farming and the participation
of small-scale producers.
F. T. M. Kilima and L. R. Kurwijila
been the root cause of side selling in some countries (Eaton and Shepherd 2001;
Minot and Ngigi 2010; Mansur et al. 2009). In addition, there has been concern
regarding abrupt changes in demand or supply side factors that can cause a flourishing contract scheme to collapse, leading to a disruption in production (Reardon
and Barrett 2000). Other concerns relate to deliberate moves by some exporters to
use contracts as interim measures to stabilize supply while contemplating the
adoption of their own long-term measures to meet such an objective or contracting
large-scale producers (Minot and Ngigi 2010). Equally, sudden changes in standards may be detrimental to smallholder farmers who are incapable of upgrading
practices instantly to comply with new requirements (Minot and Ngigi 2010;
Narrod et al. 2009).
Moreover, selectivity bias has been noted across almost all contracts within
SSA. This is because buyers (processors and exporters) usually prefer to work
with medium- and large-scale farmers, and not smallholders who require more
support in terms of accessing credit, inputs and technical assistance. Socioeconomic characteristics of smallholder farmers have also been identified to influence agricultural contracts. Minten et al. (2009) found that contract growers in a
vegetable value chain in Madagascar were relatively better off than non-contracted
farmers in terms of their education and welfare levels, as well as income stability.
Maertens and Swinnen (2009) found that producers who were contracted to produce vegetables and fruits for export were either independent farmers or employed
within the export sector and had significantly higher incomes than those not working in the sector. Moreover, the literature also revealed that farmer contracts have
been effective in selected commodities (Abdulai and Birachi 2009; Barrett and
Bowne 1996).
Some scholars have identified that inclusion of smallholder farmers could be
achieved through intermediation involving a wide range of agencies such as cooperatives, village leaders and local traders, especially local buyers and sellers
(Coulter et al. 1999; Narrod et al. 2009). The rationale for this is that outsourcing
services such as input control, field visits and quality measurement can be more
effectively performed by an agent than by a foreign buyer. While possible, this
arrangement raises concerns with respect to the way agencies generate their revenues to finance contract-specific activities and the implications for farmers’
earnings.
An evaluation of contract farming involving grower schemes in Tanzania by
West (2017) reveals several challenges with respect to: (1) harmonizing the interests
and motives of actors in the public and private sector, (2) variation in levels of
investment and market set-ups, (3) variation in agroecosystems (e.g. rainfall amount
and distribution along with soil conditions) where commodities are farmed and (4)
differences between small- and large-scale producers with respect to their exposure
to risks, ability to hedge against such risks and rewards. Small producers’ incentives
to engage in these schemes seems to be diversifying and securing their livelihoods; this discourages long-term investment and commercialization in agricultural
enterprises and threatens the sustainability of contract farming and the participation
of small-scale producers.
F. T. M. Kilima and L. R. Kurwijila