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Contract Farming in Potato Production: An Alternative for Managing Risk and Uncertainty

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  • Tripathi, R.S.
  • Singh, Ram
  • Singh, Sube

Abstract

The cost of potato cultivation has been found 17 to 24 per cent higher under contract farming over various costs than under non-contract system, mainly due to high investments on seeds, fertilizers and machine power. Yield has been found 255.78 quintals per ha in the contract farms, which is 8.84 per cent higher over the potato yield obtained from the non-contract farms. Gross income has been Rs 99753 per ha in the contract farms as against Rs 41572 per ha in non-contract system. The sale price of potato has been found much higher (Rs 390/q) for contract than non-contract farms (Rs 177 /q). The net return over operational cost (cost ‘A1’) has been found as Rs 11882 per ha in non-contract farms, which increased more than five-times under contract farming system, it being Rs 62982 per ha. Similarly, the net return has been found five-and-a-half times more in contract than non-contract system over cost C1 (without rental value of the land). The net return over cost C2 has been observed as Rs 51866 per ha for contract farms and only Rs 800 per ha under non-contract system. Benefit-cost ratio on various costs has been found to vary from 1.40 to 1.02 for without contract and from 2.71 and 2.08 for contract farming. The impact of contract farming has been quite visible and remarkably favourable on yield and profitability of potato production at the existing pattern of resource-use and production technology prevalent in the Haryana farming system. The regression analysis has indicated significant influence of manure and fertilizers and human labour on the return of potatoes grown under contract farming situation. MVP-MFC ratios of plant protection, manure-fertilizers and human labour have been found much higher, indicating tremendous scope to increase the profitability in potato production under contract farming situation whereas in the case of non-contract system, irrigation and plant protection have shown sufficient scope to raise the crop income. The yield uncertainty has been less in contract than non-contract potato production. There has been no price uncertainty in the contract farming of potato whereas in the non-contract system, it exits to a large extent due variations in the price of potatoes sold in the market. These findings have clearly underlined the superiority of contract farming over non-contract farming system in potato production.

Suggested Citation

  • Tripathi, R.S. & Singh, Ram & Singh, Sube, 2005. "Contract Farming in Potato Production: An Alternative for Managing Risk and Uncertainty," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 18(Conferenc).
    • Handle: RePEc:ags:aerrae:58460
    DOI: 10.22004/ag.econ.58460
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    Cited by:

    1. Senakpon F. A. Dedehouanou & Johan Swinnen & Miet Maertens, 2013. "Does Contracting Make Farmers Happy? Evidence from Senegal," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59, pages 138-160, October.
    2. Kumar, Anjani & Roy, Devesh & Tripathi, Gaurav & Joshi, Pramod Kumar & Adhikari, Rajendra Prasad, 2016. "Contracting by small farmers in commodities with export potential: Assessing farm profits of lentil growers in Nepal:," IFPRI discussion papers 1533, International Food Policy Research Institute (IFPRI).
    3. Kumar, Anjani & Roy, Devesh & Trapathi, Gaurav & Joshi, Pramod Kumar & Adhikari, Rajendra Prasad, 2016. "Can contract farming increase farmers’ income and enhance adoption of food safety practices?: Evidence from remote areas of Nepal:," IFPRI discussion papers 1524, International Food Policy Research Institute (IFPRI).
    4. Pavneet Kaur & Naresh Singla & Sukhpal Singh, 2021. "Role of Contract Farming in Crop Diversification and Employment Generation: Empirical Evidence from Indian Punjab," Millennial Asia, , vol. 12(3), pages 350-366, December.
    5. Pandit, Arun & Pandey, N.K. & Rana, Rajesh K. & Lal, Barsati, 2009. "An Empirical Study of Gains from Potato Contract Farming," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 64(3), pages 1-12.
    6. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D’Souza, Alwin, 2018. "Impact of contract farming on yield, costs and profitability in low-value crop: evidence from a low-income country," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(4), October.
    7. Kumar, Anjani & Roy, Devesh & Joshi, Pramod K. & Tripathi, Gaurav & Adhikari, Rajendra P., 2016. "Impact of Contract Farming on Profits and Yield of Smallholder Farms in Nepal: An Evidence from Lentil Cultivation," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235848, Agricultural and Applied Economics Association.
    8. Vamsidhar Reddy, T.S. & Hall, Andy & Sulaiman V., Rasheed, 2010. "New Organisational and Institutional Vehicles for Managing Innovation in South Asia: Opportunities for Using Research for Technical Change and Social Gain," MERIT Working Papers 2010-054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Ruml, Anette & Qaim, Matin, 2020. "Effects of marketing contracts and resource-providing contracts in the African small farm sector: Insights from oil palm production in Ghana," World Development, Elsevier, vol. 136(C).
    10. Thomas Kopp & Ashok K. Mishra, 2022. "Perishability and market power in Nepalese food crop production," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 518-540, June.
    11. Giel Ton & Sam Desiere & Wytse Vellema & Sophia Weituschat & Marijke D'Haese, 2017. "The effectiveness of contract farming for raising income of smallholder farmers in low‐ and middle‐income countries: a systematic review," Campbell Systematic Reviews, John Wiley & Sons, vol. 13(1), pages 1-131.
    12. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D'Souza, Alwin & Tripathi, Gaurav, 2018. "How can organic rice be a boon to smallholders? Evidence from contract farming in India," Food Policy, Elsevier, vol. 75(C), pages 147-157.
    13. Felicetta Carillo & Francesco Caracciolo & Luigi Cembalo, 2017. "Do durum wheat producers benefit of vertical coordination?," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-13, December.
    14. repec:oup:apecpp:v:40:y:2018:i:3:p:353-378. is not listed on IDEAS
    15. Kumar, A. & Mishra, A. & Joshi, P. & D'Souza, A., 2018. "Impact of Contract Farming and Risk Preference on Food Security: The Case of Organic Basmati Rice Smallholders," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277008, International Association of Agricultural Economists.
    16. Yiming Zhang & Rui Yang & Kai Zhao & Xiangzhi Kong, 2023. "Fertilizer Application in Contract Farming: A Risk Analysis," Land, MDPI, vol. 12(8), pages 1-20, July.
    17. Kumar, Anjani & Mishra, Ashok K. & Saroj, Sunil & Joshi, P.K., 2019. "Impact of traditional versus modern dairy value chains on food security: Evidence from India’s dairy sector," Food Policy, Elsevier, vol. 83(C), pages 260-270.
    18. Waghmare, M N & Pawar, B N, 2022. "Effectiveness of contract farming: evidence from cultivators of onion in Maharashtra," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 35(Conferenc), December.
    19. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
    20. Narayanan, Sudha, 2014. "Profits from participation in high value agriculture: Evidence of heterogeneous benefits in contract farming schemes in Southern India," Food Policy, Elsevier, vol. 44(C), pages 142-157.

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