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Vertical Integration In Agriculture And Contract Farming

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  • Rehber, Erkan

Abstract

It has been widely argued recently that agriculture is undergoing a process of vertical integration with allied industries. One of the worldwide ways of vertical integration in agriculture is contract farming. Contract farming is a continually evolving process. Worldwide applications of contract farming have shown that the terms of contracts are shaped by their own conditions and varied from product to product. Also, each country has its own experiences. Contract farming has many advantages for both producers/growers and integrators, besides some inherent disadvantages and failures regarding its implementation. Some measures, however, could be taken to outweigh these advantages for both sides. In this study, first of all, a brief history is presented along with an explanation of contract farming concepts. Secondly, the reasons behind contract farming are discussed. And, successes and failures of contract farming are analyzed based on several research works and articles. Finally a simplified model is presented for the success of private contractual arrangements in the light of evidence taken from the experiences on the world.

Suggested Citation

  • Rehber, Erkan, 1998. "Vertical Integration In Agriculture And Contract Farming," Working Papers 25991, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    • Handle: RePEc:ags:rpspwp:25991
    DOI: 10.22004/ag.econ.25991
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    References listed on IDEAS

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    1. D. Glover, 1990. "Contract Farming And Outgrower Schemes In East And Southern Africa," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(3), pages 303-315, September.
    2. Scott Johnson, C. & Foster, Kenneth A., 1994. "Risk Preferences and Contracting In the U.S. Hog Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(2), pages 393-405, December.
    3. Glover, David J., 1987. "Increasing the benefits to smallholders from contract farming: Problems for farmers' organizations and policy makers," World Development, Elsevier, vol. 15(4), pages 441-448, April.
    4. Glover, David J., 1984. "Contract farming and smallholder outgrower schemes in less-developed countries," World Development, Elsevier, vol. 12(11-12), pages 1143-1157.
    5. Minot, Nicholas, 1986. "Contract Farming and Its Effect on Small Farmers in Less Developed Countries," Food Security International Development Working Papers 54740, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    6. Raymond J. Penn, 1958. "Tenure Innovations and Tenure Problems Associated with Vertical Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 40(5), pages 1383-1390.
    7. Raphael Trifon, 1959. "Guides for Speculation about the Vertical Integration of Agriculture with Allied Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 41(4), pages 734-746.
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    Cited by:

    1. Erkan Rehber, 2000. "Vertical Coordination In The Agro-Food Industry And Contract Farming: A Comparative Study Of Turkey And The Usa," Food Marketing Policy Center Research Reports 052, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    2. Sartorius, K & Kirsten, J, 2002. "Can Small-Scale Farmers Be Linked To Agribusiness? The Timber Experience," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 41(4).
    3. David Raba & Rafael D. Tordecilla & Pedro Copado & Angel A. Juan & Daniel Mount, 2022. "A Digital Twin for Decision Making on Livestock Feeding," Interfaces, INFORMS, vol. 52(3), pages 267-282, May.
    4. Rehber, Erkan, 2007. "A Global Overview of Contract Farming," Monographs: Applied Economics, AgEcon Search, number 259079, July.
    5. Wainaina, Priscilla W. & Okello, Julius Juma & Nzuma, Jonathan M., 2012. "Impact of Contract Farming on Smallholder Poultry Farmers’ Income in Kenya," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126323, International Association of Agricultural Economists.
    6. Bazyli Czyżewski & Agnieszka Sapa & Piotr Kułyk, 2021. "Human Capital and Eco-Contractual Governance in Small Farms in Poland: Simultaneous Confirmatory Factor Analysis with Ordinal Variables," Agriculture, MDPI, vol. 11(1), pages 1-16, January.
    7. H. Holly Wang & Yanping Zhang & Laping Wu, 2011. "Is contract farming a risk management instrument for Chinese farmers?," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 3(4), pages 489-505, November.
    8. Wainaina, Priscilla W. & Okello, Julius Juma & Nzuma, Jonathan M., 2012. "Impact of Contract Farming on Smallholder Poultry Farmers' Income in Kenya," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126196, International Association of Agricultural Economists.
    9. Hudson, Darren, 2000. "Contracting In Agriculture: A Primer For Farm Lenders," Research Reports 15789, Mississippi State University, Department of Agricultural Economics.
    10. Navajas, Roberto & Hinson, Roger A. & Pinel, Raul A., 2003. "Analyzing Linkages Between Nursery Farm Growth Rates, Structural Variables, And Firm Characteristics," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35125, Southern Agricultural Economics Association.
    11. Ashish Aman Sinha & Hari Charan Behera & Ajit Kumar Behura & Braja Bandhu Swain, 2021. "Land Allocation Choice in Both Contract and Non-Contract Farming: A Study of Potato Growers in West Bengal, India," SAGE Open, , vol. 11(3), pages 21582440211, September.
    12. Lauren C. Ponisio & Paul R. Ehrlich, 2016. "Diversification, Yield and a New Agricultural Revolution: Problems and Prospects," Sustainability, MDPI, vol. 8(11), pages 1-15, November.
    13. Sifundza, Sandile Bongani, 2019. "Contract farming and access to formal credit in South Africa: A case of small-scale sugarcane growers in the Felixton Mill area of KwaZulu-Natal," Research Theses 334774, Collaborative Masters Program in Agricultural and Applied Economics.
    14. Zhanwen Shi & Erbao Cao, 2020. "Contract farming problems and games under yield uncertainty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1210-1238, October.
    15. repec:oup:apecpp:v:40:y:2018:i:3:p:379-401. is not listed on IDEAS
    16. Bor, Özgür, 2013. "Agrarian Transformation: Power And Dominance In Markets," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1(1), pages 1-12, July.
    17. Sartorius, Kurt & Kirsten, Johann, 2007. "A framework to facilitate institutional arrangements for smallholder supply in developing countries: An agribusiness perspective," Food Policy, Elsevier, vol. 32(5-6), pages 640-655.
    18. Du, Xiaoxue & Lu, Liang & Zilberman, David, 2013. "Vertical Integration or Contract Farming on Biofuel Feedstock Production: A Technology Innovation Perspective," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150629, Agricultural and Applied Economics Association.
    19. Okello, Julius Juma & Swinton, Scott M., 2005. "Compliance with International Food Safety Standards in Kenya's Green Bean Industry: A Paired Case Study of Small and Large Family Farms," 2005 Annual meeting, July 24-27, Providence, RI 19241, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Vermeulen, Hester & Kirsten, Johann F. & Sartorius, Kurt, 2008. "Contracting arrangements in agribusiness procurement practices in South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(2), pages 1-24, June.
    21. 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.
    22. Justin Kyalo & Lawrence Njoroge, 2015. "Market Integration as a Determinant of Household Decision-Making in the Production of Roselle Plant in Mwea Sub-County," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(10), pages 249-259, October.
    23. Wainaina, Priscilla W. & Okello, Julius J. & Nzuma, Jonathan M., 2014. "Blessing or Evil? Contract Farming, Smallholder Poultry Production and Household Welfare in Kenya," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 53(4), pages 1-22, November.
    24. Mansur, Kasim & Tola, Mansur & Ationg, Romzi, 2009. "Contract Farming System: A Tool to Tranforming Rural Society in Sabah," MPRA Paper 13271, University Library of Munich, Germany.
    25. Zhanwen Shi & Erbao Cao, 2021. "Risk pooling cooperative games in contract farming," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(1), pages 117-139, March.

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