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Vertical Integration In Agriculture And Contract Farming

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  • Rehber, Erkan
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    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.

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    File URL: http://purl.umn.edu/25991
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    Bibliographic Info

    Paper provided by Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance in its series Working Papers with number 25991.

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    Date of creation: 1998
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    Handle: RePEc:ags:rpspwp:25991

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    Postal: Draper Hall, College of Food and Natural Resources, Amherst, MA 01003
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    Web page: http://www.umass.edu/ne165/
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    Related research

    Keywords: Vertical integration; contract farming; out-grower schemes; Agribusiness;

    References

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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.
    2. 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.
    3. Johnson, C. Scott & Foster, Kenneth A., 1994. "Risk Preferences And Contracting In The U.S. Hog Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(02), December.
    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.
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    Cited by:
    1. 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.
    2. 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, International Association of Agricultural Economists 126323, International Association of Agricultural Economists.
    3. 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., Agricultural and Applied Economics Association 150629, Agricultural and Applied Economics Association.
    4. 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), June.
    5. 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, Southern Agricultural Economics Association 35125, Southern Agricultural Economics Association.
    6. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, Elsevier, vol. 40(C), pages 14-24.
    7. H. Holly Wang & Yanping Zhang & Laping Wu, 2011. "Is contract farming a risk management instrument for Chinese farmers?: Evidence from a survey of vegetable farmers in Shandong," China Agricultural Economic Review, Emerald Group Publishing, Emerald Group Publishing, vol. 3(4), pages 489-505, November.
    8. Sartorius, Kurt & Kirsten, Johann, 2007. "A framework to facilitate institutional arrangements for smallholder supply in developing countries: An agribusiness perspective," Food Policy, Elsevier, Elsevier, vol. 32(5-6), pages 640-655.
    9. Hudson, Darren, 2000. "Contracting In Agriculture: A Primer For Farm Lenders," Research reports 15789, Mississippi State University, Department of Agricultural Economics.
    10. 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, International Association of Agricultural Economists 126196, International Association of Agricultural Economists.
    11. 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).
    12. Rehber, Erkan, 2000. "Vertical Coordination In The Agro-Food Industry And Contract Farming: A Comparative Study Of Turkey And The Usa," Research Reports, University of Connecticut, Food Marketing Policy Center 25225, University of Connecticut, Food Marketing Policy Center.

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