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Improving farm-to-market linkages through contract farming: A case study of smallholder dairying in India

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Author Info

  • Birthal, Pratap S.
  • Jha, Awadhesh K.
  • Tiongco, Marites
  • Narrod, Clare

Abstract

"Contract farming is emerging as an important form of vertical coordination in the agrifood supply chain in India, and its socioeconomic consequences are attracting considerable attention in public policy debates. This study is an empirical assessment of the costs and benefits of contract farming in milk using information generated through field surveys in the western state of Rajasthan. Contract farming is found to be more profitable than independent production. Its major benefits come from a reduction in marketing and transaction costs, which are otherwise much higher in the open markets. Contract farming also contributes toward improving milk yield and reducing production costs, albeit not significantly. Dairy producers also benefit from provision of services and technical advice by integrators/firms who secure milk supplies from farmers through contract. The benefits of contract farming vary by scale of operation. Economies of scale are also important determinants of competitiveness, in which large farms (both contract and independent) have lower per unit cost due to buying of inputs in bulk and greater access to markets. Smallholders, on the other hand, derive significant benefits from a reduction in marketing and transaction costs due to their participation in contract farming." from authors' abstract

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 814.

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Date of creation: 2008
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Handle: RePEc:fpr:ifprid:814

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Keywords: Contract farming; smallholder dairying in India; marketing and transaction costs; milk supply chain; treatment effects model; mass balance approach;

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References

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  1. Delgado, Christopher L. & Rosegrant, Mark W. & Steinfeld, Henning & Ehui, Simeon K. & Courbois, Claude, 1999. "Livestock to 2020: the next food revolution," 2020 vision briefs 61, International Food Policy Research Institute (IFPRI).
  2. Birthal, Pratap S. & Joshi, P. K. & Gulati, Ashok, 2005. "Vertical coordination in high-value commodities," MTID discussion papers 85, International Food Policy Research Institute (IFPRI).
  3. Holloway, Garth & Nicholson, Charles & Delgado, Chris & Staal, Steve & Ehui, Simeon, 2000. "Agroindustrialization through institutional innovation: Transaction costs, cooperatives and milk-market development in the east-African highlands," Agricultural Economics, Blackwell, vol. 23(3), pages 279-288, September.
  4. Patrick, Ian, 2004. "Contract farming in Indonesia: Smallholders and agribusiness working together," Technical Reports 113792, Australian Centre for International Agricultural Research.
  5. Ramaswami, Bharat & Birthal, Pratap Singh & Joshi, P.K., 2006. "Efficiency and distribution in contract farming: the case of Indian poultry growers," MTID discussion papers 91, International Food Policy Research Institute (IFPRI).
  6. Delgado, Christopher L. & Narrod, Clare A. & Tiongco, Marites M. & Barros, Geraldo Sant'Ana de Camargo & Catelo, Maria Angeles & Costales, Achilles & Mehta, Rajesh & Naranong, Viroj & Poapongsakorn, N, 2008. "Determinants and implications of the growing scale of livestock farms in four fast-growing developing countries:," Research reports 157, International Food Policy Research Institute (IFPRI).
  7. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.
  8. Davis, Junior, 2006. "How can the poor benefit from the growing markets for high value agricultural products?," MPRA Paper 26048, University Library of Munich, Germany.
  9. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," World Development, Elsevier, vol. 30(9), pages 1621-1638, September.
  10. Joshi, P.K. & Gulati, Ashok & Birthal, Pratap S. & Tewari, Laxmi, 2003. "Agriculture diversification in South Asia," MSSD discussion papers 57, International Food Policy Research Institute (IFPRI).
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Cited by:
  1. S. Mahendra Dev, 2012. "Small farmers in India: Challenges and opportunities," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-014, Indira Gandhi Institute of Development Research, Mumbai, India.
  2. Charles Kunaka, 2011. "Logistics in Lagging Regions : Overcoming Local Barriers to Global Connectivity," World Bank Publications, The World Bank, number 2543, October.
  3. S. Mahendra Dev, 2012. "Small Farmers in India: Challenges and Opportunities," Working Papers id:5037, eSocialSciences.
  4. Varadan, R. Jayakumara & Kumar, Pramod, 2012. "Impact of Crop Insurance on Rice Farming in Tamil Nadu," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 25(2).

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