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Impact of contract farming on yield, costs and profitability in low-value crop: evidence from a low-income country

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  • Mishra, Ashok K.
  • Kumar, Anjani
  • Joshi, Pramod K.
  • D’Souza, Alwin

Abstract

Lentils, a low-value and highly nutritious crop, are Nepal’s largest pulse cash crop. However, the majority of the nation’s smallholders produce lentils on very small plots of land. The large gap in lentil yields between Nepal and other lentil-producing countries underscores the importance of improving yields and income of smallholders. When it comes to the financial viability of small farms, particularly in developing countries, and globalisation, contract farming (CF) may prove useful in achieving efficiency and profitability in smallholder lentil farms in Nepal. This study employs the propensity score matching approach to examine the effects of the adoption of CF on yields, profitability and costs of smallholder lentil farms in Nepal. Findings from this study reveal that contrary to popular belief, CF adoption by lentil producers in Nepal has a positive and significant effect on per-hectare revenues, profits and yield and a negative impact on variable and transportation costs. The study finds that only very smallholder lentil farms (0.01-0.05 ha) benefit from CF.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:aareaj:333737
    DOI: 10.22004/ag.econ.333737
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    3. Delelegne A. Tefera & Jos Bijman, 2021. "Economics of contracts in African food systems: evidence from the malt barley sector in Ethiopia," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-21, December.
    4. Anette Ruml & Catherine Ragasa & Matin Qaim, 2022. "Contract farming, contract design and smallholder livelihoods," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 24-43, January.
    5. 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).
    6. Balezentis, Tomas & Ribasauskiene, Erika & Morkunas, Mangirdas & Volkov, Artiom & Streimikiene, Dalia & Toma, Pierluigi, 2020. "Young farmers’ support under the Common Agricultural Policy and sustainability of rural regions: Evidence from Lithuania," Land Use Policy, Elsevier, vol. 94(C).
    7. Stefano Ciliberti & Simone Del Sarto & Angelo Frascarelli & Giulia Pastorelli & Gaetano Martino, 2020. "Contracts to Govern the Transition towards Sustainable Production: Evidence from a Discrete Choice Analysis in the Durum Wheat Sector in Italy," Sustainability, MDPI, vol. 12(22), pages 1-14, November.
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    9. Md. Bokhtiar Hasan & Md. Delowar Hossain & Abu N.M. Wahid, 2018. "Application of Forward Contract and Crop Insurance as Risk Management Tools of Agriculture: A Case Study in Bangladesh," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(12), pages 1394-1405, December.
    10. Saparova, Gulkaiyr & Khan, Ghulam Dastgir & Joshi, Niraj Prakash, 2024. "Linking farmers to markets: Assessing small-scale farmers' preferences for an official phytosanitary regime in the Kyrgyz Republic," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 696-708.
    11. Marwa, Erick & Manda, Julius, 2021. "Do Youth Farmers Benefit from Participating in Contract Farming: Evidence from French Beans Youth Farmers in Arusha, Tanzania," 2021 Conference, August 17-31, 2021, Virtual 315907, International Association of Agricultural Economists.
    12. Awal Abdul‐Rahaman & Awudu Abdulai, 2020. "Social networks, rice value chain participation and market performance of smallholder farmers in Ghana," African Development Review, African Development Bank, vol. 32(2), pages 216-227, June.
    13. Badria Hamed Al Ruqishi & Tarig Gibreel & Faical Akaichi & Lokman Zaibet & Slim Zekri, 2020. "Contractual agriculture: better partnerships between small farmers and the business sector in the sultanate of Oman," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 10(1), pages 321-335, June.
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