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Farmers’ preferences for supermarket contracts in Kenya

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  • Ochieng, Dennis O.
  • Veettil, Prakashan C.
  • Qaim, Matin

Abstract

With the modernization of global agri-food systems, the role of contract farming increases. This also involves smallholder farmers in developing countries. While previous studies have looked at economic impacts of contract schemes on smallholder farmers, little is known about farmers’ preferences for contracting in general, and for specific contract design attributes in particular. Better understanding farmers’ preferences and constraints is important to make smallholder contract schemes more viable and beneficial. This article builds on a choice experiment to analyze farmers’ preferences and preference heterogeneity for contracts in Kenya. In the study region, supermarkets use contracts to source fresh vegetables directly from preferred suppliers. However, farmer dropout rates are high. Mixed logit models are estimated to examine farmers’ attitudes towards critical contract design attributes. Having to deliver their harvest to urban supermarkets is costly; hence farmers require a significant output price premium. Farmers also dislike delayed payments that are commonplace in contract schemes. The most problematic contract attribute is related to unpredictable product rejection rates, substantially adding to farmers’ risk. Designing contracts with lower transaction costs, more transparent quality grading, and fairer risk-sharing arrangements could enhance smallholder participation in supermarket procurement channels.

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  • Ochieng, Dennis O. & Veettil, Prakashan C. & Qaim, Matin, 2017. "Farmers’ preferences for supermarket contracts in Kenya," Food Policy, Elsevier, vol. 68(C), pages 100-111.
  • Handle: RePEc:eee:jfpoli:v:68:y:2017:i:c:p:100-111
    DOI: 10.1016/j.foodpol.2017.01.008
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    1. repec:eee:wdevel:v:99:y:2017:i:c:p:285-298 is not listed on IDEAS
    2. repec:gam:jsusta:v:10:y:2018:i:10:p:3735-:d:176246 is not listed on IDEAS
    3. Liu, Y., 2018. "Determinants and impacts of marketing channel choice among cooperatives members: Evidence from agricultural cooperative in China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275898, International Association of Agricultural Economists.
    4. Omondi, S.O., 2018. "Economic analysis of small-scale poultry production in Kenyan medium-sized cities of Kisumu and Thika," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277360, International Association of Agricultural Economists.
    5. repec:eee:jfpoli:v:85:y:2019:i:c:p:28-39 is not listed on IDEAS
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    7. repec:bla:agecon:v:50:y:2019:i:1:p:27-37 is not listed on IDEAS
    8. Ochieng, D., 2018. "Supermarket Contracts, Income, and Changing Diets of Farm Households: Panel Data Evidence from Kenya," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277423, International Association of Agricultural Economists.
    9. repec:eee:wdevel:v:112:y:2018:i:c:p:259-271 is not listed on IDEAS
    10. Dennis O. Ochieng, 2017. "Supermarket Contracts, Income, and Changing Diets of Farm Households: Panel Data Evidence from Kenya," GlobalFood Discussion Papers 260397, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    11. repec:eee:jfpoli:v:81:y:2018:i:c:p:67-81 is not listed on IDEAS
    12. Gamboa, Cindybell & Van Den Broeck, Goedele & Maertens, Miet, 2018. "Adoption of improved quinoa varieties among smallholder farmers in the Peruvian Andes," Working Papers 277984, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    13. Benali, M. & Bruemmer, B. & Afari-Sefa, V., 2018. "Small producer participation in export vegetable supply chains and poverty: evidence from different export schemes in Tanzania," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277131, International Association of Agricultural Economists.
    14. Benali, Marwan & Brümmer, Bernhard & Afari-Sefa, Victor, 2017. "Small producer participation in export vegetable supply chains and poverty: evidence from different export schemes in Tanzania," GlobalFood Discussion Papers 262583, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

    More about this item

    Keywords

    Supermarkets; Contracts; Farmers’ preferences; Choice experiment; Kenya;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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