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Grower heterogeneity and the gains from contract farming: The case of Indian poultry

Author

Listed:
  • Bharat Ramaswami
  • Pratap Singh Birthal
  • P.K. Joshi

Abstract

Purpose - The purpose of this paper is to offer an empirical analysis of contract farming (CF) for poultry in the southern state of Andhra Pradesh in India. Design/methodology/approach - Through a probit equation, the factors that matter to their participation in contracting are evaluated. The estimation of income gains is considered within a treatment effects model. The risk benefits from contracting are estimated by simulating the variability of returns if the contract farmers were to be independent growers. Findings - This paper shows that the poultry integrators in Andhra Pradesh are able to appropriate almost the entire efficiency gains from contracting. Yet, the contract growers are better off with the contract. This outcome is because of grower heterogeneity and the way it is employed in the selection of contract growers. The paper also finds that contract growers do gain substantially in terms of risk reduction. Research limitations/implications - The CF literature reminds us that these arrangements often fail because of opportunistic behavior. The poultry example shows that contracting is a useful institution when processor interests are closely aligned to that of the grower. This paper describes the circumstances under which this alignment is obtained. Originality/value - First, it adds to the small and growing body of work that estimates the income gains to contract growers. Second and going beyond existing work on developing countries, this paper also addresses the risk benefits from contracting. Thirdly, this paper estimates the income gains from contracting to the processing firms.

Suggested Citation

  • Bharat Ramaswami & Pratap Singh Birthal & P.K. Joshi, 2009. "Grower heterogeneity and the gains from contract farming: The case of Indian poultry," Indian Growth and Development Review, Emerald Group Publishing, vol. 2(1), pages 56-74, April.
  • Handle: RePEc:eme:igdrpp:v:2:y:2009:i:1:p:56-74
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    Citations

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    Cited by:

    1. Pavneet Kaur & Naresh Singla, 2016. "Contract Farming In India: Models And Impacts," Working papers 2016-06-11, Voice of Research.
    2. Van den Broeck, Goedele & Swinnen, Johan & Maertens, Miet, 2017. "Global value chains, large-scale farming, and poverty: Long-term effects in Senegal," Food Policy, Elsevier, vol. 66(C), pages 97-107.
    3. repec:spr:endesu:v:19:y:2017:i:6:d:10.1007_s10668-016-9854-z is not listed on IDEAS
    4. John C. Beghin & Miet Maertens & Johan Swinnen, 2017. "Nontariff Measures and Standards in Trade and Global Value Chains," World Scientific Book Chapters,in: Nontariff Measures and International Trade, chapter 2, pages 13-38 World Scientific Publishing Co. Pte. Ltd..
    5. Briones, Roehlano M., 2015. "Small Farmers in High-Value Chains: Binding or Relaxing Constraints to Inclusive Growth?," World Development, Elsevier, vol. 72(C), pages 43-52.
    6. Shivangi Chandel & Shubhro Sarkar, 2014. "Revenue non-equivalence in multidimensional procurement auctions under asymmetry," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Ton, Giel & Vellema, Wytse & Desiere, Sam & Weituschat, Sophia & D’Haese, Marijke, 2016. "Effectiveness of contract farming for improving income of smallholder farmers-Preliminary results of a systematic review," 149th Seminar, October 27-28, 2016, Rennes, France 244792, European Association of Agricultural Economists.
    8. Schwarz, Jana & Mathijs, Erik & Maertens, Miet, 2015. "Changing patterns of global agri-food trade and virtual water flows," Working Papers 200308, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.

    More about this item

    Keywords

    Agriculture; Poultry; Vertical marketing; India;

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