IDEAS home Printed from https://ideas.repec.org/a/gam/jagris/v10y2020i5p187-d362371.html
   My bibliography  Save this article

Inclusiveness of Contract Farming along the Modern Food Supply Chain: Empirical Evidence from Taiwan

Author

Listed:
  • Yir-Hueih Luh

    (Department of Agricultural Economics, National Taiwan University, Taipei City 10617, Taiwan)

Abstract

One of the debates in the literature of contract farming concerns contracting firms’ preferences over large growers and if contract farming is inclusive of smallholders. The empirical evidence was mixed, which may be due to ignoring the stylized fact that modern food supply chain is characterized by large organized retailers who often contract with farmers. The present study aims at addressing this issue by incorporating sales to supermarket and hypermarket chains as one of the determinants of contract farming participation. Based on a nationally-representative farm household data set in Taiwan, this study presents empirical evidence to support the positive effects of selling farm produce to supermarkets and/or hypermarkets on the probability of contract farming participation. However, the increase in the share of chain stores, convenience stores, as well as local grocers was found to lower the probability of contract farming participation. The results suggest the effect of organized retailing on the participation of contract farming varies with different food retailers in the modern supply chain. Moreover, based on the predicted probability from the participation-determining model, contracting firms in Taiwan are found to exhibit preferences towards large-scale growers. A further analysis of the interaction between grower’s scale and membership of farmer organizations indicates participation in the farmer organizations can effectively mitigate contracting firms’ scale bias. The significance of the moderating effect of farmer organizations suggests their important role in the inclusion of smallholders into modern food supply chain.

Suggested Citation

  • Yir-Hueih Luh, 2020. "Inclusiveness of Contract Farming along the Modern Food Supply Chain: Empirical Evidence from Taiwan," Agriculture, MDPI, vol. 10(5), pages 1-12, May.
    • Handle: RePEc:gam:jagris:v:10:y:2020:i:5:p:187-:d:362371
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2077-0472/10/5/187/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2077-0472/10/5/187/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Seo, S. Niggol & Mendelsohn, Robert, 2008. "Animal husbandry in Africa: Climate change impacts and adaptations," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 2(1), pages 1-18, March.
    2. Kurukulasuriya, Pradeep & Mendelsohn, Robert, 2008. "Crop switching as a strategy for adapting to climate change," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 2(1), pages 1-22, March.
    3. 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.
    4. 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.
    5. Miyata, Sachiko & Minot, Nicholas & Hu, Dinghuan, 2009. "Impact of Contract Farming on Income: Linking Small Farmers, Packers, and Supermarkets in China," World Development, Elsevier, vol. 37(11), pages 1781-1790, November.
    6. Ba, Hélène A. & de Mey, Yann & Thoron, Sylvie & Demont, Matty, 2019. "Inclusiveness of contract farming along the vertical coordination continuum: Evidence from the Vietnamese rice sector," Land Use Policy, Elsevier, vol. 87(C).
    7. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," 2002 ASAE 3rd International Conference, October 18-20, Jaipur, India 294714, Asian Society of Agricultural Economists (ASAE).
    8. Genius, Margarita & Pantzios, Christos J. & Tzouvelekas, Vangelis, 2006. "Information Acquisition and Adoption of Organic Farming Practices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(1), pages 1-21, April.
    9. N. Chandrasekhara Rao & R. Radhakrishna & R. K. Mishra & Venkata Reddy Kata, 2016. "Implications of New Supply Chains on the Indian Farm Economy: An Overview," India Studies in Business and Economics, in: N. Chandrasekhara Rao & R. Radhakrishna & Ram Kumar Mishra & Venkata Reddy Kata (ed.), Organised Retailing and Agri-Business, edition 1, chapter 1, pages 1-25, Springer.
    10. S. Freguin-Gresh & M. d'Haese & W. Anseeuw, 2012. "Demythifying contract farming: Evidence from rural South Africa," Agrekon, Taylor & Francis Journals, vol. 51(3), pages 24-51, September.
    11. Freguin-Gresh, Sandrine & Anseeuw, Ward & D'Haese, Marijke F.C., 2012. "Demythifying Contract Farming: Evidence from Rural South Africa," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126567, International Association of Agricultural Economists.
    12. Glover, David J., 1984. "Contract farming and smallholder outgrower schemes in less-developed countries," World Development, Elsevier, vol. 12(11-12), pages 1143-1157.
    13. 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.
    14. Jose Blandon & Spencer Henson & John Cranfield, 2009. "Small-scale farmer participation in new agri-food supply chains: Case of the supermarket supply chain for fruit and vegetables in Honduras," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(7), pages 971-984.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yun-Cih Chang & Min-Fang Wei & Yir-Hueih Luh, 2021. "Choice of Modern Food Distribution Channels and Its Welfare Effects: Empirical Evidence from Taiwan," Agriculture, MDPI, vol. 11(6), pages 1-13, May.
    2. Ming-Feng Hsieh & Yir-Hueih Luh, 2022. "Is Contract Farming with Modern Distributors Partnership for Higher Returns? Analysis of Rice Farm Households in Taiwan," Sustainability, MDPI, vol. 14(22), pages 1-16, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
    2. Maertens, Miet & Vande Velde, Katrien, 2017. "Contract-farming in Staple Food Chains: The Case of Rice in Benin," World Development, Elsevier, vol. 95(C), pages 73-87.
    3. repec:oup:apecpp:v:40:y:2018:i:3:p:353-378. is not listed on IDEAS
    4. Minot, Nicholas & Sawyer, Bradley, 2016. "Contract farming in developing countries: Theory, practice, and policy implications," IFPRI book chapters, in: Devaux, André & Torero, Maximo & Donovan, Jason & Horton, Douglas E. (ed.), Innovation for inclusive value-chain development: Successes and challenges, chapter 4, pages 127-158, International Food Policy Research Institute (IFPRI).
    5. Ba, Hélène A. & de Mey, Yann & Thoron, Sylvie & Demont, Matty, 2019. "Inclusiveness of contract farming along the vertical coordination continuum: Evidence from the Vietnamese rice sector," Land Use Policy, Elsevier, vol. 87(C).
    6. Thomas Kopp & Ashok K. Mishra, 2022. "Perishability and market power in Nepalese food crop production," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 518-540, June.
    7. Kumar, Anjani & Mishra, Ashok K. & Saroj, Sunil & Joshi, P.K., 2019. "Impact of traditional versus modern dairy value chains on food security: Evidence from India’s dairy sector," Food Policy, Elsevier, vol. 83(C), pages 260-270.
    8. repec:ags:aaea22:335470 is not listed on IDEAS
    9. Girma, Jony & Gardebroek, Cornelis, 2015. "The impact of contracts on organic honey producers' incomes in southwestern Ethiopia," Forest Policy and Economics, Elsevier, vol. 50(C), pages 259-268.
    10. Nguyen Hung Anh & Wolfgang Bokelmann & Ngo Thi Thuan & Do Thi Nga & Nguyen Van Minh, 2019. "Smallholders’ Preferences for Different Contract Farming Models: Empirical Evidence from Sustainable Certified Coffee Production in Vietnam," Sustainability, MDPI, vol. 11(14), pages 1-26, July.
    11. Shaibu Baanni Azumah & Samuel A. Donkoh & Isaac Gershon K. Ansah, 2017. "Contract farming and the adoption of climate change coping and adaptation strategies in the northern region of Ghana," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(6), pages 2275-2295, December.
    12. Adu-Gyamfi Poku & Regina Birner & Saurabh Gupta, 2018. "Making Contract Farming Arrangements Work in Africa’s Bioeconomy: Evidence from Cassava Outgrower Schemes in Ghana," Sustainability, MDPI, vol. 10(5), pages 1-21, May.
    13. Senakpon F. A. Dedehouanou & Johan Swinnen & Miet Maertens, 2013. "Does Contracting Make Farmers Happy? Evidence from Senegal," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59, pages 138-160, October.
    14. Andersson, Camilla I.M. & Kiria, Christine G. & Qaim, Matin & Rao, Elizaphan J.O., 2013. "Following up on smallholder farmers and supermarkets," GlobalFood Discussion Papers 158142, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    15. Valentinov, Vladislav & Imami, Drini & Xhoxhi, Orjon, 2024. "Contract farming in transitional economies: A stakeholder theory perspective," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 27(4), pages 633-649.
    16. Veettil, P. Chellattan & Yashodha, Y. & Johny, J., 2018. "Group contracts and sustainability - Experimental evidence from smallholder rice seed production," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277563, International Association of Agricultural Economists.
    17. Neda Trifković, 2014. "Governance Strategies and Welfare Effects: Vertical Integration and Contracts in the Catfish Sector in Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 50(7), pages 949-961, July.
    18. Johny, J. & Veettil, P.C. & Yashodha, Y., 2018. "Group contracts and sustainability - Experimental evidences from smallholder rice seed production," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276042, International Association of Agricultural Economists.
    19. Ragasa, Catherine & Lambrecht, Isabel & Kufoalor, Doreen S., 2018. "Limitations of Contract Farming as a Pro-poor Strategy: The Case of Maize Outgrower Schemes in Upper West Ghana," World Development, Elsevier, vol. 102(C), pages 30-56.
    20. Wendimu, Mengistu Assefa & Henningsen, Arne & Gibbon, Peter, 2016. "Sugarcane Outgrowers in Ethiopia: “Forced” to Remain Poor?," World Development, Elsevier, vol. 83(C), pages 84-97.
    21. 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.
    22. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D'souza, Alwin, 2016. "Impact of contracts in high yielding varieties seed production on profits and yield: The case of Nepal," Food Policy, Elsevier, vol. 62(C), pages 110-121.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jagris:v:10:y:2020:i:5:p:187-:d:362371. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.