IDEAS home Printed from https://ideas.repec.org/a/gam/jlands/v12y2023i8p1495-d1204531.html
   My bibliography  Save this article

Fertilizer Application in Contract Farming: A Risk Analysis

Author

Listed:
  • Yiming Zhang

    (School of Agricultural Economics and Rural Development, Renmin University of China, Beijing 100872, China)

  • Rui Yang

    (School of Agricultural Economics and Rural Development, Renmin University of China, Beijing 100872, China)

  • Kai Zhao

    (Institute of Animal Science, Chinese Academy of Agricultural Sciences, Beijing 100193, China)

  • Xiangzhi Kong

    (School of Agricultural Economics and Rural Development, Renmin University of China, Beijing 100872, China)

Abstract

To our knowledge, this is the first study in the world to incorporate risk into the contract-farming participation decision process and to examine empirical evidence on the effect of contract farming on fertilizer application, filling the research gaps in the relevant literature and providing perspectives on both chemical fertilizer reduction and organic fertilizer application behavior. To estimate the impact of contract farming on farmers’ application of chemical fertilizer and organic fertilizer, we used data on tea farmers from the Fujian and Hubei provinces in China and the recursive binary probit model. The 2SLS (two-stage least-squares) model was used to estimate the impact of the contract-farming participation rate on farmers’ organic and chemical fertilizer application intensity. The empirical results show that farmers’ risk-prevention ability had a significant negative impact on farmers’ contract-farming participation decision and rates. Contract-farming participation had a significant, positive impact on farmers’ organic and chemical fertilizer application intensity, while contract-farming participation rates had a significant, negative impact on the intensity of chemical fertilizer application by farmers. However, contract-farming participation rates did not have a significant impact on organic and chemical fertilizer application intensity. To promote fertilizer reduction and organic fertilizer incremental application, an effective strategy could be to promote farmers’ participation in contract agriculture.

Suggested Citation

  • Yiming Zhang & Rui Yang & Kai Zhao & Xiangzhi Kong, 2023. "Fertilizer Application in Contract Farming: A Risk Analysis," Land, MDPI, vol. 12(8), pages 1-20, July.
    • Handle: RePEc:gam:jlands:v:12:y:2023:i:8:p:1495-:d:1204531
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-445X/12/8/1495/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2073-445X/12/8/1495/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Adnan, Nadia & Nordin, Shahrina Md & Anwar, Abdullah, 2020. "Transition pathways for Malaysian paddy farmers to sustainable agricultural practices: An integrated exhibiting tactics to adopt Green fertilizer," Land Use Policy, Elsevier, vol. 90(C).
    3. Mary Thuo & Alexandra Bell & Boris Bravo-Ureta & Michée Lachaud & David Okello & Evelyn Okoko & Nelson Kidula & Carl Deom & Naveen Puppala, 2014. "Effects of social network factors on information acquisition and adoption of improved groundnut varieties: the case of Uganda and Kenya," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 31(3), pages 339-353, September.
    4. Chiburis, Richard C. & Das, Jishnu & Lokshin, Michael, 2012. "A practical comparison of the bivariate probit and linear IV estimators," Economics Letters, Elsevier, vol. 117(3), pages 762-766.
    5. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod Kumar & D’Souza, Alwin & Tripathi, Gaurav, 2018. "Contract farming, productivity and fertilizer usage: Empirical evidence from specialty crop production," IFPRI discussion papers 1768, International Food Policy Research Institute (IFPRI).
    6. Ligang Shi & Tao Pang & Hongjun Peng, 2023. "Production and green technology investment strategy for contract-farming supply chain under yield insurance," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 74(1), pages 225-238, January.
    7. Anette Ruml & Matin Qaim, 2021. "New evidence regarding the effects of contract farming on agricultural labor use," Agricultural Economics, International Association of Agricultural Economists, vol. 52(1), pages 51-66, January.
    8. Martin, Laura L., 1997. "Production Contracts, Risk Shifting, And Relative Performance Payments In The Pork Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(2), pages 1-12, December.
    9. Suzuki, Aya & Jarvis, Lovell S. & Sexton, Richard J., 2011. "Partial Vertical Integration, Risk Shifting, and Product Rejection in the High-Value Export Supply Chain: The Ghana Pineapple Sector," World Development, Elsevier, vol. 39(9), pages 1611-1623, September.
    10. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2012. "Smallholder Participation in Contract Farming: Comparative Evidence from Five Countries," World Development, Elsevier, vol. 40(4), pages 715-730.
    11. Sulewski, Piotr & Kłoczko-Gajewska, Anna, 2014. "Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 116(3), pages 1-8, December.
    12. 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.
    13. Wanglin Ma & Awudu Abdulai & Renan Goetz, 2018. "Agricultural Cooperatives and Investment in Organic Soil Amendments and Chemical Fertilizer in China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(2), pages 502-520.
    14. 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.
    15. Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
    16. Mai Chiem Tuyen & Prapinwadee Sirisupluxana & Isriya Bunyasiri & Pham Xuan Hung, 2022. "Perceptions, Problems and Prospects of Contract Farming: Insights from Rice Production in Vietnam," Sustainability, MDPI, vol. 14(19), pages 1-22, September.
    17. Martin, Laura L., 1997. "Production Contracts, Risk Shifting, and Relative Performance Payments in the Pork Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 29(2), pages 267-278, December.
    18. Nagaraj, N. & Chandrakanth, Mysore G. & Chengappa, P.G. & Roopa, H.S. & Chandakavate, Pramod M., 2008. "Contract farming and its implications for input-supply, linkages between markets and farmers in Karnataka," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 21(Conferenc).
    19. Wolfgang Scholl & Carsten C. Schermuly, 2020. "The Impact of Culture on Corruption, Gross Domestic Product, and Human Development," Journal of Business Ethics, Springer, vol. 162(1), pages 171-189, February.
    20. 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.
    21. Bellemare, Marc F. & Lee, Yu Na & Novak, Lindsey, 2021. "Contract farming as partial insurance," World Development, Elsevier, vol. 140(C).
    22. Bahati, Ibrahim & Martiniello, Giuliano & Abebe, Gumataw Kifle, 2022. "The implications of sugarcane contract farming on land rights, labor, and food security in the Bunyoro sub-region, Uganda," Land Use Policy, Elsevier, vol. 122(C).
    23. Murphy, Anthony, 2007. "Score tests of normality in bivariate probit models," Economics Letters, Elsevier, vol. 95(3), pages 374-379, June.
    24. Caroline Dubbert & Awudu Abdulai & Sadick Mohammed, 2023. "Contract farming and the adoption of sustainable farm practices: Empirical evidence from cashew farmers in Ghana," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 487-509, March.
    25. Tripathi, R.S. & Singh, Ram & Singh, Sube, 2005. "Contract Farming in Potato Production: An Alternative for Managing Risk and Uncertainty," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 18(Conferenc).
    26. Ton, Giel & Vellema, Wytse & Desiere, Sam & Weituschat, Sophia & D'Haese, Marijke, 2018. "Contract farming for improving smallholder incomes: What can we learn from effectiveness studies?," World Development, Elsevier, vol. 104(C), pages 46-64.
    27. Xinyue Liu & Li Zhou & Lei Lei, 2023. "Contract farming, animal epidemic disease outbreaks, and inclusive growth in rural China," Applied Economics, Taylor & Francis Journals, vol. 55(41), pages 4765-4780, September.
    28. Hueth, Brent & Wolf, Stephen & Ligon, Ethan, 2001. "Policing Mechanisms in Agricultural Contracts," Staff General Research Papers Archive 5257, Iowa State University, Department of Economics.
    29. Jussi Lankoski & Markku Ollikainen, 2008. "Bioenergy crop production and climate policies: a von Thunen model and the case of reed canary grass in Finland," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 35(4), pages 519-546, December.
    Full references (including those not matched with items on IDEAS)

    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. 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).
    2. 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.
    3. Mai Chiem Tuyen & Prapinwadee Sirisupluxana & Isriya Bunyasiri & Pham Xuan Hung, 2022. "Perceptions, Problems and Prospects of Contract Farming: Insights from Rice Production in Vietnam," Sustainability, MDPI, vol. 14(19), pages 1-22, September.
    4. Mai Chiem Tuyen & Prapinwadee Sirisupluxana & Isriya Bunyasiri & Pham Xuan Hung, 2022. "Stakeholders’ Preferences towards Contract Attributes: Evidence from Rice Production in Vietnam," Sustainability, MDPI, vol. 14(6), pages 1-21, March.
    5. Celina Schelle & Benno Pokorny, 2021. "How Inclusive Is Inclusive? A Critical Analysis of an Agribusiness Initiative in Kenya," Sustainability, MDPI, vol. 13(19), pages 1-17, October.
    6. Shinya Ikeda & Ronnie S. Natawidjaja, 2022. "The Sustainability of Contract Farming with Specialized Suppliers to Modern Retailers: Insights from Vegetable Marketing in Indonesia," Agriculture, MDPI, vol. 12(3), pages 1-11, March.
    7. Anette Ruml & Martin C. Parlasca, 2022. "In‐kind credit provision through contract farming and formal credit markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(2), pages 402-425, April.
    8. Richard Kwasi Bannor & Yaw Gyekye, 2022. "Unpacking The Nexus Between Broiler Contract Farming and Its Impact in Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2759-2786, December.
    9. Khan, Muhammad Fawad & Nakano, Yuko & Kurosaki, Takashi, 2019. "Impact of contract farming on land productivity and income of maize and potato growers in Pakistan," Food Policy, Elsevier, vol. 85(C), pages 28-39.
    10. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
    11. George Malindretos & Eleni Sardianou & Maria Briana, 2023. "Farmers’ Perception on Contract Farming in the Post-COVID Era: Empirical Study in Greece," Sustainability, MDPI, vol. 15(20), pages 1-14, October.
    12. repec:oup:apecpp:v:40:y:2018:i:3:p:379-401. is not listed on IDEAS
    13. Arouna, Aminou & Michler, Jeffrey D. & Lokossou, Jourdain C., 2021. "Contract farming and rural transformation: Evidence from a field experiment in Benin," Journal of Development Economics, Elsevier, vol. 151(C).
    14. Ayeduvor Selorm & D. B. S. Sarpong & Irene S. Egyir & Akwasi Mensah Bonsu & Henry An, 2023. "Does contract farming affect technical efficiency? Evidence from soybean farmers in Northern Ghana," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 11(1), pages 1-22, December.
    15. Otsuka, Keijiro & Ali, Mubarik, 2020. "Strategy for the development of agro-based clusters," World Development Perspectives, Elsevier, vol. 20(C).
    16. Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
    17. Viet Hoang, 2021. "Impact of Contract Farming on Farmers’ Income in the Food Value Chain: A Theoretical Analysis and Empirical Study in Vietnam," Agriculture, MDPI, vol. 11(8), pages 1-16, August.
    18. Ashish Aman Sinha & Hari Charan Behera & Ajit Kumar Behura & Braja Bandhu Swain, 2021. "Land Allocation Choice in Both Contract and Non-Contract Farming: A Study of Potato Growers in West Bengal, India," SAGE Open, , vol. 11(3), pages 21582440211, September.
    19. Ola, Oreoluwa & Menapace, Luisa, 2020. "A meta-analysis understanding smallholder entry into high-value markets," World Development, Elsevier, vol. 135(C).
    20. Li, Xiaokang & Guo, Hongdong & Li, Lin, 2016. "Contract Farming in China: Perspectives of Smallholders in Vegetable Production," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235573, Agricultural and Applied Economics Association.
    21. Viet Hoang & Vinh Nguyen, 2023. "Determinants of small farmers' participation in contract farming in developing countries: A study in Vietnam," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 836-853, July.

    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:jlands:v:12:y:2023:i:8:p:1495-:d:1204531. 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.