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Smallholder farmers’ dissatisfaction with contract schemes in spite of economic benefits: Issues of mistrust and lack of transparency

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  • Ruml, Anette
  • Qaim, Matin

Abstract

Contract farming is typically seen as a useful mechanism to help smallholders. However, despite economic benefits, high dropout rates from contract schemes are commonplace. We use data from Ghana to show that smallholders benefit from a resource-providing contract in terms of higher yields and profits, but most of them still regret their decision to participate and would prefer to exit if they could. The main problem is insufficient information from the company. Farmers do not understand all contract details, which leads to mistrust. We argue that lack of transparency may explain high dropout rates in Ghana and other situations too.

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  • Ruml, Anette & Qaim, Matin, 2020. "Smallholder farmers’ dissatisfaction with contract schemes in spite of economic benefits: Issues of mistrust and lack of transparency," GlobalFood Discussion Papers 301006, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    • Handle: RePEc:ags:gagfdp:301006
    DOI: 10.22004/ag.econ.301006
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    Cited by:

    1. Donkor, Emmanuel & Mbeche, Robert & Mithofer, Dagmar, 2021. "Relational contract decision of retailers in the grasshopper value chain in Uganda," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317078, German Association of Agricultural Economists (GEWISOLA).
    2. 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.
    3. 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.
    4. Iffat Abbas Abbasi & Hasbullah Ashari & Amin Jan & Ahmad Shabudin Ariffin, 2021. "Contract Farming towards Social Business: A New Paradigm," Sustainability, MDPI, vol. 13(22), pages 1-17, November.
    5. Angelo Frascarelli & Stefano Ciliberti & Gustavo Magalhães de Oliveira & Gabriele Chiodini & Gaetano Martino, 2021. "Production Contracts and Food Quality: A Transaction Cost Analysis for the Italian Durum Wheat Sector," Sustainability, MDPI, vol. 13(5), pages 1-12, March.
    6. Kopp, Thomas & Dsouza, Alwin & Mishra, Ashok K., 2024. "The relation between contract type and market power: Evidence from a high-value crop in India," Food Policy, Elsevier, vol. 127(C).
    7. repec:ags:aaea22:335470 is not listed on IDEAS
    8. Brendel Lewnsky Chuma & Cecil Togarepi & Benisiu Thomas, 2024. "Participation of smallholder farmers in cattle contract farming: a systematic review," SN Business & Economics, Springer, vol. 4(11), pages 1-23, November.
    9. Donkor, Emmanuel & Mbeche, Robert & Mithöfer, Dagmar, 2021. "Purchasing Behaviour and Relational Contract Decisions of Retailers in Grasshopper Value Chains in Uganda," 2021 Conference, August 17-31, 2021, Virtual 315105, International Association of Agricultural Economists.
    10. Evans Appiah Kissi & Christian Herzig, 2024. "Labour relations and working conditions of workers on smallholder cocoa farms in Ghana," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 41(1), pages 109-120, March.
    11. Ruml, Anette & Chrisendo, Daniel & Osabuohien, Evans & Karakara, Alhassan & Iddrisu, Abdul Malik & Lay, Jann, 2021. "Smallholders in Agro-Industrial Production: Lessons from Rural Development at New Frontiers from a Comparative Analysis of Ghana’s and Indonesia’s Oil Palm Sectors," 2021 Conference, August 17-31, 2021, Virtual 315162, International Association of Agricultural Economists.
    12. Temesgen Gelata, Fikiru & Han, Jiqin & Kipkogei Limo, Shadrack, 2024. "Impact of dairy contract farming adoption on household resilience to food insecurity evidence from Ethiopia," World Development Perspectives, Elsevier, vol. 33(C).
    13. Creppy, Priscilla & Bicknell, Kathryn & Renwick, Alan, 2024. "Understanding smallholder preferences for joint ventures in Ghana's rice sector: Improving market access through inclusive business models," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 470-481.
    14. Alper Demirdogen, 2023. "Before Privatization There was Its Impact: Sugar Factories in Turkey," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(2), pages 199-218, March.
    15. Ke-Fen Chang & Pei-Ing Wu & Je-Liang Liou & Shou-Lin Yang, 2022. "Contract Owner’s Best Commanding for Sweet Potato Farming Based on the Theory of Planned Behavior," Agriculture, MDPI, vol. 12(8), pages 1-18, August.
    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 Paul Jr. Tabe‐Ojong, 2024. "Context matters: Oil palm production and women's dietary diversity in the tropical forest of Cameroon," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(1), pages 323-340, February.
    18. Ruml, Anette & Chrisendo, Daniel & Iddrisu, Abdul Malik & Karakara, Alhassan A. & Nuryartono, Nunung & Osabuohien, Evans & Lay, Jann, 2022. "Smallholders in agro-industrial production: Lessons for rural development from a comparative analysis of Ghana’s and Indonesia’s oil palm sectors," Land Use Policy, Elsevier, vol. 119(C).
    19. Francisco Benitez‐Altuna & Valentina C. Materia & Jos Bijman & Daniel Gaitán‐Cremaschi & Jacques Trienekens, 2024. "Farmer–buyer relationships and sustainable agricultural practices in the food supply chain: The case of vegetables in Chile," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 3-30, January.
    20. Asante, Kofi Takyi, 2023. "The politics of policy failure in Ghana: The case of oil palm," World Development Perspectives, Elsevier, vol. 31(C).
    21. Villacis, Alexis H. & Kopp, Thomas & Mishra, Ashok K., 2024. "Agricultural marketing channels and market prices: Evidence from high-value crop producers in India," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1308-1321.
    22. Jieming Zhu & Chen Chen & Lie You, 2022. "Engaging Smallholders in Flower Agribusiness for Inclusive Rural Development: The Case of Yunnan, China," Sustainability, MDPI, vol. 14(5), pages 1-15, February.

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