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Impact of Contract Farming on Smallholder Poultry Farmers' Income in Kenya

Author

Listed:
  • Wainaina, Priscilla W.
  • Okello, Julius Juma
  • Nzuma, Jonathan M.

Abstract

Contract farming is a form of vertical coordination largely aimed at correcting the market failure associated with spot markets that arise due to imperfect information. However the impact of contract farming on the welfare of smallholder farmers in Kenya is not well understood. While some authors have argued that contact farming improves access to ready markets by smallholder farmers, other studies have suggested that contract farming lowers the incomes of smallholder farmers because the contractors wield greater market power over the farmers. Consequently, it is seen as a blessing by some and a necessary evil by others. This study uses a propensity score matching technique to shed light on the impact of contract farming on smallholder farmers. The study also examines the conditioners of participation in contract farming. It uses data collected from 180 smallholder poultry farmers stratified by participation in contract production. The study finds that, on average, contracted farmers earned more net revenue per bird compared to the independent farmers, by approximately 27 percent, and as such participating in contract farming could improve the welfare of these small holder poultry farmers. This finding suggests that getting smallholder commercial poultry farmers to participate in contract farming can help improve their welfare through increasing the net revenues from these birds and thereof incomes.

Suggested Citation

  • Wainaina, Priscilla W. & Okello, Julius Juma & Nzuma, Jonathan M., 2012. "Impact of Contract Farming on Smallholder Poultry Farmers' Income in Kenya," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126196, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae12:126196
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    File URL: http://purl.umn.edu/126196
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    References listed on IDEAS

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    4. Judy L. Baker, 2000. "Evaluating the Impact of Development Projects on Poverty : A Handbook for Practitioners," World Bank Publications, The World Bank, number 13949.
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    9. Warning, Matthew & Key, Nigel, 2002. "The Social Performance and Distributional Consequences of Contract Farming: An Equilibrium Analysis of the Arachide de Bouche Program in Senegal," World Development, Elsevier, vol. 30(2), pages 255-263, February.
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    12. Minot, Nicholas, 1986. "Contract Farming and Its Effect on Small Farmers in Less Developed Countries," Food Security International Development Working Papers 54740, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    13. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 01 Feb 2018.
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    Cited by:

    1. Xolile Mamba, Tangetile, 2016. "The role of contracts in improving access to credit in the smallholder livestock sector of Swaziland," Research Theses 243472, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Mwambi, Mercy & Oduol, Judith & Mshenga, Patience M. & Mwanarusi, Saidi, 2013. "Does Contract Farming Improve Smallholder Farmers Income? The Case of Avocado Farming in Kenya," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161514, African Association of Agricultural Economists (AAAE).

    More about this item

    Keywords

    Contract farming; smallholder farmers; impact; propensity score matching; poultry production; Kenya.; Agribusiness; Institutional and Behavioral Economics;

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