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Improving farm-to-market linkages through contract farming: A case study of smallholder dairying in India

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  • Birthal, Pratap S.
  • Jha, Awadhesh K.
  • Tiongco, Marites
  • Narrod, Clare

Abstract

"Contract farming is emerging as an important form of vertical coordination in the agrifood supply chain in India, and its socioeconomic consequences are attracting considerable attention in public policy debates. This study is an empirical assessment of the costs and benefits of contract farming in milk using information generated through field surveys in the western state of Rajasthan. Contract farming is found to be more profitable than independent production. Its major benefits come from a reduction in marketing and transaction costs, which are otherwise much higher in the open markets. Contract farming also contributes toward improving milk yield and reducing production costs, albeit not significantly. Dairy producers also benefit from provision of services and technical advice by integrators/firms who secure milk supplies from farmers through contract. The benefits of contract farming vary by scale of operation. Economies of scale are also important determinants of competitiveness, in which large farms (both contract and independent) have lower per unit cost due to buying of inputs in bulk and greater access to markets. Smallholders, on the other hand, derive significant benefits from a reduction in marketing and transaction costs due to their participation in contract farming." from authors' abstract

Suggested Citation

  • Birthal, Pratap S. & Jha, Awadhesh K. & Tiongco, Marites & Narrod, Clare, 2008. "Improving farm-to-market linkages through contract farming: A case study of smallholder dairying in India," IFPRI discussion papers 814, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:814
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    References listed on IDEAS

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    Cited by:

    1. Kydd, Jonathon, 2015. "Ex-post evaluation study of IFPRI’s research on high-value agriculture, 1994–2010," Impact assessments 39, International Food Policy Research Institute (IFPRI).
    2. Varadan, R. Jayakumara & Kumar, Pramod, 2012. "Impact of Crop Insurance on Rice Farming in Tamil Nadu," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 0(Number 2).
    3. Henningsen, Arne & Mpeta, Daniel F. & Adem, Anwar S. & Kuzilwa, Joseph A. & Czekaj, Tomasz G., 2015. "The Effects of Contract Farming on Efficiency and Productivity of Small-Scare Sunflower Farmers in Tanzania," 2015 Conference, August 9-14, 2015, Milan, Italy 212478, International Association of Agricultural Economists.
    4. Minot, Nicholas & Sawyer, Bradley, 2016. "Contract farming in developing countries: Theory, practice, and policy implications," IFPRI book chapters,in: Innovation for inclusive value-chain development: Successes and challenges, chapter 4, pages 127-158 International Food Policy Research Institute (IFPRI).
    5. S. Mahendra Dev, 2012. "Small farmers in India: Challenges and opportunities," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-014, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. S. Mahendra Dev, 2012. "Small Farmers in India: Challenges and Opportunities," Working Papers id:5037, eSocialSciences.
    7. Nicholas Minot & Loraine Ronchi, 2014. "Contract Farming," World Bank Other Operational Studies 24249, The World Bank.
    8. Charles Kunaka, 2011. "Logistics in Lagging Regions : Overcoming Local Barriers to Global Connectivity," World Bank Publications, The World Bank, number 2543, August.
    9. Henningsen, Arne & Mpeta, Daniel F. & Adem, Anwar S. & Kuzilwa, Joseph A. & Czekaj, Tomasz G., 2015. "A Meta-Frontier Approach for Causal Inference in Productivity Analysis: The Effect of Contract Farming on Sunflower Productivity in Tanzania," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 206200, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    10. Iro Ibrahim Kutawa, 2016. "Empirical evidence on contract farming in northern Nigeria: Case study of tomato production," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 6(12), pages 240-253, December.
    11. Bernard, Tanguy & Hidrobo, Melissa & Le Port, Agnès & Rawat, Rahul, 2017. "Nutrition incentives in dairy contract farming in northern Senegal," IFPRI discussion papers 1629, International Food Policy Research Institute (IFPRI).
    12. Birthal, Pratap S. & Chand, Ramesh & Joshi, Pramod Kumar & Saxena, Raka & Rajkhowa, Pallavi & Khan, Md. Tajuddin & Khan, Mohd Arshad & Chaudhary, Khyali R., 2016. "Formal versus informal: Efficiency, inclusiveness, and financing of dairy value chains in India:," IFPRI discussion papers 1513, International Food Policy Research Institute (IFPRI).

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    Keywords

    Contract farming; smallholder dairying in India; marketing and transaction costs; milk supply chain; treatment effects model; mass balance approach;

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