This paper examines the impacts of contract farming on its smallholder participants in East Java, Bali and West Nusa Tengarra (NTB). Three contracts were selected for detailed analysis: seed corn in East Java; seed rice in Bali; and broiler chickens in NTB. The analysis was informed through key informant interviews and household surveys. The report includes a review of contract farming and detailed description and analysis of the three selected contracts. Analysis results are discussed in terms of the factors that impact on smallholder participation in contract farming and the effects of contract farming on gross margins and farm employment. Smallholder age, education and participation in farm groups are identified as key factors influencing smallholder contract participation. The authors highlight the importance of local conditions and technical considerations in evaluating smallholder participation and the impacts of different contracts. Of the contracts studied the seed rice contract did not increase returns to capital. Contract benefits to smallholders are detailed including access to markets, credit or inputs and reduced smallholder risk. The authors conclude with how each contract contributes to smallholder welfare.
Download reference document (PDF 130.88 KB)
Simmons P., Winters P. and Patrick I. Agricultural Economics 33(3), 513-525.
Agricultural Economics 33(3), 513-525