Contract Farming and Poverty Reduction: the Case of Organic Rice Contract Farming in Thailand

Contract farming is emerging as a promising tool to facilitate transformation from subsistence to commercial agriculture. It also facilitates adoption of high-value crops such as organically grown crops. Using data from a survey of 445 organic rice contract farmers and conventional rice non-contract farmers in Thailand, the paper adopts the profit frontier analysis and counterfactual analysis to assess the profitability and profit efficiency of farms at different scales of operation.

The results show that organic rice contract farming is more profitable than conventional non-contract farming by a significant margin for all scales of operation. The findings reveal that a combination of contract and organic farming is effective in improving the profitability and efficiency of small-scale organic rice farmers. Moreover, it reveals that small farms are more profitable and efficient than larger farms. Beyond financial benefits, if the potential environmental benefits, e.g. zero leakage of agro-chemicals, and health benefits, e.g. non-exposure to pesticides of organic agriculture are included, the total economic returns would be greater.

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