Contribution to Rural Development

Literature in the early 1990s indicated contract farming had not done very well or even failed in Thailand (Glover 1992; also cited by Baumann, 2000), presenting an inaccurate picture when considering the relationships between specific company contracts and farmers or groups. Farmers do seek favorable terms that they perceive to be better for them. In a broader sense, contract farming in Thailand, especially in the North, had been increasing prior to the economic crisis of 1997. The trend continued after the economic recovery, as confirmed by expansion of agro-industrial firms and production areas.

Contract farming has been a key element of the Thai Government's development plan, reflecting a strategy of “private-led integrated agricultural development” (Glover 1992, in Singh 2004; Wiboonpongse et al. 1998). However, Siamwalla (1996) stated that in the past, the government has relied too much on the private sector to provide new technology through contract farming. This was successful in some cases, but not all. Regardless, the private sector in Thailand has played a significant if not leading role, especially when interacting with farmers (e.g., the use of fertilizers, seed, and chemicals) due to the profit motives of input suppliers and contractors.

Government agencies should play a role in directing and facilitating the private sector's implementation of technological transfer for fair business, as it had successfully done with potato contracts. Universities and research centers, especially the National Biotechnology Center (BIOTEC) and Thailand Research Fund (TRF), often contribute basic knowledge for the private sector's R&D. Currently, policies of BIOTEC and TRF encompass public-private research collaboration in order to answer the needs of business.

We agree that contracts can be unfair. In this regard, contract farming does not seem to be a desirable means for rural development. However competitive environments within and among sectors (potatoes, seed, vegetables) induce more alternatives for growers when firms have to compete for contract farmers and land.

There is no indication that the poorest farmers are being excluded in the firms' selection of contract farmers, despite opinions to the contrary. Wiboonpongse and Sriboonchitta (1995) found that the farmers operating under contracts were generally smaller than non-contract. Most were small farmers; their growing area was about half the farm size of those in the Upper North region (3.74 to 4.8 rai for contract farming and 4.7–5.82 rai for non-contract farming). The average size of cultivated land for contract crops is usually limited for quality control. Potato contracts are an exception (Wongwiwat et al. 2007), possibly because potato production is established and commonplace.

In annual crops like vegetables, firms value growers' diligence, hard work habits and honesty. Tenant farmers have an equal chance to obtain the same quota providing they possess sufficient labor and crop experience. The situation can differ in forestry and livestock (broilers and hogs), where land and capital investment in animals is substantially higher

As No.14 on the list of the world food exporting countries (Food and Agriculture Organization 2005), Thailand is the leading net exporter of food in Asia. Safety and environmental issues of food consumption in the EU, US and Japan require products to conform to standards such as ISO 14000, Codex Alimentarius Standard, and in general, HACCP. To meet these standards and be competitive, Thailand must adopt cost-effective production and management along the whole supply chain. Sriwichailamphan (2007) reports contract growers of pineapple, broilers and shrimp have adopted good agricultural practices (GAP) or good animal husbandry practice (GAHP) (also Code of Conduct for shrimp) due to contract farming advice from relevant companies. This factor was most likely to be taken seriously and adopted when compared to other factors (farmers' environmental awareness, animal survival rate, or pressure from the importing countries).

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