Farmers' Attitudes Toward Contract Farming

Contract farming depends on the satisfaction of both farmers and firms, with profitability a key component. In the initial stage, farmers' perceptions regarding new crops and their attitudes towards contract farming are important. This section presents results from a survey by Sribooncitta et al. (1996) in hopes that it may be helpful for agencies attempting contract farming elsewhere. Most of the contract farmers surveyed (78%) grew only one contract crop, while the remainder had two to four different contract crops. The survey revealed primary reasons that farmers participated in contract farming. Market certainty and price stability were prime factors, as shown in Figure 2 [ PDF 16.8KB | 1 page ].

Other reasons included lack of alternatives, expectation of higher prices, etc. In addition, from the authors' survey in 2004, tenant farmers (40% of respondents) felt that contract farming provided them good opportunities to raise their income as labor was the only resource they had.

On price agreement, one would expect that most farmers would not be satisfied with the terms. A high proportion of dissatisfaction occurred in processing vegetables for the Japanese market (cucumbers, potatoes, and soybean at 75%–67%). Less dissatisfaction was found in the case of maize seed (47.5%) and tomatoes (49%) where products served domestic markets. Furthermore, studies revealed that new crops and new management restrained farmers in continuing the contracts. In the early stage of contract farming, 35% of the respondents felt that new crops were more complicated, while 43% felt the opposite and 22% were indifferent.

Attitudes were affected by production background and experience. Experienced farmers were likely to find production of newly introduced Japanese cucumbers and maize seed relatively easy (Wiboonpongse et al. 1998). Our 1994 survey found the main reason farmers (52%) kept contracts was high return from the crops relative to their other alternatives. Some farmers (16%) indicated they did so despite not knowing other alternatives, while about 11% maintained contracts because of market certainty.

Firms usually stipulated production quotas on land for contract crops to maintain quality. The average sizes of contract crops per household were only about half of what farmers desired (only 40% of the farmers' land). However, the restriction has been relaxed as demand for raw materials has increased and farmers have become more experienced (authors' 2004 survey).

In a contract farming arrangement, firms provided key inputs, i.e. selected seeds and material, in order to meet consumer preferences. Fertilizer and other chemical inputs were strictly controlled to ensure effective results and control residual levels. All inputs were provided on credit through cooperatives, groups, or middlemen. On average, 80% of the respondents were happy with advance credit as they did not need cash investment. Most farmers had no information about the price of seed (84%), but knew about fertilizer and chemical prices (68%) since the latter was available in the markets. Farmers who found input prices higher than market prices (31%) or inputs were of poor quality (9%) were mostly maize seed farmers who obtained inputs from the Land Development Cooperatives. Despite good government services in Northern areas, the survey also reported 46% of the farmers had not received any services, but about the same proportion received production advice (43%), input supply (7%) and meetings with farmers (3%). On average, 40% of the respondents were satisfied with officials' services.

Farmers also identified the types of information and knowledge most important to them: appropriate application of fertilizer and chemicals (38%), alternative crops with available markets (20%), methods for increasing productivity (17%), appropriate production methods (12%) and others (13%).

Download this Discussion Paper [ PDF 128.1KB| 21 pages ].

Comment(s)

There are [0] comment(s) for this entry. Post a comment.