Introduction

During the past decades, Thailand's agriculture has diversified from mainly rice to include various cash crops including cassava, sugar cane, kenaf, maize, etc., on dry land and soybean, peanut, and mung bean on both dry and irrigated land. Diversification was facilitated by infrastructure development during the early National Economic and Social Development Plans. During the 4th National Economic and Social Development Plan (1977– 1981), policies for value-added exports were promoted and agro-industries grew rapidly, especially in canned fish, pineapples, and tomato products. The 6th Plan promoted the integration of farming and processing and high value-added exports. Compared to other Asian countries, by early 1990 Thailand probably had the most extensive experience with contract farming and the widest range of crops (Glover 1992). By the middle of the 7th Plan, the export value of agro-industrial products had reached 82,000 million Baht and grew to 247,000 million by 2003 (Ministry of Agriculture and Cooperatives 2004) and reached 303,069 million Baht in 2006. In the fruit and vegetable and poultry processing sectors where contract production is extensive, growth rates during 2005–2006 maintained high levels–– 11.1% and 8% respectively (Ministry of Agriculture and Cooperatives 2007).

Contract farming has been instrumental in providing growers access to supply chains with market and price stability, as well as technical assistance. For resource-poor growers, production input and farm investment on credit are often provided by firms. In return, contractors expect delivery of goods in specified quantities, quality and set prices. Market and price certainty for both parties and integrated farm-processing enhances the country's competitiveness via improved quality products and an efficient supply chain. Wellcoordinated contract farming systems assist development in less privileged farming sectors.

Contract farming in Thailand is approaching maturity. In the early stage, the government was heavily involved in monitoring, facilitating and encouraging stakeholders in contractual arrangements. Over time, farmers gained skills, the market evolved, and a more flexible form of contract farming emerged. Today, former contract farmers can negotiate contracts based on their best opportunity. This is found in the case of potatoes in the North and shrimp in the South where growers can switch between open and contract markets.

This paper aims to highlight the government's role in the initial stage of contract farming development and factors that contributed to success and failure, and to evaluate the effectiveness of contract farming as a means for income stability, technological transfer, market access, and agricultural development. The paper is based on a review of literature and the authors' previous and updated field research up to 2007.

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