Abstract
At the present time there is much controversy over the equity of small-scale producers in the supply chain, especially in developing countries. It is widely believed that farmers in the Third World have difficulty in gaining market access. While contract farming is attributed as a direct mechanism to integrate small growers into the supply chain, the system has often been blamed as lacking advantages for growers. In particular, growers have a concern regarding fairness of the contracts they sign with food processors and their economic security after the termination of the contract. This paper aims to illustrate the significant change in farmers’ practice from being contracted farmers, to being non-contracted. This encourages potato growers to negotiate a better deal in order to participate in the potato supply chain, as well as creating access to public sector support by small scale farmers. Furthermore, the positive outcome of the contract farming system is also presented. Potato growers in the San Sai District of Chiang Mai Province in the northern region of Thailand, have cultivated table potatoes since the 1960s. When processing potatoes were first introduced into San Sai District in 1987, potato growers had been acquainted with the contract system. At the initial stage, the firms made contracts with the farmers’ group and provided financial support and knowledge on potato production, which benefited growers directly. However, in 2001 the contracts were terminated due to various changes. Driving forces behind these changes were: the rapid increase in demand for potato chips, technical innovations, and continuous support from various government agencies in terms of research and development. The key consequences of the changes impacted on the functioning and performance of the market and better farm gate prices, lower production costs, and higher income from rotation cropping systems for farmers, as well as better soil conservation practices.
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