Blessing or Evil? Contract Farming, Smallholder Poultry Production and Household Welfare in Kenya

Abstract

There is lack of consensus in the literature on the impact of contract farming on the welfare of smallholder farmers. Some authors argue that contact farming improves access to markets hence income, while others view contract farming as an avenue by which large corporations exploit smallholder farmers. It is hence seen as a blessing to some but a necessary evil to others. This study examines the factors influencing participation in poultry contract farming in Kenya. It then uses propensity score matching technique to assess the impact of contract poultry production. The study finds, among others, that farmer-specific factors, transaction costs and financial asset endowment affect participation in contract farming. It also finds that contracted farmers earned more net income per bird than their counterparts. It concludes that participation in contract farming practice improves the welfare smallholder poultry farmers in Kenya. The study discusses the policy implications of the findings.