Abstract
<p>Linking smallholder farmers to modern value chains through contract agriculture (CA) is one of the rural development strategies being promoted to address the challenge of smallholders’ integration in markets. However, the conditions under which CA enhances smallholders’ prospects for inclusion in modern value chains is still debatable. This paper examines the determinants of smallholders’ participation in Zambian dairy markets through interlocked contractual arrangements (ICAs). A multi-stage sampling design was used to select 266 households from milk shed areas from three districts in Lusaka and Central provinces of Zambia. A double-hurdle model was estimated from data collected through semi-structured questionnaires, key informant interviews and focus group discussions. Key determinants of smallholders’ participation in ICAs included ownership of improved breed animals, MCC milk price, access to dairy marketing information, income from other sources and landholding size. While most of these factors also affected the proportion of milk sold, the following were also important: household head education level, cattle rearing culture, extent of supplier’s dependency on buyer and trust in the exchange relationship. To enhance smallholders’ market participation, there is need to facilitate their access to extension services, infrastructure (breeding centres, MCCs and water) and affordable stock feed, and to offer them an effective milk price that is higher than the spot market price. Promotion efforts should target smallholders that are literate, from a cattle rearing culture, and particularly encourage youth and women participation. There is also need for building trust in the exchange relationship and judicious use of power by processors.</p>
Highlights
1.1 Contract Agriculture and Smallholder Farmers’ Integration in Modern Value Chains and MarketsCommercialising of smallholders’ production and enhancing their integration in markets and more inclusive value chains remains a challenge for most governments in sub-Saharan Africa
This paper examines the determinants of smallholders’ participation in Zambian dairy markets through interlocked contractual arrangements (ICAs)
This section highlights the benchmark used by processors and milk collection centres (MCCs) to choose smallholders that take part in ICAs
Summary
1.1 Contract Agriculture and Smallholder Farmers’ Integration in Modern Value Chains and Markets. Commercialising of smallholders’ production and enhancing their integration in markets and more inclusive value chains remains a challenge for most governments in sub-Saharan Africa. It is critical for enhanced food security and rural poverty reduction, because 80% of the food consumed in sub-Saharan Africa is produced by smallholders (Arias et al, 2013), 70% of whom are poor, living in rural areas (IFC, 2011; Making Finance Work For Africa [MFW4A], 2012) and lacking access to markets. Evidence regarding the conditions under which smallholders’ participate in CA is varied. Differences in commodity types exchanged influence the form of governance structures and mechanisms that develop (Williamson, 1985; Gereffi et al, 2005), and could result in increased diversity of contractual arrangements, that in turn, could affect the significance of www.ccsenet.org/jsd
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