Abstract
Purpose– Contract farming (CF) is seen as a tool for creating new market opportunities hence increasing incomes for smallholder farmers. Critics, however, argue that CF is likely to pass risks to small scale farmers, thus favouring large scale farmers at the expense of smallholder farmers. The purpose of this paper is to examine the effect of CF on smallholder farmers’ income using a case study of avocado farmers in Kandara district in Kenya.Design/methodology/approach– The study uses data collected from 100 smallholder avocado farmers in Kandara district in Kenya and employs an instrumental variable model (Probit-2SLS) to control for endogeneity in participation in the contract and examine the effect of CF on household, farm and avocado income.Findings– The results indicate that participation in CF is not sufficient to improve household, farm and avocado income. Question remains regarding efficient implementation of CF arrangements to promote spill over effects on other household enterprises.Research limitations/implications– The research was carried out using farmers in Kandara district in Kenya as a case study, findings might therefore not reflect the status of CF in all countries.Originality/value– The paper contributes to the growing debate on the effect of value chain upgrading strategies such as contracting on smallholder farmers’ welfare. The form of contracting studied in this paper differs from the standard contracts in that the key stakeholders (producers) are loosely enjoined in the contract through officials of their groups.
Highlights
IntroductionTo the extent that about 70 per cent of the population in Sub-Saharan Africa live in rural areas and depend on agriculture for their livelihoods (Nnadi et al, 2012), improving smallholder farmers’ access to markets both locally and internationally
Conclusion and policy implications Our study aimed at contributing to the current debate on the extent to which value chain upgrading strategies such as Contract farming (CF) can improve smallholder farmers’ welfare
Using a case study of smallholder avocado farmers in Kenya, the results demonstrate that participation in CF is not sufficient to increase smallholder farmers’ income in circumstances where terms of the contract are not clear to the producers
Summary
To the extent that about 70 per cent of the population in Sub-Saharan Africa live in rural areas and depend on agriculture for their livelihoods (Nnadi et al, 2012), improving smallholder farmers’ access to markets both locally and internationally. Kenya in particular has 90 per cent of smallholder farmers in all but the arid regions engaging in the production of horticultural products (Mutuku et al, 2004). Smallholder farmers can be empowered to take advantage of new market opportunities for high-value agricultural products which have emerged as a result of increasing global consumption of these products, vegetables and fruits (Temu and Temu, 2006). With most of the world’s rural poor engaging in agriculture, encouraging smallholders’ access to global export markets for high-value products is vital in increasing incomes and alleviating poverty, which is predominant in Sub-Saharan Africa
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