Factors Influencing Smallholder Farmers in Supplying Organic Fruits and Vegetables to Supermarket Supply Chains in Karnataka, India

Abstract

Organic farmers are facing problems in finding the right buyers, resulting in high transaction costs (TCs). This study considers the integration of smallholder organic farmers in vertically coordinated supply chains and factors influencing them. The article draws transaction costs economics (TCE) to develop a model explaining potential TC attributes influencing farmer’s decision to participate in supermarket supply chains (SMSC) compared to spot market (SM) in Karnataka, India. This article uses data collected from 127 smallholder organic farmers through face-to-face interviews to identify factors that significantly influence the farmer’s decision. A binary logistic regression model was employed within the TC framework. Seven TC attributes were evaluated on farmer’s decision. The results revealed that farmers have a strong marketing preference towards SMSC. Attributes such as pre-arranging price, quantity, frequency, and access to market information and finance have significant positive influence on farmer’s decision to participate in SMSC. However, attribute payment mechanism has a negative influence. Furthermore, there are significant differences between SMSC and SM supplying groups with reference to variables distance to the market, the general state of the road and age. The results have a policy and managerial implication towards the development of organic food market in the Karnataka state, India.