Impact of contract farming on the income of smallholder dairy farmers from Nyagatare district in the Eastern Province of Rwanda

Abstract

The demand for dairy milk and its products is projected to increase significantly in the developing countries by the year 2030. Globally, close to 6 billion people consume milk and other dairy products due to rising earnings, population expansion, urbanization, and dietary changes. The projected increase in demand for dairy milk and its products thus requires enhanced productivity by the dairy farmers. However, dairy farming is relatively capital intensive which requires dairy farmers to have disposal income to run the venture. Contract farming is gradually being embraced in Rwanda as a viable option to help farmers increase dairy productivity. The impact of contract farming on dairy farmers’ incomes is however not well documented in the Rwandan context. Thus, the purpose of this study was to assess the impact of contract farming on smallholder dairy farmers’ income in Rwanda among smallholders’ dairy farmers in Nyagatare District. Following the stratification and purposive sampling of two sectors, random sampling of two villages from each of those sectors allowed for the systematic and purposive sampling of representative households and farmers. Data from 214 smallholder dairy farmers were collected using structured interviews and document reviews. The multivariate logistic analysis and propensity score matching was used for data analysis in Stata Version 15. The findings showed that smallholder dairy farmers adopting contract farming earned on average 135,000 RWF (135$) more than their non-adopter counterparts. Further, contract farming was found to have a significant positive impact on income among smallholder dairy farmers in Nyagatare district. However, the impact of contract farming on farmer incomes could be further augmented by increasing the heads of cattle owned per farmer, to at least more than 30. Government intervention is one way to achieve this. The government, in collaboration with businesses like Heifer International, can give heifers to small-scale dairy farmers. Key words: Contract farming, Income, Smallholder dairy farmers, Impact, Rwanda