Role and impact of contract farming under various pricing standards: A case of Guyana's rice sector

Abstract

<abstract> <p>Rice cultivation has played a pivotal role in Guyana's agricultural history, contributing significantly to both sustenance and economic prosperity for over two centuries. Accounting for 3.3% of the country's gross domestic product (GDP) and a substantial 20.5% of the agricultural GDP, the rice industry has faced challenges influenced by various global and domestic factors, impacting the productivity and profitability of rice farmers. One key influencing factor is contract farming, involving agreements between farmers and firms that outline production and marketing conditions for agricultural products. In Guyana's rice industry, contract farming is prevalent, but challenges such as unequal bargaining power and discrepancies in weights and prices persist. Notably, using two pricing standards, high-price and low-price, further complicates the understanding of contract farming's impact on rice cultivation. We delved into the role and impact of contract farming on rice cultivation in Guyana, with a specific focus on the Mahaica-Berbice and Essequibo Islands-West Demerara regions. In this study, conducted with 121 farmers using systematic sampling, we used profitability assessment, frequency distribution, and binary logistic regression analyses. The findings revealed that high-price contracts contributed to greater farmer profitability compared to low-price contracts. Despite this, low-price contracts persisted due to factors such as risk-sharing, access to credit, and fertilizers. Moreover, pricing standards influenced farmer behavior, with low-price contracts prompting crop diversification to supplement income. These insights underscored the significance of pricing standards in determining the effectiveness of contract farming and its impact on farmers' livelihoods. Policymakers and stakeholders can leverage these findings to design more effective contract farming models, enhancing farmers' profitability and contributing to sustainable agricultural development. Furthermore, future research may explore the impact of farmers' organization membership on contract farming productivity, providing additional depth to our understanding of this crucial agricultural practice.</p> </abstract>