The effect of contract farming on the environmentally sustainable production of rice in China

Abstract

Environmentally sustainable production has been widely discussed as one of the most important issues in sustainable agricultural development, especially for countries with limited arable land resources. In this study, we estimate the effect of contract farming on environmentally sustainable production behaviours using a household survey of 623 farmers in China conducted in 2019. To address selection bias and the potential endogeneity problem of contract farming participation, the propensity score matching approach and endogenous switching regression are employed in estimations of rice farmers’ environmentally sustainable production behaviours. The results indicate that participation in contract farming can increase the probability of applying environmentally sustainable control technologies and manual weeding by 56.7% and 28.2%, respectively. It is also found that organic fertiliser use can be increased by 31.1% when farmers participate in contract farming. Thus, we conclude that contract farming promotes environmentally sustainable production and could potentially protect the environment from the abuse of inorganic fertilisers and pesticides in agricultural production. While contract farming tends to increase the total cost of rice production, the benefits of increasing the sale price and farmers’ gross and net incomes from contract farming serve as the main channels underlying the positive effect of contract farming on environmentally sustainable production.