Abstract
AbstractThis study investigates contract farming's impact on smallholders' profits and post‐harvest losses (PHLs). The study uses an endogenous switching regression (ESR) and farm‐level data from okra growers located in two different districts in India. Results show that okra growers under production contract (PC) or marketing contract (MC) have higher profits and PHLs than independent okra growers. However, under a low rejection‐rate scenario, growers under PC or MC have significantly lower PHLs and increased profits. The reduction in PHLs is not surprising, but the magnitude of the decrease shows that rejection rates are the major contributor to PHLs for contracted growers. Thus, contract farming with low rejection reduces PHLs and increases the profits of smallholders─a win‐win situation for growers and contracting firms.
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