Development of sugarcane contract farming practice in Luangnamtha province, Laos

Abstract

This research aim to analyze technical efficiency in sugarcane of contract farming. This is a co-research project between Thai and Lao researchers. Sing District in the northern part of Luangnamtha Province of Laos were selected as a sample area for the study because sugarcanes are mostly produced there in the form of contract farming. Research team selected sugarcane farmers (148 farmers) in 3 sample villages including Phiyer, Pa-Yai and Ta-Pao village for the survey. Data are collected and analyzed using variety of techniques such as descriptive explanation, mean comparison and Data Envelopment Analysis (DEA) to measure and compare productivity. The study finds that sugarcane market in Sing District of Laos is comparatively monopolistic. The relationship between farmers and buyers of sugarcane production in this contract farming (CF) business is characterized into 3 type. The first type is between head of production group or head of village and farmers. The second type is between village head and representative of Chinese company. And the third type is between farmers and the representative of Chinese company. It is found that the CF production provides better supply of factor of production. However, the risk and cost involved with CF production is not significantly different from that of other crop production. What can be clearly observed as a benefit of CF production is the improvement in welfare and livelihood of people in the community through an increase in employment and having more facilities and basic infrastructures provided by the company. On the other hand, the negative side of CF production facing the farmers is related to production and marketing issues. Nevertheless, in general the farmers are still seeing CF production as their future practice. The study also found that the second year of sugarcane production results in better net income compared with the production in other years. However, the production in the third year is more productive compared to other years. This shows that productivity could be improved in the second year of production. Therefore, the government and contracted company could come up with measures and directions to further improve productivity.