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Nature of Contract Farming
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Published:
Dec 6, 2022
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2022-12-06 (1)
Keywords:
Contract Farming Benefit of Contracts Access to Market Thailand
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Abstract
Objective of paper are to review contract farming in term of various types of agricultural contract, benefits for farmers and smallholders, reasons for success in contract farming and governments role on contract farming in Thailand.
There were four types of agricultural contract including physical spot markets or cash markets, marketing contract, production contract and vertical integration. Farmers and smallholders earn some benefit from contract farming including; adoption of new enterprises, access to markets, access to credit, managing risk, access to information and access to insurance.
However, there were some reasons for success in contract farming such as profitable market and a strong market and farm groups. In the long run, farmers and smallholders would be able to collect skill in production and management, consequently improving their bargaining power. When increasing demand makes the market more competitive, contract farming may no longer be farmers’ best choice.
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References
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A savoir collection (pp. 1-99). Paris, France: Agence Française de Développement.
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of durable production assets in low-income countries: Investments in bullocks in India. The Journal of Political
Economy, 101(2), 223-244. doi:10.1086/261874.
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Sporleder, T. L. (1992). Managerial economics of vertically coordinated agricultural firms. American Journal of
Agricultural Economics, 74(5), 1226-1231.
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Minh City, Vietnam.
Swinnen, J. F. M., & Maertens, M. (2007). Globalization, privatization, and vertical coordination in food value chains
in developing and transition countries.Agricultural Economics, 37(s1), 89-89. doi:10.1111/j.1574-
0862.2007.00237.x.
Young, L. M., & Hobbs, J. E. (2002). Vertical linkages in agri-food supply chains: Changing roles for producers,
commodity groups, and government policy. Review of Agricultural Economics, 24(2), 428-441.
doi:10.1111/1467-9353.00107
Organization.
Baumann, P. (2000). Equity and efficiency in contract farming Schemes: The experience of agricultural tree crops.
London, UK: Overseas Development Institute.
Bingen, J. (2000). Producer groups: Becoming full partners in agricultural markets and agro-enterprises.
Agribusiness and Markets Thematic Group. Washington DC, USA: The World Bank.
Bivings, L. & D. Runsten (1992). Potential competitiveness of the Mexican processed vegetable and strawberry
industries. Ministry of Agriculture Fisheries and Food. Vancouver, British Columbia: 131.
Black, J., Hashimzade, N., & Myles, G. (2012).Vertical integration.In A Dictionary of Economics.Oxford University
Press.Retrieved from http://www.oxfordreference.com/view/10.1093/acref/9780199696321.001.0001
/acref-9780199696321-e-3306.
Bonnen, J. T., & Schweikhardt, D. B. (1998). The future of U.S. agricultural policy: Reflections on the disappearance
of the “Farm Problem”. Review of Agricultural Economics, 20(1), 2-36. doi: 10.2307/1349531
Casson, M. (2012).Multinationals and world trade: Vertical integration and the division of labour in world industries.
USA and Canada: Routledge.
Coulter, J., Goodland, A., Tallontire, A., & Stringfellow, R. (1999).Marrying farmer cooperation and contract farming
for service provision in a liberalising Sub-Saharan Africa.Overseas Development Institute: Natural Resource
Perspectives, 48, 4.
Eaton, C., & Shepherd, A. (2001).Contract farming: Partnerships for growth. Food and Agriculture Organization of
the UN (FAO).
FAO, IFAD and UNIDROIT. 2017. Legal aspects of contract farming agreements. Synthesis of the
UNIDROIT/FAO/IFAD Legal Guide on Contract Farming. Rome.
Frank, S. D., & Henderson, D. R. (1992). Transaction costs as determinants of vertical coordination in the US Food
Industries. American Journal of Agricultural Economics, 74(4).doi941-950. doi: 10.2307/1243192
Goodman, D., & Watts, M. (1997). Globalising food: Agrarian questions and global restructuring.
Harwood, J. L., Heifner, R., Coble, K., Perry, J., & Somwaru, A. (1999).Managing risk in farming: Concepts,
research and analysis: US Department of Agriculture, Economic Research Service.
Hayami, Y., & Otsuka, K. (1993).The economics of contract choice: An agrarian perspective. New York: Clarendon
Press.
Heilbron, S., Roberts, F., & Rural Industries Research and Development Corporation (Australia). (1995).
Agribusiness structures: Vertical coordination in Australia and internationally. Barton, A.C.T: Rural Industries
Research and Development Corporation.
Katchova, A. L., & Miranda, M. J. (2004).Two-step econometric estimation of farm characteristics affecting
marketing contract decisions. American Journal of Agricultural Economics, 86(1), 88-102. doi:10.1111/j.0092-
5853.2004.00564.x
Kelley, C. R. (1995). Agricultural production contracts: Drafting considerations. Hamline Law Review, 18(3), 397.
Key, N., & Runsten, D. (1999). Contract farming, smallholders, and rural development in Latin America: The
organization of agro-processing firms and the scale of out-grower production. World Development, 27(2),
381-401.
Kilmer, R. L. (1986). Vertical integration in agricultural and food marketing. American Journal of Agricultural
Economics, 68(5), 1155-1160.
Kunkel, P. L., Peterson, J. A., & Mitchell, J. A. (2009).Agricultural production contracts.University of Minnesota
Extension, Farm Legal Series. Retrieved from http://www.agrisk.umn.edu/cache/ARL00782.htm.
MacDonald, J. M., Perry, J., Ahearn, M. C., Banker, D., Chambers, W., Dimitri, C. & Southard, L. W. (2005).
Agricultural Economic Report Number 837.U.S. Department of Agriculture.
Martinez, S. W., & Reed, A. (1996).From farmers to consumers: Vertical coordination in the food industry. USA:
Agriculture Information Bulletin Economic Research Service report.
Morrison, P. S., Murray, W. E., & Ngidang, D. (2006).Promoting indigenous entrepreneurship through small-scale
contract farming: The poultry sector in Sarawak, Malaysia. Singapore Journal of Tropical Geography, 27(2),
191-206. doi:10.1111/j.1467-9493.2006.00253.x.
Musser, W. N., Patrick, G. F., & Eckman, D. T. (1996).Risk and grain marketing behaviour of large-scale farmers.
Review of Agricultural Economics, 18(1), 65-77.
Netz, J. S. (1995). The effect of futures markets and corners on storage and spot price variability. American Journal
of Agricultural Economics, 77(1), 182-193. doi:10.2307/1243900.
Peterson, H. C., Wysocki, A., & Harsh, S. B. (2001).Strategic choice along the vertical coordination continuum.
International Food and Agribusiness Management Review, 4(2), 149-166. doi:10.1016/S1096-
7508(01)00079-9.
Porter, G., & Phillips-Howard, K. (1997).Comparing contracts: An evaluation of contract farming schemes in Africa.
World Development, 25(2), 227-238. doi:10.1016/S0305-750X(96)00101-5.
Prowse, M., & Thirion, M.-C. (2012). Contract farming in developing countries: A review. In R. Peccoud (Ed.),
A savoir collection (pp. 1-99). Paris, France: Agence Française de Développement.
Rosenzweig, M. R., & Wolpin, K. I. (1993). Credit market constraints, consumption smoothing, and the accumulation
of durable production assets in low-income countries: Investments in bullocks in India. The Journal of Political
Economy, 101(2), 223-244. doi:10.1086/261874.
Simmons, P. (2003). Overview of smallholder contract farming in developing countries. Agricultural and
Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO--ESA),
Working Papers: 02-04, 2002, 27 Pp, 27-27.
Sporleder, T. L. (1992). Managerial economics of vertically coordinated agricultural firms. American Journal of
Agricultural Economics, 74(5), 1226-1231.
Sriroth, K., Lamchaiyaphum, B., & Piyachomkwan, K. (2006, November, 21-23). Present situation and future
potential of cassava in Thailand. Paper presented at the Proceedings of the Sixth Regional Workshop, Ho Chi
Minh City, Vietnam.
Swinnen, J. F. M., & Maertens, M. (2007). Globalization, privatization, and vertical coordination in food value chains
in developing and transition countries.Agricultural Economics, 37(s1), 89-89. doi:10.1111/j.1574-
0862.2007.00237.x.
Young, L. M., & Hobbs, J. E. (2002). Vertical linkages in agri-food supply chains: Changing roles for producers,
commodity groups, and government policy. Review of Agricultural Economics, 24(2), 428-441.
doi:10.1111/1467-9353.00107