RESEARCH ARTICLE
Determinants of small farmers' participation in contract farming in developing countries: A study in Vietnam
Viet Hoang,
Vinh Nguyen,
Corresponding Author
Viet Hoang
University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City, Vietnam
Correspondence Viet Hoang, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City, Vietnam.
Email: [email protected]
Search for more papers by this authorVinh Nguyen
University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City, Vietnam
Search for more papers by this authorViet Hoang,
Vinh Nguyen,
Corresponding Author
Viet Hoang
University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City, Vietnam
Correspondence Viet Hoang, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City, Vietnam.
Email: [email protected]
Search for more papers by this authorVinh Nguyen
University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City, Vietnam
Search for more papers by this authorAbstract
This study aims to explore the determinants of farmers' participation in contract farming by using a qualitative approach and empirically assess the impact of the factors withdrawn from the qualitative analysis and previous studies by employing the probit model in Vietnam. The qualitative analysis illustrates 10 original factors that affect farmers' participation in contract farming, including cooperative membership, quality certifications, sale preferences, farming difficulties, technology, supporting policy and program, estimation of oversupply, market information flow, association membership, and experience of contract farming failure. The quantitative analysis provides empirical evidence that female heads, firm consulting activities, firm scales, cooperative membership, quality certifications, and good-road locations can significantly and positively influence farmers' participation in contract farming. Cooperative membership and quality certifications are the most important factors. Contrary to the expectation, head education and good soil negatively impact farmers' participation in contract farming. Besides, bad soil can hinder farmers from participating in contract farming. [EconLit Citations: C12, L24, O13, O14, Q12, Q18].
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are primarily generated and collected from the fieldwork surveys from 2017 to 2018 in the Mekong River Delta and the Central Highlands of Vietnam, and they are available from the corresponding author upon reasonable request.
REFERENCES
- Abebe, G. K., Bijman, J., Kemp, R., Omta, O., & Tsegaye, A. (2013). Contract farming configuration: Smallholders' preferences for contract design attributes. Food Policy, 40, 14–24.
- Barrett, C. B., Bachke, M. E., Bellemare, M. F., Michelson, H. C., Narayanan, S., & Walker, T. F. (2012). Smallholder participation in contract farming: Comparative evidence from five countries. World Development, 40(4), 715–730.
- Bellemare, M. F. (2010). Agricultural extension and imperfect supervision in contract farming: Evidence from Madagascar. Agricultural Economics, 41(6), 507–517.
- Bellemare, M. F. (2012). As you sow, so shall you reap: The welfare impacts of contract farming. World Development, 40(7), 1418–1434.
- Bellemare, M. F. (2018). Contract farming: opportunity cost and trade-offs. Agricultural Economics, 49(3), 279–288.
- Bellemare, M. F., & Bloem, J. R. (2018). Does contract farming improve welfare? A review. World Development, 112, 259–271.
- Bellemare, M. F., & Novak, L. (2017). Contract farming and food security. American Journal of Agricultural Economics, 99(2), 357–378.
- Bijman, J. (2008). Contract farming in developing countries: An overview. Wageningen University, Department of Business Administration.
- Bitsch, V. (2005). Qualitative research: A grounded theory example and evaluation criteria. Journal of Agribusiness, 23(345-2016-15096), 75–91.
- Blandon, J., Henson, S., & Islam, T. (2009). Marketing preferences of small-scale farmers in the context of new agrifood systems: A stated choice model. Agribusiness, 25(2), 251–267.
- Bolwig, S., Gibbon, P., & Jones, S. (2009). The economics of smallholder organic contract farming in tropical Africa. World Development, 37(6), 1094–1104.
- Casaburi, L., & Willis, J. (2018). Time versus state in insurance: Experimental evidence from contract farming in Kenya. American Economic Review, 108(12), 3778–3813.
- Charmaz, K., & Belgrave, L. L. (2007). Grounded theory. The Blackwell Encyclopedia of Sociology.
- Donati, M., Wilkinson, A., Veneziani, M., Antonioli, F., Arfini, F., Bodini, A., & Bellassen, V. (2021). Economic spill-over of food quality schemes on their territory. Journal of Agricultural & Food Industrial Organization, 19(2), 95–111.
10.1515/jafio-2019-0046 Google Scholar
- Dorward, A., Fan, S., Kydd, J., Lofgren, H., Morrison, J., Poulton, C., Rao, N., Smith, L., Tchale, H., Thorat, S., Urey, I., & Wobst, P. (2004). Institutions and policies for pro-poor agricultural growth. Development Policy Review, 22, 611–622.
10.1111/j.1467-7679.2004.00268.x Google Scholar
- Eaton, C., & Shepherd, A. (2001). Contract farming: Partnerships for growth (No. 145). Food and Agriculture Organization.
- General Statistics Office of Vietnam (GSO). (2018). Accessed: September 2018. https://www.gso.gov.vn/Default_en.aspx?tabid=766
- Goodwin, B. K., & Schroeder, T. C. (1994). Human capital, producer education programs, and the adoption of forward-pricing methods. American Journal of Agricultural Economics, 76(4), 936–947.
- Grosh, B. (1994). Contract farming in Africa: An application of the new institutional economics. Journal of African Economies, 3(2), 231–261.
10.1093/oxfordjournals.jae.a036805 Google Scholar
- Guo, H., & Jolly, R. W. (2008). Contractual arrangements and enforcement in transition agriculture: Theory and evidence from China. Food Policy, 33(6), 570–575.
- Guo, H., Jolly, R. W., & Zhu, J. (2007). Contract farming in China: perspectives of farm households and agribusiness firms. Comparative economic studies, 49(2), 285–312.
10.1057/palgrave.ces.8100202 Google Scholar
- Hoang, V. (2015). Value chain analysis and competitiveness assessment of Da Xanh pomelo sector in Ben Tre, Vietnam. Asian Social Science, 11(2), 8.
- Hoang, V. (2021a). Impact of contract farming on farmers' income in the food value chain: A theoretical analysis and empirical study in Vietnam. Agriculture (London), 11(8), 797.
- Hoang, V. (2021b). Modern short food supply chain, good agricultural practices, and sustainability: A conceptual framework and case study in Vietnam. Agronomy, 11(12), 2408.
- Hoang, V., Nguyen, A., Hubbard, C., & Nguyen, K. D. (2021). Exploring the governance and fairness in the milk value chain: A case study in Vietnam. Agriculture (London), 11(9), 884.
- Hoang, V. V., & Tran, K. T. (2019). Comparative advantages of alternative crops: A comparison study in Ben Tre, Mekong Delta, Vietnam. AGRIS on-line Papers in Economics and Informatics, 11(665-2019-3993), 35–47.
10.7160/aol.2019.110104 Google Scholar
- 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.
- Kirsten, J., & Sartorius, K. (2002). Linking agribusiness and small-scale farmers in developing countries: Is there a new role for contract farming? Development Southern Africa, 19(4), 503–529.
10.1080/0376835022000019428 Google Scholar
- Li, X., Guo, H., & Li, L. (2016). Contract Farming in China: Perspectives of Smallholders in Vegetable Production (333–2016–14109).
- Ma, W., & Abdulai, A. (2016). Does cooperative membership improve household welfare? Evidence from apple farmers in China. Food Policy, 58, 94–102.
- Malak-Rawlikowska, A., Majewski, E., Wąs, A., Borgen, S. O., Csillag, P., Donati, M., Freeman, R., Hoàng, V., Lecoeur, J. L., Mancini, M. C., Nguyen, A., Saïdi, M., Tocco, B., Török, Á., Veneziani, M., Vittersø, G., & Wavresky, P. (2019). Measuring the economic, environmental, and social sustainability of short food supply chains. Sustainability, 11(15), 4004.
- Michelson, H. C. (2013). Small farmers, NGOs, and a Walmart world: Welfare effects of supermarkets operating in Nicaragua. American Journal of Agricultural Economics, 95(3), 628–649.
- Minot, N., & Roy, D. (2007). Impact of high-value agriculture and modern marketing channels on poverty: An analytical framework. International Food Policy Research Institute.
- Minot, N., & Sawyer, B. (2016). Contract farming in developing countries: Theory, practice, and policy implications (pp. 127–155). Innovation for Inclusive Value Chain Development: Successes and Challenges, International Food Policy Research Institute.
- Mishra, A. K., Kumar, A., Joshi, P. K., & D'Souza, A. (2018). Cooperatives, contract farming, and farm size: The case of tomato producers in Nepal. Agribusiness, 34(4), 865–886.
- Miyata, S., Minot, N., & Hu, D. (2009). Impact of contract farming on income: Linking small farmers, packers, and supermarkets in China. World Development, 37(11), 1781–1790.
- Monier-Dilhan, S., Poméon, T., Böhm, M., Brečić, R., Csillag, P., Donati, M., & Bellassen, V. (2021). Do food quality schemes and net price premiums go together? Journal of Agricultural & Food Industrial Organization, 19(2), 79–94.
10.1515/jafio-2019-0044 Google Scholar
- Mugwagwa, I., Bijman, J., & Trienekens, J. (2020). Typology of contract farming arrangements: A transaction cost perspective. Agrekon, 59(2), 169–187.
- Muller, P., Böhm, M., Csillag, P., Donati, M., Drut, M., Ferrer-Pérez, H., & Bellassen, V. (2021). Are certified supply chains more socially sustainable? A bargaining power analysis. Journal of Agricultural & Food Industrial Organization, 19(2), 177–192.
10.1515/jafio-2019-0039 Google Scholar
- Narayanan, S. (2014). Profits from participation in high value agriculture: Evidence of heterogeneous benefits in contract farming schemes in Southern India. Food Policy, 44, 142–157.
- Ragasa, C., Lambrecht, I., & Kufoalor, D. S. (2018). Limitations of contract farming as a pro-poor strategy: The case of maize outgrower schemes in upper West Ghana. World Development, 102, 30–56.
- Reardon, T., Barrett, C. B., Berdegué, J. A., & Swinnen, J. F. M. (2009). Agrifood industry transformation and small farmers in developing countries. World Development, 37(11), 1717–1727.
- Rehber, E. (2007). Contract farming: Theory and practice (1114–2017–1691).
- Rehber, E. (2018). Contract Farming in Practice: An Overview (2231–2019–2215).
- Roy, E. P. (1963). Contract farming, USA (338.14 R6).
- Saenger, C., Qaim, M., Torero, M., & Viceisza, A. (2013). Contract farming and smallholder incentives to produce high quality: Experimental evidence from the Vietnamese dairy sector. Agricultural Economics, 44(3), 297–308.
- Schipmann, C., & Qaim, M. (2011). Supply chain differentiation, contract agriculture, and farmers' marketing preferences: The case of sweet pepper in Thailand. Food Policy, 36(5), 667–677.
- Da Silva, C. A. B. (2005). The growing role of contract farming in agri-foodsystems development: Drivers, theory and practice. Food and Agriculture Organization.
- Singh, S. (2002). Multi-national corporations and agricultural development: A study of contract farming in the Indian Punjab. Journal of International Development, 14(2), 181–194.
10.1002/jid.858 Google Scholar
- Soullier, G., & Moustier, P. (2018). Impacts of contract farming in domestic grain chains on farmer income and food insecurity. Contrasted evidence from Senegal. Food Policy, 79, 179–198.
- Sporleder, T. L. (1992). Managerial economics of vertically coordinated agricultural firms. American Journal of Agricultural Economics, 74(5), 1226–1231.
- Swinnen, J. F. M., & Maertens, M. (2007). Globalization, privatization, and vertical coordination in food value chains in developing and transition countries. Agricultural Economics, 37, 89–102.
- Ton, G., Vellema, W., Desiere, S., Weituschat, S., & D'Haese, M. (2018). Contract farming for improving smallholder incomes: What can we learn from effectiveness studies? World Development, 104, 46–64.
- Tran, T. K., Ho, C. V., Le, V. G. N., Hoang, V. V., Nguyen, V. A., & Nguyen, V. N. (2013). Estimate of financial benefits from value chain of Ben Tre coconut. Journal of Economic Development, (JED, No. 215) 147–160.
- Wang, H., Moustier, P., & Loc, N. T. T. (2014a). Economic impact of direct marketing and contracts: The case of safe vegetable chains in Northern Vietnam. Food Policy, 47, 13–23.
- Wang, H. H., Wang, Y., & Delgado, M. S. (2014b). The transition to modern agriculture: Contract farming in developing economies. American Journal of Agricultural Economics, 96(5), 1257–1271.
- Holly Wang, H., Zhang, Y., & Wu, L. (2011). Is contract farming a risk management instrument for Chinese farmers? Evidence from a survey of vegetable farmers in Shandong. China Agricultural Economic Review, 3(4), 489–505.
- Warning, M., & Key, N. (2002). The social performance and distributional consequences of contract farming: An equilibrium analysis of the Arachide de Bouche program in Senegal. World Development, 30(2), 255–263.
- Williamson, O. E. (1979). Transaction cost economics: The governance of contractual relations. The Journal of Law and Economics, 22, 233–261.
- van Winsen, F., de Mey, Y., Lauwers, L., Van Passel, S., Vancauteren, M., & Wauters, E. (2013). Cognitive mapping: A method to elucidate and present farmers' risk perception. Agricultural Systems, 122, 42–52.
- World Bank Database (WB). (2018). Accessed: September 2018: https://data.worldbank.org/indicator?tab=all
- Wuepper, D., & Sauer, J. (2016). Explaining the performance of contract farming in Ghana: The role of self-efficacy and social capital. Food Policy, 62, 11–27.
