The Importance Of Contract Farming

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Inclusiveness, in the context of agribusiness value chains in developing countries, refers to the beneficial participation of smallholders (Da Silva & Baker, 2009, p. 6). Contract farming has considerable potential for integrating smallholders in to export and processing markets, and into the modern economy (Kirsten & Sartorius, 2010, p. 504; Wang, Wang, & Delgado, 2014, p. 2). Contract farming is a form of vertical coordination whereby agribusiness firms contract farmers to produce for distant markets or to grow raw material for their processing facilities under various conditions (Prowse, 2012, p. 5). These conditions might include providing seed, other inputs, credit, and technical services to smallholders while guaranteeing supply to the agribusiness firm. It is a mechanism by which agribusinesses replace or supplement primary agricultural production with supply from smallholders (Glover & Kusterer, 1990). Contract farming was adopted from developed countries when agribusinesses started to source high value agricultural products from developing countries, initially in South America (Little …show more content…

Another concern is that smallholders will be marginalized because companies will prefer to work with medium- and large-scale growers, thus exacerbating rural inequality (Little & Watts, 1994; Singh, 2002 as cited in Sachiko Miyata, 2009). This implies that the effect of contract farming is still debatable among different studies. Thus, the current study aims to identify the effect of contract farming arrangement between smallholder tea growers of Kefa zone and the WushWush Tea Plantation Enterprise, the largest commercial Tea Plantations in Ethiopia located in South Western of the country. In the Study area, the major constraint to increase the benefit of smallholders is their inability

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