Agris on-line Papers in Economics and Informatics

Faculty of Economics and Management CULS Prague, Kamýcká 129, 165 00 Praha - Suchdol

The international peer-reviewed scientific journal, ISSN 1804-1930


Contract Farming and Profitability: Evidence from Rice Crop in the Central Mekong Delta, Vietnam

Tran Quoc Nhan, Tomoyuki Yutaka

DOI: 10.7160/aol.2019.110109

Agris on-line Papers in Economics and Informatics, No 1 /2019, March

pp. 83-91

Nhan, T. Q. and Yutaka, T. (2019) “Contract Farming and Profitability: Evidence from Rice Crop in the Central Mekong Delta, Vietnam", AGRIS on-line Papers in Economics and Informatics, Vol. 11, No. 1, pp. 83-91. ISSN 1804-1930.DOI 10.7160/aol.2019.110109.

Abstract

This study aims at investigating profitability of rice contract farming in Vietnam’s Mekong delta. We used data from a farm-household survey comprising of 70 contract and 96 noncontract respondents, and apply the Student’s t-test and ordinary least square regression model for data analysis. We found that farmers with larger rice plantations are unlikely to engage in contract farming, and that market outlets and output price for contract growers tend to be ensured compared with noncontract ones. The findings reveal that contract farming has a significantly positive impact on rice-farming profitability in terms of average return and average rate of return on variable cost when controlling for observable characteristics of household and farm. The results suggest that contract farming may enable rice farmers to raise their rice income as well as household income. The policy implication may be that contract farming may not be feasible for all rice farmers and rice business firms.

Keywords

Contract farming, return, average rate of return, rice, Mekong delta.

References

  1. Barrett, C. B., Bachke, M., Bellemare, M. F., Michelson, H. C., Narayanan, S. and Walker, T. F. (2012) “Smallholder participation in contract farming: Comparative evidence from five countries”, World Development, Vol. 40, No. 4, pp. 715-730. ISSN 0305-750X. DOI 10.1016/j.worlddev.2011.09.006.
  2. Bellemare, M. F. (2012) “As you sow, so shall you reap: the welfare impacts of contract farming”, World Development, Vol. 40, No. 7, pp. 1418-1434. ISSN 0305-750X. DOI 10.1016/j.worlddev.2011.12.008.
  3. Bolwig, S. Gibbon, P. and Jones, S. (2009) “The economics of smallholder organic contract farming in tropical Africa”, World Development, Vol. 37, No. 6, pp. 1094-1104. ISSN 0305-750X. DOI 10.1016/j.worlddev.2008.09.012.
  4. Cahyadi, E. R., and Waibel, H. (2013) “Is contract farming in the Indonesian oil palm industry pro-poor?”, Journal of Southeast Asian Economies, Vol. 30, No. 1, pp. 62-69. ISSN 2339-5095.
  5. Can, N. D. (2014) “Understanding linking together four houses in rice production and commerce: a case study of An Giang province, Vietnam and lesson learnt from Chiba prefecture, Japan”, No. 486, JETRO, Chiba, Japan.
  6. Dang, N. H. (2017) “Profitability and profit efficiency of rice farming in Tra Vinh province, Vietnam”, Review of Integrative Business and Economics Research, Vol. 6, No. SI 1, pp. 191-201. ISSN 2304-1013.
  7. Dedehouanou, S. F. A., Swinnen, J. and Maertens, M. (2013) “Does contracting make farmers happy? Evidence from Senegal”, The Review of Income and Wealth, Vol. 59, No. S1, pp. 138-160. ISSN 1475-4991. DOI 10.1111/roiw.12041.
  8. FAO (Food and Agriculture Organization of the United Nations) (2016) “Rice Market Monitor”, Rome, Italy.
  9. Girma, J. and Gardebroek, C. (2015) “The impact of contract on organic honey producers’ income in southwestern Ethiopia”, Forest Policy and Economics, Vol. 50, pp. 259-268. ISSN 1389-9341. DOI 10.1016/j.forpol.2014.08.001.
  10. Hu, W. Y. (2013) “Effects of contract farming on the U.S. crop farmers’ average income”, Agricultural Economics-Czech, Vol. 59, No. 5, pp. 195-201. ISSN 1805-9295.
  11. Imbens, G. W. (2004) “Nonparametric estimation of average treatment effects under exogeneity: a review”, The Review of Economics and Statistics, Vol. 86, No. 1, pp. 4-29. ISSN 1530-9142.
  12. Krause, J. and Machek, O. (2018) “A comparative analysis of organic and conventional farmers in the Czech Republic”, Agricultural Economics–Czech, Vol. 64, pp. 1-8. ISSN 1805-9295. DOI 10.17221/161/2016-AGRICECON.
  13. Maertens, M. and Swinnen, J. F. M. (2009) “Trade, standards and poverty: evidence from Senegal”, World Development, Vol. 37, No. 1, pp. 61-178. ISSN 0305-750X. DOI 10.1016/j.worlddev.2008.04.006.
  14. Maertens, M. and Velde, K. V. (2017) “Contract farming in staple food chains: The case of rice in Benin”, World Development, Vol. 95, pp. 73-87. ISSN 0305-750X. DOI 10.1016/j.worlddev.2017.02.011.
  15. Minot, N. (1986) “Contract farming and its effect on small farmers in less-developed countries”, Working Paper No. 31, Michigan State University, the U.S.
  16. Minten, B., Randrianarison, L. and Swinnen, J. F. M. (2009) “Global retail chains and poor farmers: Evidence from Madagascar”, World Development, Vol. 37, No. 11, pp. 1728-1741. ISSN 0305-750X. DOI 10.1016/j.worlddev.2008.08.024.
  17. Mishra, K. A., Kumar, A., Joshi, P. K. and D'Souza, A. (2018) “Impact of contract farming on yield, cost and profitability in low-value crop: evidence from a low-income country”, The Australian Journal of Agricultural and Resource Economics, Vol. 62. No.4, pp. 1-19. ISSN 1467-8489. DOI 10.1111/1467-8489.12268.
  18. Miyata, S., Minot, N. and Hu, D. (2009) “Impact of contract farming on income: Linking small farmers, packers, and supermarkets in China”, World Development, Vol. 37, Vol. 11, pp. 1781-1790. ISSN 0305-750X. DOI 10.1016/j.worlddev.2008.08.025.
  19. Naryananan, S. (2014) “Profits from participation in high-value agriculture: Evidence from heterogeneous benefits in contract farming schemes in Southern India”, Food Policy, Vol. 44, pp. 142-157. ISSN 0306-9192. DOI 10.1016/j.foodpol.2013.10.010.
  20. Nhan, T. Q. and Yutaka, T. (2017) “Current status and problems of rice contract farming enforcement in Mekong delta, Vietnam”, Agricultural Marketing Journal of Japan, Vol. 26, No. 1, pp. 43-50.
  21. Nhan, T.Q., Takeuchi, I. and Hoang, D. V. (2013) “Rice contract farming – the potential key to improve rice growers’ income: a farm level study in An Giang province”, Vietnam Journal of Agricultural Sciences, Vol. 11, No. 7, pp. 1062-1072. ISSN 1859-0004.
  22. Oanh, L. T. K., Nga, B. T. and Lebailly, P. (2016) “Tea production between contract and noncontract farmers in Phu Tho province, Vietnam”, Scholars Journal of Agriculture and Veterinary Sciences, Vol. 3, No. 2, pp. 117-122. ISSN 2348-1854.
  23. Reardon, T., Barrett. C. B., Bergeue, J. A. and Swinnen, J. F. M. (2009) “Agrifood industry transformation and small farmers in developing countries”, World Development, Vol. 37, No. 11, pp. 1717-1727. ISSN 0305-750X.
  24. Saenger, C., Qaim, M., Torero, M. and Viceisza, A. (2013) “Contract farming and smallholder incentives to produce high quality: experimental evidence from the Vietnamese dairy sector”, Agricultural Economics, Vol. 44, No.3, pp. 297-308. ISSN 1574-0862. DOI 10.1111/agec.12012.
  25. Swinnen, J. F. M. and Maertens, M. (2007) “Globalization, privatization and vertical coordination in food value chains in developing and transition countries”, Agricultural Economics, Vol. 37, No. S1, pp. 89-102. ISSN 1574-0862. DOI 10.1111/j.1574-0862.2007.00237.x.
  26. Tuan, N. P. (2012) “Contract farming and its impact on income and livelihoods for small-scale farmers: case study in Vietnam”, Journal of Agribusiness and Rural Development, Vol. 4, No. 26, pp. 147-166. ISSN 1899-5772.
  27. Wang, H., Moustier, P. and Loc, N. T. T. (2014) “Economic impact of direct marketing and contracts: the case of safe vegetable chains in northern Vietnam”, Food Policy, Vol. 47, pp. 13-23. ISSN 0306-9192. DOI 10.1016/j.foodpol.2014.04.001.
  28. Wooldridge, J. M. (2002) “Econometric analysis of cross section and panel data”, the MIT Press. ISBN 0262232197.

Full paper

icon of PDF documents Full paper (.pdf, 350.20 KB).

ISSN 1804-1930
© Agris on-line Papers in Economics and Informatics, 2009 - 2019
Faculty of Economics and Management CULS Prague, Kamycka 129, 165 00 Praha 6 - Suchdol