Impact of Contract Farming on Smallholder Poultry Farmers' Income in Kenya

Priscilla W. Wainaina, Julius Juma Okello and Jonathan M. Nzuma

No 126196, 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil from International Association of Agricultural Economists

Abstract: Contract farming is a form of vertical coordination largely aimed at correcting the market failure associated with spot markets that arise due to imperfect information. However the impact of contract farming on the welfare of smallholder farmers in Kenya is not well understood. While some authors have argued that contact farming improves access to ready markets by smallholder farmers, other studies have suggested that contract farming lowers the incomes of smallholder farmers because the contractors wield greater market power over the farmers. Consequently, it is seen as a blessing by some and a necessary evil by others. This study uses a propensity score matching technique to shed light on the impact of contract farming on smallholder farmers. The study also examines the conditioners of participation in contract farming. It uses data collected from 180 smallholder poultry farmers stratified by participation in contract production. The study finds that, on average, contracted farmers earned more net revenue per bird compared to the independent farmers, by approximately 27 percent, and as such participating in contract farming could improve the welfare of these small holder poultry farmers. This finding suggests that getting smallholder commercial poultry farmers to participate in contract farming can help improve their welfare through increasing the net revenues from these birds and thereof incomes.

Keywords: Agribusiness; Institutional and Behavioral Economics (search for similar items in EconPapers)
Pages: 30
Date: 2012
New Economics Papers: this item is included in nep-afr and nep-agr
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae12:126196

DOI: 10.22004/ag.econ.126196

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