Contract Farming in Potato Production: An Alternative for Managing Risk and Uncertainty

R.S. Tripathi, Ram Singh and Sube Singh

Agricultural Economics Research Review, 2005, vol. 18, issue Conference

Abstract: The cost of potato cultivation has been found 17 to 24 per cent higher under contract farming over various costs than under non-contract system, mainly due to high investments on seeds, fertilizers and machine power. Yield has been found 255.78 quintals per ha in the contract farms, which is 8.84 per cent higher over the potato yield obtained from the non-contract farms. Gross income has been Rs 99753 per ha in the contract farms as against Rs 41572 per ha in non-contract system. The sale price of potato has been found much higher (Rs 390/q) for contract than non-contract farms (Rs 177 /q). The net return over operational cost (cost ‘A1’) has been found as Rs 11882 per ha in non-contract farms, which increased more than five-times under contract farming system, it being Rs 62982 per ha. Similarly, the net return has been found five-and-a-half times more in contract than non-contract system over cost C1 (without rental value of the land). The net return over cost C2 has been observed as Rs 51866 per ha for contract farms and only Rs 800 per ha under non-contract system. Benefit-cost ratio on various costs has been found to vary from 1.40 to 1.02 for without contract and from 2.71 and 2.08 for contract farming. The impact of contract farming has been quite visible and remarkably favourable on yield and profitability of potato production at the existing pattern of resource-use and production technology prevalent in the Haryana farming system. The regression analysis has indicated significant influence of manure and fertilizers and human labour on the return of potatoes grown under contract farming situation. MVP-MFC ratios of plant protection, manure-fertilizers and human labour have been found much higher, indicating tremendous scope to increase the profitability in potato production under contract farming situation whereas in the case of non-contract system, irrigation and plant protection have shown sufficient scope to raise the crop income. The yield uncertainty has been less in contract than non-contract potato production. There has been no price uncertainty in the contract farming of potato whereas in the non-contract system, it exits to a large extent due variations in the price of potatoes sold in the market. These findings have clearly underlined the superiority of contract farming over non-contract farming system in potato production.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aerrae:58460

DOI: 10.22004/ag.econ.58460

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