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Limitations of contract farming as a pro-poor strategy: The case of maize outgrower schemes in upper West Ghana

Catherine Ragasa (), Isabel Lambrecht and Doreen S. Kufoalor

No 1626, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: The focus in this paper is on two relatively large maize-based contract farming (CF) schemes with fixed input packages (Masara and Akate) and a number of smaller and more flexible CF schemes in a remote region in Ghana (Upper West). Results show that these schemes led to improved technology adoption and yield increases. In addition, a subset of maize farmers with high yield improvements due to CF participation had high gross margins. However, on average, yields were not high enough to compensate for higher input requirements and cost of capital. On average, households harvest 29–30 bags (100 kg each), or 2.9–3.0 metric tons, of maize per hectare, and the required repayment for fertilizer, seed, herbicide, and materials provided under the average CF scheme is 21–25 bags (50 kg each) per acre, or 2.6–3.0 tons per hectare, which leaves almost none for home consumption or for sale. Despite higher yields, the costs to produce 1 ton of maize under CF schemes remain high on average—higher than on maize farms without CF schemes, more than twice that of several countries in Africa, and more than seven times higher than that of major maize-exporting countries (the United States, Brazil, and Argentina). Sustainability of these CF schemes will depend on, from the firms’ perspective, minimizing the costs to run and monitor them, and from the farmers’ perspective, developing and promoting much-improved varieties and technologies that may lead to a jump in yields and gross margins to compensate for the high cost of credit.

Keywords: farming systems; contract farming; supply chain; technology; productivity; profitability; maize; farm inputs; agricultural policies; households; agricultural research; technology adoption; GHANA; WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; Q12 Micro Analysis of Farm Firms; Farm Households; and Farm Input Markets; Q16 Agricultural R&D; Agricultural Technology; Biofuels; Agricultural Extension Services; Q18 Agricultural Policy; Food Policy; C36 Multiple or Simultaneous Equation Models: Instrumental Variables (IV) Estimation (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-dev
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Journal Article: Limitations of Contract Farming as a Pro-poor Strategy: The Case of Maize Outgrower Schemes in Upper West Ghana (2018) Downloads
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