Contract Farming and Poverty Reduction: The Case of Organic Rice Contract Farming in Thailand

Abstract

The views expressed in this paper are the views of the authors and do not necessarily reflect the view or policies of the Asian Development Bank Institute nor the Asian Development Bank.Names of countries or economies mentioned are chosen by the authors, in the exercise of their academic freedom, and the Institute is in no way responsible for such usage.labor and little or almost no access to agricultural extension services.This data is examined here using econometric analysis to evaluate the profitability and profit efficiency of rice contract farming, as compared with rice non-contract farming, in Thailand.We first examine the benefits of contract farming, particularly when it is promoted for organic agriculture.We then briefly discuss our methodology in measuring efficiency and also review relevant profit frontier studies on farming in developing countries.We next describe the survey data used in this study, before presenting our results from the profitability and efficiency analysis.A concluding section summarizes our main findings. Potential benefits of contract farming and organic agricultureThe existing literature on contract farming identifies several major areas where contract farming can provide benefits.From the point of view of farmers, contract farming can provide access to markets, credit, technology and inputs that they would otherwise be excluded from.Moreover, contract farming can lead to improvements in income while reducing some of the risks they face from production and price fluctuations.From the point of view of purchasers, contract farming provides greater control over volume and quality consistency; to a certain extent, it can also lower certain transaction and production costs that purchasers face.Table 1 summarizes the main potential benefits.

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