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Is Contract Farming More Profitable and Efficient Than Non-Contract Farming-A Survey Study of Rice Farms In Taiwan

Author

Listed:
  • Chang, Ching-Cheng
  • Chen, Chi-Chung
  • Chin, Min-Ching
  • Tseng, Wei-Chun
Abstract
Trade liberalization and globalization has modernized the food retail sector in Taiwan, affecting consumers, producers and trade patterns. These changes have placed significant pressures on farmers and processors including more stringent quality control and product varieties. The government has launched a rice production-marketing contract program in 2005 to assist rice farmers and the agro-business sector to work together as partners. The minimum scale for each contract is 50 hectares of adjacent rice paddies with 50 participants including rice farmers, seedling providers, millers and marketing agents. In order to evaluate the outcome of this program, a survey is conducted in the summer of 2005 after the first (spring) crop is harvested. Information of price and value of output and major variable and fixed inputs are collected along with characteristics of the farmers and farms. The survey results show that the average revenue of a contract farm is about 11 percent higher than an average non-contract farm. The per hectare cost of production in a contract farm is about 13 percent lower and as a result the average profit margin under contract is more than 50 percent above those without contract. A swtiching regression profit frontier model is adopted to further investigate their efficiency performance. The result indicates that an average contract farms is 20 percent more efficient than an average non-contract farm in a comparable operating environment. The result also suggests that although contract farming has potential to improve the profit of smallholders, it is not a sufficient condition for such improvement.

Suggested Citation

  • Chang, Ching-Cheng & Chen, Chi-Chung & Chin, Min-Ching & Tseng, Wei-Chun, 2006. "Is Contract Farming More Profitable and Efficient Than Non-Contract Farming-A Survey Study of Rice Farms In Taiwan," 2006 Annual meeting, July 23-26, Long Beach, CA 21374, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea06:21374
    DOI: 10.22004/ag.econ.21374
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    Citations

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    Cited by:

    1. Felicetta Carillo & Francesco Caracciolo & Luigi Cembalo, 2017. "Do durum wheat producers benefit of vertical coordination?," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-13, December.
    2. BEHERA, Deepak Kumar & SWAIN, Braja Bandhu, 2021. "Coperative-Led Contract Farming On Farm Productivity In India," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 21(1), pages 49-58.
    3. Swain, B.B., 2016. "Does Technological Linkage in Contract Farming Increase Farm Productivity and Efficiency? The Case of Hybrid Paddy Seed Cultivation in Undivided Andhra Pradesh," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 29(2).
    4. Khan, Muhammad Fawad & Nakano, Yuko & Kurosaki, Takashi, 2019. "Impact of contract farming on land productivity and income of maize and potato growers in Pakistan," Food Policy, Elsevier, vol. 85(C), pages 28-39.
    5. Marwa, Erick & Manda, Julius, 2021. "Do Youth Farmers Benefit from Participating in Contract Farming: Evidence from French Beans Youth Farmers in Arusha, Tanzania," 2021 Conference, August 17-31, 2021, Virtual 315907, International Association of Agricultural Economists.
    6. Gouranga Das & Ranajoy Bhattacharyya & Sugata Marjit, 2023. "Contract Farming and Food Insecurity in an Open Competitive Economy: Growth, Distribution, and Government Policy," JRFM, MDPI, vol. 16(4), pages 1-26, April.

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    Keywords

    Land Economics/Use;

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