Contract Farming in Developing Countries: An overview

Abstract

This paper presents a review of the literature on contract farming (CF), focusing on recent empirical research on the economic impact of CF. The paper starts with an explanation of the phenomenon of CF, providing definitions, typologies, models and objectives. Using a Transaction Costs Economics framework, the paper explains for which products and market CF seems most suitable. The empirical literature on CF is assessed by answering three questions: Why do smallholders engage in CF? Are smallholders included in or excluded from CF arrangements? What impact does CF have on smallholder income and rural development? Finally, the paper identifies the conditions under which smallholders are most likely to benefit from CF schemes