Contract Farming as an Institution for Integrating Rural Smallholders in Markets for Livestock Products in Developing Countries: (I) Framework and Applications

Contract Farming as an Institution for Integrating Rural Smallholders in Markets for Livestock Products in Developing Countries: (I) Framework and Applications

Pro-Poor Livestock Policy Initiative: A Living from Livestock

Year of publication 2008

Pages 12p.

Publisher FAO ;

Product type Document

Series title Pro-Poor Livestock Policy Initiative (PPLPI) Research Report

Edition 1

Full item page

Synopsis (short abstract) This report provides an overview of the theoretical underpinnings of the emergence of contract arrangements versus reliance on spot markets. Transaction costs economics is the dominant school of thought in the literature on contracts, particularly with respect to the rationale of firms to vertically integrate instead of engaging in direct exchange in the open market. Vertical integration and other forms of exchange organisation are traced to the objective of economic agents to reduce transaction costs in an environment where market imperfections predominate and economic agents behave opportunistically.

Language English

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Contract Farming as an Institution for Integrating Rural Smallholders in Markets for Livestock Products in Developing Countries: (II) Results in Case Countries
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This report provides an assessment of the efficiency and effectiveness of contract farming as an institution for integrating rural smallholders in markets for livestock products, using detailed reviews of particular case studies on contract farming in India, Thailand, the Philippines and Viet Nam, and in which the principal author participated. Two forms of contracts engaged in by producers and market intermediaries existed: formal and informal contracts. In general, formal contracts were writte n contracts between an integrator company and a farmer, where the rights and obligations of each party were strictly defined. Informal contracts were unwritten but nevertheless binding agreements between a farmer and his market intermediary, which could either be a trader for inputs or outputs, or with a cooperative which he is a member of, on the provision of inputs or the marketing of output, or both.
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This is the 45th of a series of Working Papers prepared for the Pro-Poor Livestock Policy Initiative (PPLPI). The purpose of these papers is to explore issues related to livestock development in the context of poverty alleviation. Livestock is vital to the economies of many developing countries. Animals are a source of food, more specifically protein for human diets, income, employment and possibly foreign exchange. For low income producers, livestock can serve as a store of wealth, provide drau ght power and organic fertiliser for crop production and a means of transport. Consumption of livestock and livestock products in developing countries, though starting from a low base, is growing rapidly.
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