Evaluating Contract Farming

September 20, 2022

Investigators: CDEP Affiliate Jack Willis, Lorenzo Casaburi

Contract farming, whereby a farmer and a buyer commit upfront to trade at harvest time, is considered a promising innovation to foster the commercialization of smallholder-based agriculture. As a form of outsourcing, it can exploit increasing returns to scale in processing, transport, and branding (often missing in spot markets), while preserving smallholder land property rights and avoiding the establishment of large plantations. As a bundled intervention for smallholder farmers, it can help overcome barriers to the adoption of high return technologies, by tying input loans to the contract, providing agricultural extension, and guaranteeing a market. Yet, despite the growing diffusion of contract farming schemes, there is limited evidence on their effects (Arouna et al. 2021).

In the project, we will use a randomized experiment to evaluate the impact of contract farming on farmer technology adoption, income and welfare in Uganda and Rwanda. Our research design consists of two different treatment groups, in addition to the control group. The first treatment group involves only the offering of a contract farming agreement. The second treatment group also includes the provision of agricultural inputs (seeds and fertilizers) on a credit basis.