An Assessment Of The Factors Affecting Contract Farming: The Case Of Sugarcane Production In Migori County, Kenya

Abstract

This study is an empirical analysis of the factors that influence participation in a contract farming scheme and the impact of contract participation on sugarcane farm households. The study characterizes the nature of the contract scheme. Through a probit model and participatory methodologies the study identifies the factors that influence participation in the contract farming scheme and analyses the impact of participation on farm household welfare. The study relies on cross-sectional data from 115 contract and 69 noncontract sugarcane growers collected through a household survey, from 30 farmers through focus group discussions and key informant surveys. The study shows that the contracted sugarcane growers were not necessarily better-off than non-contracted farmers from welfare perspective. The contracted sugarcane farmers were experiencing a number of problems including higher cost of administering the contract, than those for the non-contract growers. The study also found that the non-contract growers had more land under food crops than contract farmers whose land was mainly contracted for sugarcane growing. Hence the non-contract farmers appeared more food secure. The study concludes that the main factors influencing farmer participation in sugarcane contracts are:- (i) farm distance to the company sector office (ii) ownership of assets and access to external farm support (iii) risk-averseness (iv) farm household size, and (vi) education of the household head. The contracted farmers also claimed that they experienced high levels of sugarcane post-harvest losses because weighing of their produce was being done at the sugarcane company factory reception area rather than at the farm gate. The study thus recommends the following: (i) reviewing of contract terms and conditions with the objective of reducing contract administration costs; (ii) incorporating soil sampling and testing costs in the production credit extended to farmers; (iii) providing periodic sugarcane technical training to farmers; (iv) weighing of the sugarcane at the farm gate; and (v) payment of sugarcane delivery based on quality (sucrose content). This study also recommends that the contracted farmers be encouraged to allocate part of their land to production of food crops to enhance food security.