Contract Farming and Small Scale Producers: Non-traditional Vegetable Exports from Mexico

Abstract

, project #45149. I would like to thank all the contract growers, industry personnel and others for sharing their time and knowledge with me. ** I would like to thank the editor and an anonymous referee of this journal for valuable and constructive comments.

Smallholder Farmers’ Dissatisfaction with Contract Schemes in Spite of Economic Benefits: Issues of Mistrust and Lack of Transparency

“…And this experience is significantly correlated with the farmers' wish to exit the contract. Some farmers also claimed that the quantities the company paid for were less than what they had actually delivered, which has also been reported elsewhere (Huacuja, 2006;Ochieng et al, 2017).…”

“…We also analyse problems that arise if farmers -due to limited contract understanding -perceive the company's actions as opportunistic. While the specific results relate to the case of the oil palm contract in Ghana, comparison with other examples from the literature suggests that similar problems of mistrust and lack of transparency also occur in many other contract schemes in various developing countries (Eaton & Shepherd, 2001;Glover, 1987;Huacuja, 2006;Ochieng et al, 2017;Saenger, Torero, & Qaim, 2014;Schipmann & Qaim, 2011;Singh, 2002). Our results may encourage follow-up research to investigate the benefits and challenges of contracted smallholders beyond narrowly defined economic indicators.…”

“…Monopsony power makes farmers more dependent and vulnerable to the contractor (Cai et al, 2008;Eaton & Shepherd, 2001) and generates asymmetric power relations Key & Runsten, 1999). For instance, a monopsonist can ration procurement, lower prices, or increase quality requirements in times of supply abundance (Bijman, 2008;Glover, 1987;Huacuja, 2006).…”

“…Monopsony power is particularly problematic if farmers perceive the actions of the company as opportunistic, because farmers are powerless towards such (perceived) behaviour. The existing literature includes reports about the perceived manipulation of quality standards and reductions in the price received or the quantity weighed (Eaton & Shepherd, 2001;Glover, 1987;Huacuja, 2006;Ochieng et al, 2017;Singh, 2002). Frequently-reported examples of the perceived execution of the company's monopsony power are reported weighing losses as a result of long waiting hours at either the farm or the company gate.…”

“…But distrust and lack of transparency can easily lead to perceived unfairness, which is then hard to prove or disprove (Glover, 1987;Rist, Feintrenie, & Levang, 2010). Some contract schemes do not allow farmers to be present at the time of the weighing or grading (Huacuja, 2006), which further decreases transparency and raises the farmers' suspicion and mistrust (Eaton & Shepherd, 2001;Saenger et al, 2014;Schipmann & Qaim, 2011). In the sweet potato supply chain in the Philippines, the price setting of contractors is largely intransparent and perceived as unfair by farmers; yet, examinations of the price margins revealed that the companies are actually not acting opportunistically (Batt & Cadilhon, 2007).…”