Contract farming and the adoption of sustainable farm practices: Empirical evidence from cashew farmers in Ghana

Abstract

Contract farming has been shown to increase agricultural productivity and thus welfare of farmers in developing countries. However, studies that look at the potential environmental effects of contract farming remain quite scanty. This is however crucial, since contract farming may contribute to intensification in cultivation of the contracted crops, in terms of area and the intensity of inputs used. This study investigates the impact of participation in contract farming on sustainable farm practices, using a marginal treatment effects (MTEs) approach to account for potential selection bias and heterogeneity across households. The empirical results show significant heterogeneity in the effects of contract farming on the intensity of sustainable farm practice use. In particular, farmers with high propensity to participate in contract farming tend to have low probabilities of using sustainable farm practices. The findings of this study not only provide new insights into the heterogeneous effects of contract farming, but also entry points for further research to address the dual challenge of agriculture to produce sufficient food, while reducing the adverse impact on the environment.

Welfare impacts of adoption of improved soybean varieties in northern Ghana

“…The study's outcome is in conformity with the results of Workineh et al (2020) who found distance as a decreasing function of probability of adoption of farm innovations such as wheat varieties. Many pieces of literature (e.g., Dubbert et al, 2021, Danso-Abbeam et al, 2022a…”

Smallholder cashew production and household livelihoods in the transition zone of Ghana

“…Cashew nuts for the past decade have become popular on the international market, increasing export (Dubbert et al, 2021). In 2019, Ghana on the international market contributed about 171,924 mt of nuts to the world production volume, thus signifying the importance attached to cashew production in this part of the world (Akyereko et al, 2022).…”

A value chain perspective towards sustainable agricultural practices: the case of vegetables in Chile

“…Most of the literature on food chains that has studied adoption of SAPs focuses on the dyadic relationship between farmers and lead firms (Freidberg, 2020), specifically on the role of lead firms and the governance forms used to coordinate the adoption of SAPs with farmers (Achabou et al, 2017;Freidberg, 2020). To pursue the adoption of SAPs, lead firms usually operate through hybrid governance forms (e.g., formal contracts) and, in parallel, stimulate close relationships with farmers to sustain the relationship and create mutual benefits (Dubbert et al, 2021;Touboulic et al, 2021;Veldwisch and Woodhouse, 2021). Hence, this literature has investigated how contractual provisions (e.g., quality, price, payment schemes) and relationship attributes (e.g., trust and satisfaction) between farmers and lead firms can support farmers to adopt SAPs (Gualandris and Kalchschmidt 2016).…”

“…However, coordination works better if farmers and buyers maintain close and sustainable business relationships based on long-lasting, stable and mutual advantages. Studies have found that lead firms involve farmers through formal contracts (Bush et al, 2015;Ghadimi et al, 2016;Freidberg, 2020), in which contractual provisions specify SAP adoption (e.g., the intensity and types of inputs used) (Ghadimi et al, 2016;Thomson et al, 2020;Dubbert et al, 2021). However, Touboulic et al, (2021) stress that the pressure to adopt SAPs is effective only when there is a close, mutually trustworthy, relationship between the lead firm and the farmer.…”

“…Value chain research has mainly focused on the role of lead firms 22 and the governance forms used to coordinate with farmers to support the adoption of SAPs (Achabou et al, 2017;Freidberg, 2020). To successfully support the adoption of SAPs, lead firms operate through hybrid governance forms (e.g., formal contracts) and stimulate close relationships with farmers by for instance trust building and creating mutual benefit (Freidberg, 2020;Dubbert et al, 2021;Touboulic et al, 2021;Veldwisch and Woodhouse, 2021). Thus, this literature has analysed how contractual provisions (e.g., quality, price, payment schemes) and relationship attributes (e.g., trust and satisfaction) between farmers and lead firms can help 20 Food systems are perceived as the interaction of farmers with upstream and downstream value chains, linking input suppliers (i.e., R&D agricultural industries), wholesalers, processors, retailers and consumers (Reardon et al, 2019).…”