Determinants of Smallholder Farmers’ Participation in Zambian Dairy Sector’s Interlocked Contractual Arrangements

Abstract

<p>Linking smallholder farmers to modern value chains through contract agriculture (CA) is one of the rural development strategies being promoted to address the challenge of smallholders’ integration in markets. However, the conditions under which CA enhances smallholders’ prospects for inclusion in modern value chains is still debatable. This paper examines the determinants of smallholders’ participation in Zambian dairy markets through interlocked contractual arrangements (ICAs). A multi-stage sampling design was used to select 266 households from milk shed areas from three districts in Lusaka and Central provinces of Zambia. A double-hurdle model was estimated from data collected through semi-structured questionnaires, key informant interviews and focus group discussions. Key determinants of smallholders’ participation in ICAs included ownership of improved breed animals, MCC milk price, access to dairy marketing information, income from other sources and landholding size. While most of these factors also affected the proportion of milk sold, the following were also important: household head education level, cattle rearing culture, extent of supplier’s dependency on buyer and trust in the exchange relationship. To enhance smallholders’ market participation, there is need to facilitate their access to extension services, infrastructure (breeding centres, MCCs and water) and affordable stock feed, and to offer them an effective milk price that is higher than the spot market price. Promotion efforts should target smallholders that are literate, from a cattle rearing culture, and particularly encourage youth and women participation. There is also need for building trust in the exchange relationship and judicious use of power by processors.</p>

A Double Hurdle Estimation of Sales Decisions by Smallholder Beef Cattle Farmers in Eswatini

“…The model is popular in market participation literature, applied in dairy [80], poultry [81], small-ruminants [77] and beef cattle [82]. However, the model is best suitable for non-random samples [73] and is deficient when the normality assumption is violated [83]. For these reasons, this approach was not considered for our analysis.…”

“…The model is a generalization of the Tobit, where two separate stochastic processes determine the participation and quantity decisions. The notable difference between the two-stage models is based on the assumption of the Heckman, that non-participants will not participate under any circumstance [83]. Contrary, the double hurdle assumes that the decision not to participate is a deliberate choice [84], thus the zeros from non-participants are considered as corners solution in the utility maximizing model [85].…”

“…Notably, Ndoro et al [12] applied the model in analyzing cattle commercialization in South Africa. The model has also been applied in dairy [83], and crop marketing [84,86].…”

“…The farmer-household characteristics capture the capability of the farmer to employ production resources and manage marketing processes. Education enhances skills application and information utilization required for cattle marketing [83]. The variable is also an indicator for the adoption of innovations and new technology necessary for increasing farm productivity.…”

“…Therefore, an increase by one year of formal education is related to a 0.16% increase in the number of cattle offered for sale, implying that educated farmers sell more cattle than their less educated counterparts. It is expected that educated farmers possess meaningful comprehension of production and marketing processes, thus actively involved in cattle marketing [83].…”