Farmers’ preferences for supermarket contracts in Kenya

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWith the modernization of global agri-food systems, the role of contract farming is increasing. This also involves smallholder farmers in developing countries. While previous studies have looked at economic impacts of contract schemes on smallholder farmers, little is known about farmers' preferences for contracting in general, and for specific contract design attributes in particular. Better understanding farmers' preferences and constraints is important to make smallholder contract schemes more viable and beneficial. This article builds on a choice experiment to analyze farmers' preferences and preference heterogeneity for contracts in Kenya. In the study region, supermarkets use contracts to source for fresh vegetables directly from preferred suppliers. However, farmer dropout rates are high. Mixed logit models are estimated to examine farmers' attitudes towards critical contract design attributes. Having to deliver their harvest to urban supermarkets is costly; hence farmers require a significant output price markup. Farmers also dislike delayed payments that are commonplace in contract schemes. The most problematic contract attribute is related to unpredictable product rejection rates, which substantially add to farmers' risk. Designing contracts with lower transaction costs, more transparent quality grading, and fairer risk-sharing clauses could enhance smallholder participation in supermarket procurement channels.

Risk Transfer Mechanism for Agricultural Products Supply Chain Based on Weather Index Insurance

“…When E π WI C w * C = E π sc I * sc + n Θ r − k − E π F I * d , under the risk transfer mechanism, the company withdraws all profits increased from the coordination of the supply chain. Combining the formulas (2), (6), and (20), we can…”

“…According to the analysis of Proposition 2, we can see that the total profit of the company and the farmer under the decentralized decision is less than the profit under the centralized decision. It shows that when the company and the farmer are maximizing their own profits, they make decisions for their own maximum benefits instead of the 6 Complexity benefit of the supply chain system, which leads to a loss of performance in the supply chain system. Therefore, it is necessary to design a reasonable mechanism to improve the farmer's optimal agricultural investment level under decentralized decision so as to ease the "double marginalization" brought about by the distorted investment level of agricultural resources, so as to ensure the stable operation of the supply chain system.…”

“…In response to the weather risk encountered in agricultural production activities, some experts studied the design of the corresponding contract mechanism from the dimension of supply chain operational hedging in order to minimize the losses caused by weather risk [5][6][7]. However, these studies mainly focus on the design of coordination mechanisms among supply chain members, lacking effective risk externalization mechanisms.…”

“…From Figure 11, we can see that under the risk transfer mechanism WI, φ, T , when there is no disastrous weather or catastrophic weather is moderated r < 6 125 , the insurance compensation obtained from the insurance market is lower than the purchase insurance payment cost, which will make the decentralized supply chain performance lower than 6 6.2 6.4 6.6 6. Figure 7: Effect of w F and r on φ.…”

Willingness to contract versus opportunity to contract: a case study in Kenya's French bean export market

“…Although there is a large theoretical literature on relational contracting and reputations, there have been few empirical studies published (see discussion in [Lafontaine and Slade, ]). We are aware of only three other articles that specifically test for the impact of contract enforcement on contract farming: a field experiment conducted in Vietnam (Saenger et al., ), a choice experiment conducted in Thailand (Schipmann and Qaim, ), and a choice experiment conducted in Kenya's supermarket fresh produce supply chain (Ochieng et al., ). Both the study in Vietnam and the study in Thailand found that lack of exogenous contract enforcement mechanisms impacted the intensive supply margins for these two markets.…”