Responses to Forces Shaping Agricultural Marketing: Contracting

Linking agribusiness and small-scale farmers in developing countries: Is there a new role for contract farming?

“…The increased industrialised nature of agriculture in both developed and developing countries is largely the result of biological and information technologies (Schrader, 1986), economic growth, mechanisation, the increasing scale of organisation and the modernisation of production, processing and distribution systems (Sofranko et al, 2000). Drabenstott (1995: 14) argues that there are two powerful forces driving this process of industrialisation: a new consumer and a new producer.…”

“…The result of these forces is that the industry has evolved to optimise efficiency and minimise transaction costs, and this has resulted in fewer larger farms, the concentration of farming, and specialisation (Schrader, 1986;Frank & Henderson, 1992;Rhodes, 1993;Ling & Liebrand, 1995;Pasour, 1998). Agriculture has therefore seen a move away from open market production and has become increasingly vertically coordinated with agribusiness in order to produce a greater range of high-quality differentiated products (Babb, 1992;Sporleder, 1992;Royer, 1995;Peterson & Wysocki, 1998;Pasour, 1998;Pritchett & Liu, 1998;Goodhue, 1999;Sofranko et al, 2000).…”

“…There is a universal loss of autonomy as farmers operate under a centralised control system (Schrader, 1986;Currie & Ray, 1986;Levin, 1988;Korovkin, 1992;Morvaridi, 1995;Pasour, 1998;Rehber, 1998;Wolz & Kirsch, 1999;Colchao, 1999;Sofranko et al, 2000) and the contracted farmer is sometimes reduced to little more than a hired hand (Clapp, 1994). Conversely, it can be argued that the independent farmer who is heavily indebted has much the same status (Watts, 1994).…”

“…Cost is reduced as a result of a more synchronised input-output processing function (Kilmer, 1986;Azzam, 1996) and the cost and financing of production are passed on to the farmer (Schrader, 1986) without the loss of control (Rhodes, 1993). The company can ensure that the quality of large volumes of the raw commodity is better controlled (King, 1992;Featherstone & Sherrick, 1992;Goodhue, 1999) and that the company's technology is adopted properly by the producer (Leathers, 1999).…”

The New Institutional Economics: Applications for Agricultural Policy Research in Developing Countries

“…The increased industrialized nature of agriculture in developed as well as developing countries is largely the result of biological and information technologies (Schrader, 1986), economic growth, mechanization, the increasing scale of organization and the modernization of production, processing and distribution systems (Sofranko et al, 2000). Drabenstott (1995:14) argues that there are two powerful forces driving this process of industrialization: a new consumer and a new producer.…”