Chapter 3 Prospect of Contract Farming -Experiences in Developed and Developing Economies and the Current Situation in China-

This chapter provides a selective review of empirical research on the contract farming, poverty impact of high-value agriculture, and modern marketing methods.The focus of this chapter is to review what types of contract arrangements have worked or not worked under various circumstances and to explore the common findings from the developed and developing countries' experiences.What can we learn from the experiences in contract farming schemes in developing countries as well as developed countries?What role can the government play for successful contact farming?Are there any patterns in contract farming models according to the commodity type, the farmer scale, or land size?What are the modern marketing methods found in high value agriculture commodities?This chapter aims to provide some answers to these questions.The empirical research reviewed is mainly from the experience in developing countries, focusing on the poverty impact in Asia, Africa, and Latin America, along with some from the developed countries.Contract farming has been studied since 1970s, with the early empirical research being mostly descriptive.For example, case studies in Africa have focused on the historical and political context of contract farming, conflicts between farmers and the contracting firms, and the imbalance of power between the two parties, among others.As more data at the farmer level were collected, more rigorous studies began to emerge.There are studies that have skeptical views as well as those that discuss the benefits of contract farming for farmers.This chapter examines both of these views in detail.The chapter is organized into six sections.The first section provides some background as to the importance of contract farming in vertical coordination.The second section reviews the empirical research of qualitative studies.The third section assesses the studies that used more rigorous econometric analysis.The fifth section discusses the preliminary results from the firm survey of the pork industry conducted in 2008 in Henan province and Jilin province in China.The sixth section provides the concluding remarks.