Farmers' preferences for supermarket contracts in Kenya

Arbeitspapier

With 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: GlobalFood Discussion Papers ; No. 86

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Analyses of Economic Development ; Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products ; Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets ; Agricultural Markets and Marketing; Cooperatives; Agribusiness ; Agricultural Policy; Food Policy
• Subject: supermarkets ; contracts ; farmers' preferences ; choice experiment ; Kenya

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ochieng, Dennis O. ; Veettil, Prakashan Chellattan ; Qaim, Matin
• Event: Veröffentlichung
• (who): Georg-August-Universität Göttingen, Research Training Group (RTG) 1666 - GlobalFood
• (where): Göttingen
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145449
• Last update: 10.03.2025, 11:44 AM CET