Quarterly Journal of International Agriculture No. 4/09
Efficiency and equity in contract farming:
evidence from a case study of dairying in India
Pratap S. Birthal
International Crops Research Institute for the Semi-Arid Tropics,
Patancheru, India
Pramod K. Joshi
National Centre for Agricultural Economics and Policy Research, New
Delhi, India
Abstract
Contract farming is emerging as an important form of vertical
coordination in India, and its economic and social consequences are
attracting considerable attention in the agri-food policy debates. In
this paper, we have examined issues of efficiency and equity in
contract farming of milk and arrive at the following conclusions.
First, contract farming is more profitable than independent production
mainly because of its potential to reduce marketing and transaction
costs. Second, small-scale producers face higher marketing and
transaction costs, and they derive significant benefits from
participation in contract farming. Third, we do not find any difference
in price realize¬tion by contract and independent producers, hence no
extraction of monopsonistic rent by the firm.
Keywords: contract farming, efficiency, equity, dairy, India
JEL: Q12, Q13, D61, D63, Q18
Vol. 48 (2009), No. 4: 363-378