Humboldt-Universität zu Berlin - Quarterly Journal of International Agriculture

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


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