Determinants of Smallholder Farmers’ Participation in Contract Farming and Its Effects on Sorghum Productivity in Siaya County, Kenya

Abstract

Sorghum production in Siaya County is inherently low. To mitigate this, the East Africa Breweries Company has entered into a public-private partnership arrangement with the County Government of Siaya to increase sorghum production through contract farming. Contract farming is regarded as among the viable solutions for addressing farmers’ problems by providing quality inputs such as seeds and fertilizers, improving access to markets, promoting new agricultural innovations and consequently raising household incomes. Since farmers enroll themselves in sorghum contract farming, the factors influencing their participation and its effect on productivity in Siaya county is not clearly understood. The objectives of this study were to: determine factors influencing smallholder farmers’ decision to participate in contract farming; determine smallholder farmers' preferences for various sorghum contract design attributes; and determine the effect of contract farming participation on smallholder farmers’ sorghum productivity. A multistage sampling procedure was used to select 240 smallholder sorghum farmers (105 contracted and 135 non-contracted). A semi-structured questionnaire was administered through face-to-face interviews to smallholder sorghum farmers. Logistic regression was used to estimate determinants of smallholder sorghum farmers’ participation in contract farming. Their preference for farming contract design attributes was estimated by conjoint analysis. The effect of participation in contract farming on sorghum productivity was estimated using endogenous switching regression model. Results indicate that age, gender, education of the household head, number of active household members, farmer group membership, distance to the nearest main road, and asset ownership positively influenced participation in contract farming. Distance to extension agent office negatively affected participation in the contract farming. Smallholder sorghum farmers preferred farming contract offering high prices, deferred payments, and financial services. Participation in sorghum contract farming was associated with 104% gain in sorghum productivity. Counterfactual results indicate that had non-contracted smallholder farmers participated in contract farming, they would have sorghum yield gain of 116%. These sorghum yield impacts of contract farming highlight the potential of achieving significant growth in sorghum production in Kenya through promoting contract farming among a broad base of smallholder farmers. Designing of such contracts should be cognizant of farmers’ socio-economic characteristics, as they influence their decisions to participate in the contracts, and the need for contract terms that are responsive to farmers’ preferences. Public investments to improve access to agricultural information and extension services and rural access roads would play important facilitative role for farmers’ effective engagement in contract farming.