Impact of contract farming on rice farm performance: Endogenous switching regression

Abstract

Contract farming (CF) is increasing been used as a strategy in rice production in Ghana while there is no empirical data supporting it. This study investigated the importance of CF in rice production. Cross-sectional farm household level data collected from 350 rice farmers randomly selected across the rice production areas of Ghana was used. The adoption and casual impact of CF was estimated using endogenous switching regression and propensity score matching methods. Results revealed positive and significant relationship between CF and farm performance measures (yield and gross margins). Results indicate that, CF increases yield and gross margins significantly. It further identified educational level, rice farm size and ISFM as positive determinants of contract participation. This evidence provides strong support for efforts to promote CF in Ghana. Educated farmers should be targeted for CF participation because their propensity to participate in CF is high. Sensitising our illiterate farmers to participate in CF should be vigorously pursued. CF should also be encouraged as a means to promote the adoption of ISFM technology. CF is recommended as a good tool for developing the local rice value chain in Ghana.

Keywords

• contract farming
• impact
• rice
• endogenous switching regression