Farmer-trader vertical coordination: drivers and impact on the lotus-grain value chains in central Vietnam

Abstract

Lotus plants have emerged as a relatively new commodity in the food industry in Vietnam, with significant economic potential from its diverse applications in medicine, cosmetics, food, and decoration. Vertical coordination, involving strategic alignment and collaboration among different actors in the value chain, plays a critical role in supporting the small-grain grower-trader relationship. This study aimed to investigate the factors driving the adoption of vertical coordination mechanisms within lotus-grain value chains and to assess the impact of different coordination strategies applied by farmers on their well-being in central Vietnam. Employing a multinomial endogenous switching regression methodology, the study offers nuanced insights into the adoption patterns and impacts of various coordination strategies, controlling for both sample selection bias and unobservable factors. The results highlight the importance of trust, input management, and strategic decision-making in enhancing yield and revenue outcomes among smallholder farming households. Trust between farmers and traders significantly influences the adoption of such strategies in agricultural transactions. Higher trust levels correlate with an increased likelihood of adopting verbal, input, or written contracts. The positive impacts of input contracts on lotus grain yield and revenue, highlighting the importance of effective input management. These findings deepen our understanding of vertical coordination within lotus-grain value chains and assist stakeholders in making evidence-based decisions when selecting vertical coordination strategies for sustainable value chain management.

Keywords

• Vertical coordination
• Lotus-grain value chains
• Smallholder farming
• Welfare impact, Vietnam
• Goodness Aye, University of Agriculture, Makurdi Benue State, Nigeria
• Economic Development