Why Do Smallholders Decide to Produce on Contract? The Views of Traditional Staple Foods Producers in the Upper East Region of Ghana

Abstract

The recent growth in contract farming schemes particularly in developing countries has sparked controversy over its economic and welfare impacts on participating smallholders. This has given rise to a body of literature that analyses various aspects of the phenomenon. However, the question of why smallholders choose to participate in a contract farming scheme has not been thoroughly explored. Seldom are smallholders themselves asked explicitly why they choose to produce on contract for agribusiness firms, as many studies take it axiomatic that smallholders produce on contract solely because of the income benefits they expect to derive. This study explores the motivational factors behind smallholders decision to produce traditional staple foods on contract for local agribusiness firms in Tampola, a typical farming community in the north-eastern part of Ghana. The goal is to ascertain and highlight smallholder constraints that are embedded in such motivational factors to enhance agricultural policy intervention. Using a qualitative research method, I find among other things that, the volatility of the mainstream input and output markets for agriculture were sources of motivation for smallholders to produce on contract. I also find that the urge to sell farm produce in weight rather than in volumes was another motivating factor. The desire to earn surplus food induced by the high yields potential of contract farming for household consumption was also another source of motivation for smallholders. The study concludes with some recommendations for agricultural policy that are meant to address some smallholder constraints that emanates from the motivational factors. Among them is the need for the state and other development agencies to give the needed attention to the development of food crop value chains, not only to enhance food security, but also the creation of non-farm employment opportunities for smallholders.