The hypotheses of this thesis is: There is a positive relationship between contract farming and the economic benefits of broiler producers and the development of the broiler sector in Jezzine District. Findings from farmer’s interviews indicated that sustainability, guaranteed price, risk reduction, credit facilities and technical aids are the main reasons for signing a contract. In contrast, Farmers have expressed problems concerning the contractors’ responsibilities such as delay in payment and delivery. Also, when prices are high, it was argued that farmers were selling the products in the open market.
This thesis has been realized within the agribusiness sector and experiments the Transaction Cost Theory a branch of the New Institutional Economy which explain market failure caused by many factors. Transaction costs are associated with carrying a transaction between buyers and sellers. This study has been conducted between 2014 and 2017; and has collected data from 11 broiler producers in Jezzine, Lebanon, about: Production costs, capital investment, revenues, land tenure, access to infrastructure, and information about the contract.
Table of Contents
1. Introduction
2. Literature Review
3. Theoretical Foundations
3.1 Foundation in Transaction Cost Theory
3.2 Factors for the emergence of contract farming
3.2.1 Bounded Rationality
3.2.2 Opportunistic Behavior
3.2.3 Asset Specificity
3.2.4 Level of Uncertainty
3.2.5 Frequency of Transactions
4. Hypotheses Development
5. Methodology
6. Results
7. Discussion
8. Conclusion
Research Objectives and Key Topics
This thesis examines the impact of contract farming on the economic sustainability of broiler producers in the Jezzine District of Lebanon. By utilizing the Transaction Cost Theory, the research evaluates how contractual arrangements influence income, production efficiency, and market participation for smallholder farmers compared to independent producers.
- Application of Transaction Cost Theory within the Lebanese agribusiness sector.
- Comparative analysis of contract vs. non-contract broiler producers.
- Evaluation of factors influencing farmers' decisions to engage in contract farming.
- Assessment of the role of institutional support, credit facilities, and technical aids.
- Impact analysis of contract farming on long-term farmer income and economic welfare.
Excerpt from the Book
Factors for the emergence of contract farming
We consider many factors for the emergence and evolution of contract farming: bounded rationality, opportunistic behavior, asset specificity, uncertainty, and frequency of transactions; in the absence of these factors, spot market trading is most efficient, and contract farming would not occur since agribusiness firms could buy all their produce from the spot market which would be instantly and perfectly responsive to their demand (Williamson, 1979; Simmons, 2002). However, in reality one or more of these problems may happen which indicates the need for contract farming. Another procurement option for agribusiness firms is to operate their own plantations; yet, with this option they may face other transaction costs such as supervision costs, costs of land and skill acquisition, and crop risk. Therefore, contract farming may occur only if it generates lower transaction costs compared to the other alternatives of market arrangement (Hobbs, 1996; Eaton & Shepherd, 2001; Simmons, 2002). Among the many aspects in current analyses are organizational arrangements like:
Bounded Rationality: Contracted parties suffer from information deficiencies and are unable to process all the information available to them to formulate solution and solve complex problems in a costless and straightforward way (Simmons, Winters & Patrick, 2005; Bijman, 2008);
Opportunistic Behavior: The probability that the other party will engage in opportunistic behavior is hard and costly to predict. Actors seek self-interest without considering the other party; they can deceive, lie, cheat and steal (Bijman, 2008);
Summary of Chapters
Introduction: This chapter contextualizes the global demand for food and the transformation of agricultural value chains, highlighting the shift from traditional spot markets to vertical integration and contract farming.
Literature Review: This section examines existing research on contract farming, focusing on how risk reduction and incentives help smallholders overcome market imperfections.
Theoretical Foundations: This chapter details the New Institutional Economics and Transaction Cost Theory as the primary framework for explaining why firms integrate production and why farmers enter contracts.
Hypotheses Development: This chapter proposes that a positive relationship exists between contract farming and the economic benefits/sustainability of broiler producers.
Methodology: This chapter outlines the two-year study involving a survey of 11 broiler producers in the Jezzine District, using propensity score matching to analyze the impact of contracts.
Results: This chapter presents data comparing contract and non-contract producers, showing that participants often have better access to inputs and technical advice, despite common payment and delivery disputes.
Discussion: This chapter reflects on the institutional challenges of the broiler industry and the mixed success of contract farming as a development strategy in Lebanon.
Conclusion: This chapter summarizes findings, confirming that contract farming generally improves economic welfare but remains constrained by risks like debt and unequal power relations.
Keywords
Contract farming, broiler producers, economic sustainability, transaction cost theory, Lebanon, Jezzine District, vertical integration, market failure, smallholders, agribusiness, propensity score matching, agricultural value chains, food security, rural development, poultry industry.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on the impact of contract farming arrangements on the economic sustainability and income of smallholder broiler producers in the Jezzine District of Lebanon.
What are the primary themes discussed in the study?
Key themes include Transaction Cost Theory, market failures, vertical coordination, the role of institutional support, and the welfare effects of contract farming on family farmers.
What is the main hypothesis of the study?
The study hypothesizes that there is a positive relationship between participating in contract farming and the economic benefits and long-term sustainability of broiler producers.
Which scientific methodology was utilized?
The researcher employed a quantitative approach using a questionnaire for data collection from 11 farmers, followed by the application of the propensity score matching method to estimate the treatment effects of contract participation.
What topics are covered in the main body?
The main body covers theoretical frameworks (New Institutional Economics), literature reviews on global value chains, an empirical analysis of farmers in Lebanon, and a critical discussion of contracting risks.
Which keywords characterize this thesis?
Key terms include contract farming, broiler producers, transaction costs, agribusiness, economic sustainability, and the Jezzine District.
Why is Transaction Cost Theory relevant to this study?
It provides an explanation for why market failures occur and why agribusiness firms and farmers choose vertical integration or contracts to minimize the costs associated with uncertainty, information asymmetry, and asset specificity.
What were the specific challenges mentioned by farmers in the study?
Farmers reported concerns such as payment delays, issues with delivery schedules, inadequate access to technical inputs, and difficulty in understanding complex contract language.
Does contract farming always lead to better outcomes for farmers?
The study concludes that while it generally increases income, it also introduces risks such as debt, dependency on the integrator, and the potential for "agribusiness normalization" where benefits decline over time.
- Citation du texte
- Rodrique Kozhaya (Auteur), 2020, Contract farming and its impact on broiler producers in Lebanon. A systematic review, Munich, GRIN Verlag, https://www.grin.com/document/538103
