Factors influencing participation in contract farming among smallholder tobacco producers in Malawi

Abstract

This paper used cross-sectional survey data from 132 contract and 64 non-contract smallholder tobacco farmers drawn from Kasungu district in Malawi to determine factors that influence their participation in contract farming schemes. We find systemic differences in the socioeconomic characteristics of the two farmer types. Household head gender (Z=1.786, p=0.074) and education level (Z=2.043, p=0.041), household size (Z=2.232, p=0.026), land size allocated to tobacco cultivation (Z=3.016, p=0.003), and access to guaranteed markets (Z=2.102, p=0.036) increase the probability of contract participation. Farmers’ perception that some contract terms are not known at the point of contract signing (Z=-2.922, p=0.003) reduces the probability of contract participation. The majority of the farmers are dissatisfied with the current contracts on account of high rates of tobacco rejection and low tobacco prices at the selling floors. Deliberate policies to increase land ownership by women, reduce illiteracy levels, and ensure transparency and fair trade would not only increase contract participation but also lower dropout rates, hence sustainability of the tobacco contract farming scheme.