Limitations of Contract Farming as a Pro-poor Strategy: The Case of Maize Outgrower Schemes in Upper West Ghana

54 Pages Posted: 4 Apr 2017

See all articles by Catherine Ragasa

Catherine Ragasa

International Food Policy Research Institute (IFPRI)

Isabel Lambrecht

International Food Policy Research Institute (IFPRI)

Doreen Kufoalor

Ghana Strategy Support Program

Date Written: March 30, 2017

Abstract

The focus in this paper is on two relatively large maize-based contract farming (CF) schemes with fixed input packages (Masara and Akate) and a number of smaller and more flexible CF schemes in a remote region in Ghana (Upper West). Results show that these schemes led to improved technology adoption and yield increases. In addition, a subset of maize farmers with high yield improvements due to CF participation had high gross margins. However, on average, yields were not high enough to compensate for higher input requirements and cost of capital. On average, households harvest 29–30 bags (100 kg each), or 2.9–3.0 metric tons, of maize per hectare, and the required repayment for fertilizer, seed, herbicide, and materials provided under the average CF scheme is 21–25 bags (50 kg each) per acre, or 2.6–3.0 tons per hectare, which leaves almost none for home consumption or for sale. Despite higher yields, the costs to produce 1 ton of maize under CF schemes remain high on average — higher than on maize farms without CF schemes, more than twice that of several countries in Africa, and more than seven times higher than that of major maize-exporting countries (the United States, Brazil, and Argentina). Sustainability of these CF schemes will depend on, from the firms’ perspective, minimizing the costs to run and monitor them, and from the farmers’ perspective, developing and promoting much-improved varieties and technologies that may lead to a jump in yields and gross margins to compensate for the high cost of credit.

Keywords: GHANA, WEST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, farming systems, contract farming, supply chain, technology, productivity, profitability, maize, farm inputs, agricultural policies, households, agricultural research, technology adoption

JEL Classification: Q12, Q16, Q18, C36

Suggested Citation

Ragasa, Catherine and Lambrecht, Isabel and Kufoalor, Doreen, Limitations of Contract Farming as a Pro-poor Strategy: The Case of Maize Outgrower Schemes in Upper West Ghana (March 30, 2017). IFPRI Discussion Paper 1626, Available at SSRN: https://ssrn.com/abstract=2946086

Catherine Ragasa (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Isabel Lambrecht

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States
+1 202-862-5600 (Phone)
+1 202-467-4439 (Fax)

HOME PAGE: http://www.ifpri.org/

Doreen Kufoalor

Ghana Strategy Support Program ( email )

2033 K Street, NW
Washington, DC 20006
United States

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