Contract farming as a determinant of promoting tea marketing channel for small producers in Phu Tho province.

Abstract

Making contracts between farmers and firms (contract farming, for short) plays an important role in establishing access to the agricultural markets for the small producers, especially in the developing and less developed countries. It is argued that contract farming provides farmers with the assured sale of their crops and agro-business firms with a steady supply of agricultural products required by the market. This paper focuses on analyzing benefits of tea producers through signing contract with firms. By using relevant research methods of verifying studying areas, making Participatory Rural Appraisal (PRA), and surveying farmers, the paper finds that although contract farmers receive lower fresh tea price in compared with the price received by non-contract farmers, they would have higher price stability and are provided with market guarantee mechanism. These benefits are really important in context of globalization and market liberalization with the demand for high quality and high value products. It is highly recommended that small farmers therefore should participate in the coordination model between farmers and firms in the process of tea production and marketing in Phu Tho Province, Vietnam.