Contract farming for vegetable producers: challenges and the way forward in the Central Rift Valley Ethiopia

Vegetable farming is one of the fastest and most intensively growing agricultural productions and dominates markets in Ethiopia. Contract farming is an institutional arrangement that evolved in agriculture to minimize risks and market imperfection, transaction costs and maximize profit. However, due to the different factors, contract farming in vegetable production has not been as successful as expected. This article provides empirical evidence about the factors that hinder vegetables contract farming in Central Rift Valley of Ethiopia. The analyses were based on a dataset that was collected from qualitative and quantitative household surveys through semi-structural questionnaires, focused group discussions, and key informant interviews of 194 randomly selected vegetable-producing farmers in the study area. A binary logistic regression model was used. Results show that, the education level of household heads, off-farm and non–farm households' income, perception about price uncertainty, involvement of households in saving group 'equb', and form of agreement significantly affected the participation of the household heads in the side selling practices, whereas the experience of household head, off-farm and non– farm income, training on vegetable farming, distance from the market center, involvement of households in saving group 'equib', and form of agreement significantly affected participation in input diversion practices in one or other way. From these results, it's recommended that the Government and Non-governmental organizations should intervene to mitigate the existing challenges of vegetable contract farming by setting clear and participatory contract enforcement mechanisms, providing capacity building training and facilitate table round discussion to build trust and transparency between smallholder farmers and contractors in the study area. Moreover, further study should be conducted about contract farming structure and its performance in the study area.