Assessing the effect of contract farming on sorghum land productivity: An endogenous switching regression approach

<h2>Abstract</h2> In low-and middle-income countries, contract farming handles agricultural problems facing small-scale growers. This study analyzes the extent to which sorghum productivity can be enhanced under contract farming in Tanzania. Using cross-sectional data from 400 sorghum growers in Tanzania and an endogenous switching regression model, we observed that contract farming significantly improves the productivity of contract farmers compared to non-contract farmers. The findings show a 12 % increase in productivity for contract farmers, while non-contract farmers could potentially increase their productivity by 28 % if they participated in contract farming. Moreover, the study identifies significant variables such as age, off-farm income, location, hired labor, the mix of owned-hired labor, farm size, financial services, household size, gender, experience, and the number of groups as determinants of contract farming participation among sorghum farmers. The results call for policies emphasizing contract farming as a viable approach to improve sorghum productivity, especially for small-scale farmers. Furthermore, policy adjustments matching the specific requirements of farmers in the target area are needed to maximize the positive impact of contract farming, factoring in the heterogeneity among producers.