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We use new data from the administrative records of a large Kenyan sugarcane contract farming scheme to study participation and productivity among outgrowers. First, we relate the origins and the impact of the scheme targeted by our study to the existing literature on contract farming. Second, after providing some institutional background and introducing the data, we look at farmers' participation, focusing on entry, exit, and plot sizes within the scheme. Third, we focus on yields and farmers' net revenues per hectare. After documenting the trends in these variables, we find that producer unobserved heterogeneity and plot size explain a large share of the variance in yields. We conclude by arguing that, in the presence of labor market imperfections that would make plantations inefficient, contract farming can enable producers to take advantage of relevant economies of scale, while preserving the existing allocation of land property rights.

The chapter discusses that there is a strong need to formalize agriculture and make farmers a beneficiary of the end market opportunities. Contract farming attempts to bring in possibilities of organizing the agricultural sector by carving commercial, financial, and technological partnerships with farmers in the commodity value chain. Contract farming has been introduced in the Indian states following the enactment of the model APMC Act of 2005.The success of contract farming with commercial exuberance and regulatory safeguards will help realize the dream of the Millennium Development Goals of reducing the world poverty by half. This chapter attempts to find the success and sustainability of formal agriculture over informal agriculture through empirically evident parameters and it critically examines the present regulatory framework’s efficacy to safeguard the interest of the most prominent actor in the commodity value chain—the farmer.

The growing corporate presence in a wider variety of agricultural value chains can open up new opportunities for contract farming to the advantage of smallholders in agriculture, but more ‘corporatization’ also has downsides such as less competitive markets, more vertical integration in agricultural value chains, and changes in systems and modalities (e.g. land development modality in sub-Saharan Africa) that makes little provision for small farm participation. This chapter suggests that harnessing the economic power of corporate agribusiness for the benefit of small farmers requires purposive action from the three parties involved: farmers to self-organize into large enough producer groups, companies to make small farm supply an integral part of their business models, and governments to provide the necessary enabling environment. The open question is the extent to which such corporate commitment will only be forthcoming through enterprises and partnerships that have access to non-commercial capital.

This chapter examines food prices from 1900 to 2015. Despite growing populations, rising incomes, new technologies, globalization, and the emergence of commodities as an asset class, no trends are evident in food price levels or volatility. Still, food prices have averaged higher since 2010, harming the poor and raising fears that agricultural productivity growth has slowed. Consistently since 1900, food prices have been more volatile than the prices of manufactured goods and most other commodity groups. This relation drives terms-of-trade volatility, which slows economic growth. At the farm level, price volatility impedes investment and technology adoption, and encourages low-income livelihood strategies. Past policies to manage food prices have not worked and governments have shifted to policies aimed at mitigating the consequences of high and volatile food prices. Extending the reach of risk markets, warehouse receipt systems, index insurance, and contract farming can be useful policy components.

This chapter analyzes Chinese rural development in the reform era. Before the 2000s, China's reform-era agricultural policy could be summed up as decollectivization followed by resource extraction and neglect. Between 1978 and 1984, the replacement of the people's commune system with household contract farming resulted in historic poverty reduction. After 1984, however, central government investment and growth rates in agriculture started to decline. As was the case during the Maoist period, local governments were expected to be self-reliant and raise their own funds for development. Under pressure to impress higher-level officials with economic achievements, many local governments resorted to imposing heavy taxes on farmers. These went toward developing industry instead of providing public goods. In 2004, China had entered a new era in which “industry should nurture agriculture, and the cities should support the countryside.” Two policies in particular came to embody this principle. First, after a period of experimentation with rural tax reform, the central government decided in 2006 to completely eliminate agricultural taxes. Second, a policy called Building a New Socialist Countryside was introduced as the top domestic priority of the eleventh five-year plan (2006–2010).