Impact of Contract Farming on Farmers’ Income: A Case of Wuchang Rice in China

Abstract

This study aims to examine the revenue effects of rice contract farming for small high-value rice farmers and explore the constraints on the adoption of contract farming in China using a face-to-face survey questionnaire as the main instrument of data collection. A probit model and ordinary least-squares (OLS) regression analysis were used to estimate the likelihood of participation in contract farming and the impact of contract farming on rice farmers’ income, respectively. A total of 78 household questionnaires collected in Wuchang was considered valid for analysis. This study proves that participating in contract farming is an effective way of increasing rice farmers’ income, after control for observable and unobservable household characteristics. Specifically, contract farming contributes toward enhancing the rice farm-gate price and cost-profit ratio. The results also reveal that rice farmers with organic or green planting experience are more likely to participate in contract farming.