CONTRACT FARMING AND RICE QUALITY UPGRADING: ASSESSING SMALLHOLDER FARMERS’ MOTIVATION, PERFORMANCE AND CONSTRAINTS UNDER THE BUSINESS SERVICES AND FARMERS’ ORGANISATION (ESOP) IN TOGO

ABSTRACT

Contract farming is emerging as a promising way to upgrade domestic rice quality in

Togo. The Non-Government Organisation ‘Entreprise Territoir et Développement’

(ETD) has started promoting a kind of contract farming scheme called ’Entreprise de

Service et Organisation de Producteurs’ (ESOP) in the country. The rewards from

contract farming could be substantial for smallholder farmers; yet there is a serious

concern about the farmers’ ability to stay in the partnership for long term because of

constraints that they face. Based on the Modern Contract Theory and the Impact

Evaluation Theory, this study sought to address the following issues: farmers’

motivation to work under ESOP’s contract farming, the impact of ESOP contract

farming on farmers’ performance and the constraints that farmers face in ESOP’s

contract farming. Primary data were collected from a total of 414 smallholder rice

farmers comprising 186 ESOP contract farmers and 228 non contract farmers selected

using a multiple stage sampling techniques in three (3) out of the five (5) Regions in

Togo. Farmers’ motivation and constraints under ESOP contract farming were assessed

using Factors Analysis and Cluster Analysis. The impact of contract farming on farmers

performance was assessed using the Propensitity Score Matching Model and the

Endogenous Switching Regression Model to compare the results. The results showed

that i) incentive elements in the ESOP contract terms, the prevailing input output market

condition in the country and farmers’ need for a reliable source of income were behind

their motivation to work under ESOP contract farming, ii) by participating in ESOP

contract farming, the rice yield was increased by 14%, revenue by 32%, net benefit by

92,200 FCFA/Ha, and paddy quality upgraded from grade IV (poor) to grade I

(premium), iii) ESOP contract farmers face three groups of constraints: a) the price

formula used by ESOP is not satisfactory b) ESOP shows no respect to the agreed

payment mode and c) lack of solidarity within the Farmer Based Organisation. If these

constraints are not well addressed, the ESOP rice contract scheme will gradually

collapse because about 45% of farmers will exit due to the lack of appropriate incentive

elements in the contract, 28% because of lack of cash and carry method of payment, and

27% because of lack of solidarity within the Farmer Based Organisation. The findings

suggest that a policy intervention that facilitates capital access by ESOP from Financial

Institutions is needed to avoid the contract scheme’s collapse. A new design of contract

should include more incentive elements such as the split quality premium price, the

respect of the contract in terms of cash and carry payment method and training on

solidarity within the Farmer Based Organisation.