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Abstract

Hybrid coordination systems (marketing cooperatives and contracts) are in place in agriculture to link smallholder farmers to the global agri-food value chains. With the framework of transaction cost economics, this study, however, is particularly designed to investigate the key determinants pushing dairy farmers to hybrids (marketing cooperatives and contracts), viz. spot market channels in the local food chains. A household survey of 415 smallholder dairy farmers was designed. Data collection was administered using trained enumerators. A multinomial logistic regression model was employed to analyze data and to identify the signifi cant determinants. The results indicate that high transaction costs and resource constraints were found driving farmers to cooperative engagement and contracts, implying that hybrids were found to be a solution to farmers’ constraints of access to information and institutional absence, as well as resource constraints. Policy makers and development partners are advised to strengthen cooperative societies and contract enforcement mechanisms. Providing information and resources to increase smallholders’ capacity with resources appear to be interventions which will enable the agricultural marketing system to properly function by serving smallholders in linking to the global food chains.

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