Impact of Contract Farming and Risk Preference on Food Security: The Case of Organic Basmati Rice Smallholders

Demand for organic basmati rice (OBR), both at home and abroad, coupled with policy reforms in India have given rise to contract farming (CF) production in that nation. OBR production, however, is highly susceptible to weather and pest risks. This study investigates the impact of smallholders perceived production risks on their adoption of CF in OBR farming. We also assess the impact of CF in OBR production on yields, prices received, and the livelihood of OBR producers. We use farm-level data from smallholder basmati rice farms in India and the endogenous switching regression method to account for heterogeneity. Although CF in OBR led to lower yields, it increased the prices producers received and improved the livelihood of OBR producers. The impact of CF varied with farmers revealed risk attitudes. Risk-loving OBR growers with CF experienced the highest loss in yields, and risk-averse OBR growers with CF received the highest prices. We find that the OBR growers who did not adopt CF would benefit from adopting it, regardless of their risk attitudes, especially when it comes to prices received and livelihood. Acknowledgement : The project was supported by IFPRI.

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Conference Paper/ Presentation
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JEL Codes:
C21; D13

 Record created 2018-10-02, last modified 2020-10-28

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