Staple Food Chains: The Case of Rice in Benin

As in other countries in Western Africa, rice consumption in Benin has increased sharply over the past decade. According to a recent paper published in World Development, Benin’s domestic rice production has also grown considerably between 2001 and 2011, quadrupling from 37 thousand tons to 147 thousand tons. Despite this drastic increase in production, however, the largest share of rice consumed in Benin still comes from imports, due in large part to the low quality  that often characterizes Benin’s domestic rice sector.

Rice self-sufficiency is thus a major goal of Benin’s government. This new paper explores the impact of contract farming in Benin’s rice sector, with the goal of determining whether contract farming schemes can help smallholder farmers both reach self-sufficiency targets and improve the quality of domestically produced rice to compete with imports. The study contributes to scarce evidence on contract farming as it relates to staple and domestic food chains in developing nations, as most research has focused on high-value exports.

Contract farming can provide several important benefits for smallholders, including reduced transaction costs in food supply chains and improved access to agricultural inputs, credit, and technology. Contracts also reduce farmers’ risks by guaranteeing a market outlet and by sharing production risks between farmers and buyers. In some cases, farmers can eventually become co-owners of the contracting company. All of this makes the working relationship between farmers and those contracting the work mutually beneficial.

The Benin study looks specifically at the Enterprises de Services et Organisations de Producteurs, or ESOP, program developed by the Centre International de Developpement et de Recherche (CIDR). ESOPs are private food processing and marketing enterprises that aim to efficiently and sustainably connect smallholder farmers to markets. Each ESOP contracts with 10-15 smallholders for the delivery of produce; farmers can also eventually become co-owners of the enterprise in order to share in the profits. CIDR currently runs 10 ESOP schemes in Benin, including three for rice. This study focuses on the rice ESOP in the Collines department in the municipality of Savalou.

Data for the study was collected from a cross-sectional farm household survey. The sample included 89 contract farmers and 307 non-contracted farmers, and the survey questionnaire covered demographics, assets, agricultural production, off-farm employment, food security, and credit. This resulted in detailed data on households’ rice production and income, rice contract farming experience, and agricultural practices.

The results show that by participating in these contract farming schemes, farmers experience increased household income through a combination of expansion of the rice area, intensification of production, and increased commercialization of rice at a higher farm-gate price. These factors resulted in doubled income from rice and an increase of total household income of 17 percent - a meaningful increase in poverty-stricken areas. The findings of the study show that access to contracts is not biased to households with more physical and human capital, but rather depends on farmers’ network and farming experience.

The study concludes that contract farming can contribute to upgrading the rice supply chain and further developing the rice sector in Benin to be more competitive.  More importantly, according to the authors, the study results reveal that contract farming for staple food crops can be sustainable and benefit smallholder farmers. According to the authors, this finding goes against the commonly accepted theory that contracting for staple crops is not feasible due to contract enforcement problems stemming from the low value of the commodity, low storage and transportation costs, and a larger number of buyers in the value chain. The results show that contract farming for staple crops can provide income and productivity benefits similar to those seen in high-value export sectors. In addition, more smallholder farmers can benefit from these contract farming schemes since smallholders are more likely to be involved in staple food sectors than in high-value sectors. The authors argue that these results could be used as a case study to explore contract farming of staple foods in other developing nations.

By: Jenn Campus