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Does market upgrading benefit farmers? : market differentiation, contract farming, and professional cooperatives in China's pork processing industry

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  • Watanabe, Mariko

Abstract

This study tested whether contract farming or farmers professional cooperatives (FPCs) improved the social benefit of pork production and income of breeding farmers in China. The main concern of this study is whether institutional arrangement like contract farming or FPCs actually improved the welfare of farmers as expected. To answer this question accurately, we estimated the differentiated market demand of pork products in order to quantify the benefit by transaction types. Our study finds that contract farming or FPCs improved the benefits of pork products, but farmer's income remained lower than that of traditional transaction types. This finding is new in terms of quantifying distribution of the economic values among sales outlets, agro-firms and farmers. It is more reliable because it explicitly captures impacts from both demand side and supply side by structural estimation. In practice, we need to keep it mind the bargaining power of small farmers will not improve instantly even when the contract farming or FPCs are introduced.

Suggested Citation

  • Watanabe, Mariko, 2016. "Does market upgrading benefit farmers? : market differentiation, contract farming, and professional cooperatives in China's pork processing industry," IDE Discussion Papers 612, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper612
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    References listed on IDEAS

    as
    1. Miyata, Sachiko & Minot, Nicholas & Hu, Dinghuan, 2009. "Impact of Contract Farming on Income: Linking Small Farmers, Packers, and Supermarkets in China," World Development, Elsevier, vol. 37(11), pages 1781-1790, November.
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    5. Liange, Zhao & Hongyun, Han, 2014. "Structural Changes of Hog Farming in China: Good or Bad? A Case Study of Wuxue City in Hubei Province," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 15(1), pages 1-18.
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    7. Ma, Wanglin & Abdulai, Awudu, 2016. "Does cooperative membership improve household welfare? Evidence from apple farmers in China," Food Policy, Elsevier, vol. 58(C), pages 94-102.
    8. JIA, Xiangping & HUANG, Jikun & XU, Zhigang, 2012. "Marketing of farmer professional cooperatives in the wave of transformed agrofood market in China," China Economic Review, Elsevier, vol. 23(3), pages 665-674.
    9. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
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    More about this item

    Keywords

    Agricultural industries; Agriculture; Agricultural cooperative; Farmers; Food industry; Pork processing industry; Differentiated demand estimates; Value chain; Contract farming; Farmers professional cooperatives;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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