Thesis: Contract farming in oil palm: The case if Ghana and the Philippines
This thesis reviews the role that contract farming plays in the development process through an examination of the oil palm industry in Ghana and in the Philippines. It contributes to ongoing debates concerning agricultural liberalisation in developing economies. The general view is that while the private sector can provide access to capital, technology and markets, the transition to a market-led system will increase the financial vulnerability of farmers, particularly smallholder farmers, through unequal power relationships. Of particular concern is the capacity of the private sector to alleviate poverty and promote social equity amongst small rural landholders. At the heart of much of the debate is the issue of contract farming, which has increased rapidly in line with structural adjustment in the agricultural sector.
The research found that cultivating oil palm has the propensity to reward outgrowers with increasing income and a better access to knowledge, information and technology, capital and credit, agricultural inputs, markets and other services. Contract farming in oil palm also allows small farmers to cultivate and market this non-traditional cash crop, leading to the creation of employment, infrastructure and growth in their local economies. A real transfer of technology was evident and the technology was being adapted for use by the outgrowers, and by their part time workers, in other farming activities. There was very little evidence of systemic conflict or contractual problems between the processor and the outgrowers, in spite of historical evidence of this in Ghana. There was also no abuse of family labour or difficulties concerning access to staple food crops as identified in previous research.
The present research highlighted the need for contract farming schemes to be judged on a stand-alone basis, based upon their unique effects on local rural communities. Contract-farming schemes can be quite complicated and, therefore, it is imperative that sponsors address potential adverse impacts on rural societies during the planning process. In this regard, there is a need to conduct further and more detailed research into: the income generation and income distributional effects of contract farming; food security issues; social differentiation issues that specifically address the exclusion of elements of rural society and the development of inequalities within the household; and, rural employment including the possible creation of further difficulties for landless rural citizenry.
As the experience and lessons of the past decades demonstrate, the move to a private sector-led development of oil palm outgrower contracting schemes has provided a better opportunity for promoting agricultural development in Ghana and the Philippines. The two outgrower programs are presently successful and do not show signs of the major problems identified by researchers in other areas. However, both governments need to ensure that a comprehensive policy and regulatory framework for private sector agricultural development is put in place. A strong private sector could provide the vehicle for agricultural development and the reduction of poverty in the countryside, however, both governments and the various private sector companies engaged in oil palm production need to work in partnership with each other and the outgrower community towards the goal of a diversified and expanded agricultural production base.
Why my research is important
One of the central difficulties in drawing any conclusion on whether contract farming should be encouraged or discouraged, is the lack of comparability between the large number of types of schemes, crops being contracted, the ‘actors’ involved and the socio-economic, political and institutional environments in which contract farming schemes are nurtured. This study focused on the role that contract farming plays in the pursuit of development through an analysis of the key socio-economic issues involved with the adaptation of contract farming in the oil palm industries in the Philippines and in Ghana. This analysis allowed for the identification of conditions under which the impacts of contract farming schemes can either be augmented or mitigated.