Agric Res

https://doi.org/10.1007/s40003-021-00544-0

FULL-LENGTH RESEARCH ARTICLE

Factors Affecting Participation in Contract Farming

of Smallholder Cavendish Banana Farmers in the Philippines
Melissa P. Loquias1 • Larry N. Digal1 • Shemaiah Gail Placencia1 • Ivi Jaquelyn T. Astronomo1 •

Marvin Louie G. Orbeta1 • Carol Q. Balgos1

Received: 5 September 2019 / Accepted: 9 March 2021

Ó NAAS (National Academy of Agricultural Sciences) 2021

Abstract Participation of smallholder Cavendish banana farmers in contract farming in the Philippines started with the
implementation of the Comprehensive Agrarian Reform Law. Multinational and large domestic companies which used to
manage their corporate farms had to transfer ownership of lands to the farmers who used to work in these corporate farms.
Various contractual arrangements had emerged to engage farmers for these companies to continue their foothold in the
export markets where Philippines ranks second. However, some of these arrangements were deemed inequitable that
resulted to side-selling and the emergence of spot markets. Participating in contracts or selling in the spot market has
corresponding implications to profit generation. Therefore, exploring what influences contract participation of farmers and
its role in improving their profit became highly relevant. As such, this paper aimed to examine the factors that affect the
decision of farmers to contract or sell in spot market and explore which arrangement yields better profit. Data collected
from 187 respondents were analyzed using a probit regression model. Results show that education, farming experience, and
credit/financial support significantly affect contract farming participation. The results highlighted the importance of
technical skills and knowledge, and financial support in making decisions such as contract participation. Results also show
that contract farmers earn higher profits than non-contract farmers which may imply contract farming to be better. Due to
the controversies surrounding contract farming, effective mechanisms to regulate contracts are among the recommenda-
tions to ensure the welfare of the farmers.

Keywords Agrarian reform  Cavendish banana  Corporate farms  Land ownership  Probit regression 
Smallholder farmers

Introduction value of USD 3.0 billion (Food and Agriculture Organi-

The Philippines is the second top exporter of Cavendish
banana worldwide behind Ecuador [13]. In 2017, the
Philippines exported a volume of 2.8 million metric tons
[27] with an estimated export value of USD 1.13 billion
[27]. This is still far behind Ecuador which had an export
volume of 6.4 million metric tons and an estimated export
& Melissa P. Loquias
mploquias1@up.edu.ph
1 still plagued with sustainability issues. Production risks are
School of Management, University of the Philippines
Mindanao, 8022 Mintal, Tugbok District, Davao City,
Philippines
zation (FAO), 2019). Other countries with significant
export volumes are Costa Rica, Guatemala, and Colombia
(FAO, 2019). Specifically for the Philippines, the island of
Mindanao produces over 99% of the country’s production
(Philippine Statistics Authority[PSA]- OpenSTAT, 2018).
Many depend on the industry as a source of employment
and livelihood. Approximately 183,000 fulltime jobs are
generated in Mindanao from Cavendish banana production
[36] indicating its economic significance to many people,
particularly the farmers.
Despite its position in the world market, the industry is
increasing in most recent years particularly with the abrupt
changes in weather conditions like typhoons, which have

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not occurred in the major production areas for decades. The
yield of farmers in Region XI experienced a big drop from
2014 to 2016 as a result of Typhoon Bopha in 2012 [25].
The incidence of Fusarium wilt has also increased in the
last few years and has affected almost 20% of the total
production area in the country [25]. Other plant diseases
such as the Black Sigatoka have also contributed to the
drastic export decline in 2015 and 2016 [14]. These are
compounded with problems in peace and order conditions
in some production areas [14]. These issues consequently
threaten farm productivity and profitability. More so, per-
forming competitively in the industry may be proven more
challenging for smallholder farmers who are already con-
strained with insufficient technical knowledge, lack of
capital and market access. Many studies have shown con-
tract farming to offer solutions to various production and
marketing problems [28, 32].
The Philippine Cavendish banana industry was intro-
duced to contract farming due to the implementation of the
Comprehensive Agrarian Reform Law (CARL) in the
1990s for commercial farms. For years, multinational
companies (MNCs) who run large plantations that range
from 50 to 6,000 hectares dominated the industry (Dwyer
& Digal, 2010). With CARL, land ownership was limited
to five hectares and lands were distributed to the tillers and
farmworkers [16]. Through the land reform, farm workers
received landownership while cooperatives, with Agrarian
Reform Beneficiaries (ARBs) as members, were estab-
lished [8]. Many farm workers became small1 landowners.
To maintain productivity and to address the increasing
demand in the world market, MNCs explored various
options including leasing back lands or offering contracts
to farmers.
Because of landownership, farmers now have to decide
whether to enter into contract farming, leaseback their
lands, or sell in the spot market. This consequently resulted
to different types of grower–buyer arrangements: (1) con-
tracted individual farmers; (2) non-contracted individual/
independent farmers; (3) growership under cooperatives;
(4) leaseback/lease. Contracted individual farmers are
contracted by MNCs while non-contracted individual
farmers are independent farmers who sell to spot buyers or
independent exporters. Growership under cooperatives
involves farmers organized into cooperatives that partici-
pate in banana production and/or marketing. Cooperatives
can be contracted or independent. In leaseback arrange-
ment, companies lease back or rent lands of farmers that
were distributed through CARL for a certain period of time
with a periodic payment. Farmers still have landownership
but no longer have control over farm operations. Leased
1
Small/Smallholder/Small-scale refers to farmers with less than two
hectares of land.
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Agric Res
back lands are usually less than three hectares and are
owned by ARBs. The arrangement usually lasts for 15 to
20 years (Dwyer & Digal, 2010). For underdeveloped
farms, companies rent the land for 10 to 15 years while the
land owner is hired by the renting or leasing company
(Dwyer & Digal, 2010). Meanwhile, some farmers have
their land leased by other companies or large independent
growers. These large independent growers rent the land of
farmers. Similar with leaseback, farmers with leased farms
no longer have control over farm operations. The payment
for the leaseback/lease arrangement previously ranged
between Php15,000 to Php25,000 but has now increased to
Php25,000 to Php50,000. Whether individual or organized,
a farmer can decide to participate in contracts or sell in the
spot market. However, the decision may have varied
implications for the farmer.
Contract farming is a joint venture between a farmer and
an MNC where the company contracts a grower to plant
banana in his/her land and sell the entire produce exclu-
sively to the company while following the production
protocols set by the MNC [10]. Contracts in the Cavendish
banana industry are usually 15 to 25 years long. Farmers
are offered with various benefits including the provision of
inputs, technology and skills transfer, guaranteed and fixed
pricing structures, credit support, and better access to
reliable and guaranteed markets [8, 11, 21, 29]. In the
Philippines, MNCs offer a fixed annual price ranging from
USD 2.90 to USD 3.40 per box on average [35]. As such,
farmers face reduced risk due to fixed pricing and guar-
anteed market outlet. Contract farming has also been
observed to increase incomes of farmers [9, 20, 24, 34].
Under contracts, technology and strategies to eradicate
plant diseases are also decided by companies. For instance,
the strategy of putting a Panama disease-infected farm into
quarantine [7] is done in some contract farms. Aerial
farming for disease management is also more economical
for companies and might be costly for small independent
farms.
However, contract farming is also plagued with a
number of controversies. For one, agribusiness firms may
alter the terms of contracts when market conditions become
unfavorable such as imposing higher quality standards and
more demanding contracts [12] which may be
inequitable for the farmers. There are also complaints from
Cavendish banana farmers about buyers controlling prices
and allegations that price increases in foreign markets are
not reflected in the contract price [35]. Moreover, although
companies provide credit support, alternative credit sources
are also limited since the lands distributed through CARL
are not accepted as collaterals by banks [10]. In this case,
smallholder farmers may opt to borrow from informal
sources such as traders, moneylenders, and loan sharks that
do not have stringent loan requirements but may charge
Agric Res
exploitative interest rates. Additionally, farmers may also
be susceptible to overreliance and indebtedness due to
uncontrolled cash advances [8, 11].
Given these issues, the spot market can be extremely
attractive to Cavendish banana farmers especially due to
higher prices and less strict quality requirements. Some opt
to grow independently and sell to spot buyers or indepen-
dent exporters who usually offer competitive and signifi-
cantly higher prices during high demand season [35]. Some
contract farmers are also enticed to side-sell to spot buyers
due to the competitive prices. However, these prices are
erratic and susceptible to changes in the supply and
demand in the world market. Prices in the spot market can
go up to as high as USD 13.80 and as low as USD 0.79. In
2012, the prices in the spot market were affected when
China, a major market of Philippine banana, stopped
buying from the country [35]. Hence, farmers have to deal
with the instability in the spot market sometimes leading
them to a loss. Moreover, the production cost and the
absence of financial assistance from spot buyers may be an
issue especially to small farmers [35]. Due to the absences
of financial assistance, non-contract farmers may have
lesser access to newer technologies and developments that
could potentially improve production and protect farms
from diseases.
While the spot market can offer significantly higher
prices, contract farming may still be more advantageous for
smallholder farmers especially in the long run due to
reduced price risk and production support. But the con-
troversies associated with it should not be overlooked.
Possibility of inequitable terms, for example, may harm
contract farmers rather than improve their living. Which-
ever is the more beneficial arrangement for smallholder
farmers may be debatable, but it is clear that the arrange-
ment choice will affect their performance in the industry
and consequently, their profits.
As such, it becomes essential to understand what influ-
ences farmers to participate in contracts or sell in the spot
market. This study aims to identify the factors affecting
contract farming participation of Cavendish banana farm-
ers. Due to the risks and benefits associated with both
arrangements, this study further explores which arrange-
ment could be more advantageous by comparing the prices
offered, total production cost, and profits in each
arrangement.
To the knowledge of the researchers, a number of
studies have explored a similar topic [3, 4, 18, 19, 23, 31]
but not much have been explored in the context of the
Philippines and the Cavendish banana industry which is an
important export industry worldwide. The results of this
study have the potential to aid farmers in decision-making.
Moreover, knowledge and understanding on the factors can
be useful for crafting new agricultural policies,
amendments, and interventions that will ensure the welfare
of the farmers.
Materials and Methods
Materials and Sampling
This study uses a database with 187 valid samples from a
2012 household survey conducted in Sto.Tomas, Davao del
Norte. The province has the largest production accounting
for 32% of the nationwide production (PSA- OpenSTAT,
2018) and a total of 32,561 hectares planted with
Cavendish banana (Provincial Agriculturist’s Office
[PAGRO], 2016). The municipality of Sto.Tomas covers
the largest production area in the province with 10,180
hectares of land planted with Cavendish banana (PAGRO,
2016). A list of farmers was obtained from the munici-
pality, and respondents were determined through simple
random sampling. Only farmers who are decision-makers
of their farms were included in the analysis; hence, farmers
under leaseback/leased arrangement were not included due
to their lack of control over farm production.
Probit Regression Model
Logit and probit models are the commonly used approa-
ches for studies with binary outcomes such as contract
farming participation [15]. According to Cameron & Tri-
vedi [6], a logit model’s relatively simple form for the first-
order conditions and asymptotic distribution are among the
reasons for preferring the model over probit. Additionally,
coefficients of a logit model can be interpreted in terms of
log-odds. Meanwhile, a probit model is used by many
economists due to the model being motivated by a latent
normal random variable [6]. Both models are almost
identical and choosing which model to use is usually
arbitrary [15] and more related to estimation and famil-
iarity (Park, 2009). The main difference between these
models is in the assumption about error distributions (Park,
2009). Errors in a logit model are assumed to have standard
logistic distribution while errors in probit have a standard
normal distribution [1, 6]. In terms of outcomes, the models
may produce quite different estimates of regression
parameters and, hence, are not directly comparable [1, 6].
Both models, however, produce almost identical marginal
effects [1].
Due to the interpretation of logit as odd ratios, a logit
model is widely used in biostatistics and health sciences.
Meanwhile, a probit model is used by many economists
due to its assumption of a normal random variable influ-
encing the model [6]. Moreover, various studies have used
probit regression model for binary outcome studies such as
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fertilizer adoption [2], credit use [30], and contract farming
participation [26]. Hence, this model was used in this
study.
The estimated probabilities in a probit model are limited
between 0 and 1, and it is assumed that while 0 and 1 are
the only values observed, there is a latent, unobserved
continuous variable Yi that determines the value of Yi [2,
30; Nagler, 1994].
We assume that the dependent variable Yi is binary with
only two possible outcomes (1 = contract farming and
0 = non-contract/spot market). A vector of independent
variables xi is assumed to influence Yi , shown in the probit
model as follows:
PrðYi ¼ 1jxi Þ ¼ jðb0 xi Þ ¼ Uðb0 xi Þ
where Pr is the probability of Yi being the binary choice
variable (1 for contract farming and 0 for non-contract
farming) and U is the cumulative normal distribution
function, while b is a vector of unknown
parameters/coefficients.
As stated above, there is a latent, unobserved Yi that
determines Yi . This can be specified below as:
Yi ¼ b0 þ b1 X1i þ b2 X2i þ    þ bk Xki þ ei
and that:
Yi ¼ 1 if Yi [ 0
Yi ¼ 0 otherwise
The empirical model for this study is given as follows:
Yi ¼ b0  b1 X1  b2 X2 þ b3 X3 þ b4 X4 þ b5 X5 þ b6 X6
 b7 X 7 þ b8 X 8 þ e i
The variables used in the study were based on existing
studies which tackled farmers’ participation in contract
farming particularly the factors affecting the contract
farming participation [3–5, 17–19, 22, 23, 26, 31, 33].
Sociodemographic and farm characteristics were among
the independent variables used in the regression. For this
study, farmers leased/leaseback lands were not included
primarily because they are no longer decision-makers of
the farms and do not have control whether to enter into
contracts or not. Table 1 summarizes the variables.
Results and Discussion
Characteristics of Contract and Non-contract
Farmers
Results indicate that participation in contract farming is
high with 72% of the Cavendish banana farmers under
contracts while 28% are non-contracted. Table 2 further
characterizes contract and non-contract farmers. Both
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contract and non-contract farmers are seemingly similar in
terms of key socio-demographic characteristics. Most of
the farmers from both arrangements are aged between 51
and 65 years old although non-contract farmers are rela-
tively younger than contract farmers, on the average. The
results coincide with Miassi & Dossa [23] who showed that
older producers are more likely to enter contracts than
younger farmers. The experience of older farmers in
farming allows for better discernment and understanding
on contracts while younger farmers with lesser experience
may be more skeptical. Both contract and non-contract
farmers have a household size of not more than five. In
both contract and non-contract farms, males are found to
outnumber females. This is because males are usually more
involved in farm production activities and decisions than
females. Meanwhile, women are more involved in value-
adding activities such as chipping and drying of banana
rejects for the banana flour industry which provides alter-
native source of income [36]. It can also be implied that
both contract and non-contract farmers are fairly literate
since all farmers have reached at least elementary level.
Key findings also suggest that 57% of contract farmers
are non-cooperative members while 43% are members.
Results further indicate that none of the non-contract
farmers are members of cooperatives, hence implying that
all farmers who are cooperative members have opted to
participate in contracts. The average years of farm expe-
rience of contract farmers is 16 years while non-contract
farmers had an average of 12 years farm experience.
However, most contract and non-contract farmers have less
than 10 years of experience in Cavendish banana produc-
tion. Results also show that majority of the contract and
non-contract farmers did not have participation in trainings.
Findings suggest the high participation of smallholders in
the industry because they comprise majority of farmers
across types. The average farm size of contract farmers is
2.6 hectares while non-contract farmers had an average
farm size of 2.1 hectares. Results also show that 57% of
contract farmers are from barangays with good infrastruc-
ture level while 62% of non-contract farmers are from bad
infrastructure barangays. The type of barangay infrastruc-
ture was determined by the local government unit of
Sto.Tomas, Davao del Norte. Classified under good
infrastructure facilities, barangays are those with good
infrastructure that are useful for Cavendish banana pro-
duction such as overhead cables, packing plants, and good
road conditions [35]. Meanwhile, barangay classified as
bad infrastructure barangays have major issues in the
availability and accessibility of the abovementioned
physical infrastructure [35].
With the aim to help farmers make more informed
decisions on contract farming participation, the cost and
Agric Res

Table 1 Summary of dependent and independent variables

Variable Variable name Measurement Description Expected
sign

Yi Contract farming Dummy Contract-1, 0- Otherwise

participation
X1 Age Continuous Age of farmers (in years) ?/–
X2 Education Categorical Highest level of education attained by the farmers (1- college graduate; 2- college ?/–
level; 3- high school graduate; 4- high school level; 5- elementary graduate; 6-
elementary level; 7- did not go to school)
X3 Sex Dummy Sex of the farmer (1-Male, 0- otherwise) ?/–
X4 Household Size Continuous Number of people in the household ?
X5 Farming Continuous Number of years in the Cavendish banana production ?/–
Experience
X6 Farm Size Continuous Size of productive farm area of the farmers ? /–
(hectares)
X7 Training Dummy Attendance to trainings (1-Yes, 0- No) ?
X8 Credit/Financial Dummy Access to credit/financial support of farmers (1- Yes, 0 -No) –
Support

profit earned from contract and spot market are compared
in Table 3.
In terms of annual production cost per hectare, contract
farmers spend 5.6% more than non-contract farmers on the
average. Despite the higher production cost, contract
farmers are seen to earn higher profits than non-contract
farmers. Contract farmers earned an average annual profit
per hectare of USD 2,000 while non-contract farmers had
negative average of profit of USD (1,233). Additionally,
46% of contract farmers earned annual net profits of USD
1,971 to USD 7,882 per hectare, and 29% earned not more
than USD 1,971. Only 25% of the contract farmers had
negative profits which is significantly lesser than the 81%
of non-contract farmers with negative profits. The higher
profits could be explained by the relatively higher average
price per box of Class A banana under contracts than in the
spot market. Average per box price of Class A banana in
contract farming is Php124 (USD 2.45) while the average
in the spot market is Php85 (USD 1.68). These findings
suggest contract farming to be more beneficial due to the
higher prices and profit. Contract prices also appeared more
stable with prices ranging from Php98-175 (USD 1.94–
3.46) while spot market prices ranged from Php25-195
(USD 0.49– 3.85), thus showing how spot prices could be
erratic. Furthermore, 54% of contract farmers received
credit/financial support while only 23% of non-contract
farmers had access to credit/financial support (Table 2).
Results further show the majority (77%) of non-contract
farmers do not have credit support. In contrast to contract
farmers, non-contract farmers selling in the spot market do
not have financial assistance from buyers and not all
independent growers are able to borrow from formal
institutions with lower interest rates [35]. These results
imply that most of the farmers in contract farming may not
be as challenged by capital constraints as those non-con-
tractual farmers due to the credit support.
Factors affecting Contract Farming Participation
Empirical results showed that the model is statistically
significant with Prob [ chi2 = 0.0000. Test for multi-
collinearity indicates no severe multicollinearity among the
independent variables with the maximum value variance
inflation factor (VIF) at 3.75 and a mean VIF of 1.90. With
a 90% level of confidence, three variables appear to sig-
nificantly affect the decision of farmers to participate in
contract farming. These variables include the education
( -), farming experience ( ?), and credit/financial support
( ?). Meanwhile, factors such as age, sex, household size,
farm size, and trainings were insignificant (see Table 4).
Only the significant variables would be further discussed.
Education
Education is a categorical variable with elementary level as
the base outcome. Results show that college education has
a significant but negative effect on the decision to partic-
ipate in contracts. Specifically, farmers who graduated
college or reached college level are less likely to partici-
pate in contract farming compared to farmers who only
reached elementary level. The probability of undergraduate
farmers and college graduates to engage into contracts are
decreased by 0.227 and 0.319 respectively. Statistics in
Table 2 show 37% of non-contract farmers are college
graduates while only 14% of contract farmers are college
graduates. This corroborates the findings that more

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Table 2 Descriptive statistics and percentage distribution of contract and non-contract farmers
Contract (%) Mean Non-Contract (%) Mean

Sex –
Male 62 74
Female 38 26
Age 55 52
Below 35 9 12
36 to 50 21 27
51–65 51 49
66 to 80 18 12
81 and above 1 0
Household Size 5 5
0–5 members 60 58
6–10 members 38 40
11 and above 2 2
Education – –
Did not go to school 0 0
Elementary Level 9 2
Elementary Graduate 18 8
High School Level 11 14
High School Graduate 35 21
College Level 13 18
College Graduate 14 37
Farming Experience 16 12
0–10 years 46 57
11– 20 years 27 26
21– 30 years 11 11
31– 40 years 10 0
41 years and above 6 6
Farm Size 2.6 2.1
0–1.99 hectares 66 60
2–10 hectares 31 40
10 hectares above 3 0
Membership to cooperative – –
Member 43 0
Non–member 57 100
Trainings – –
With training 24 30
Without training 76 70
Credit/Financial Support – –
With credit support 54 23
No credit support 46 77
Type of Barangay Infrastructure – –
Good 57 38
Bad 43 62

educated farmers are less likely to participate in contracts. credit as their motivation (Kokeyo, 2013). The results
Farmers with higher education may have more access to could also mean that less educated farmers are more likely
alternative sources of incomes and hence can be less likely to participate in contracts and hence are susceptible to the
to participate in contracts with the provision of inputs and risks associated with contract farming such as corruption

123
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Table 3 Average annual total production cost and profit of contract and non-contract farmers
Contract Mean Non-Contract Mean

Total Cost per hectare USD 5,493 USD 5,185

Less than USD 3,941 4% 13%
USD 3,941– 7,882 94% 81%
USD 7,882 above 2% 6%
Net Profit per hectare USD 2,000 USD (1,233)
Negative Profit 25% 81%
Less than USD 1,971 29% 13%
USD 1,971– 7,882 46% 6%

Table 4 Factors affecting contract farming participation among Cavendish banana farmers
Coef P-value Std. Err Marginal effects

Age 0.013 0.225 0.011 0.003

Education
College graduate - 1.288 0.024** 0.572 - 0.326
College level - 0.979 0.092* 0.581 - 0.227
Highschool graduate - 0.486 0.366 0.538 - 0.093
Highschool level - 0.799 0.183 0.599 - 0.174
Elementary graduate - 0.779 0.182 0.584 - 0.169
Sex - 0.361 0.167 0.261 - 0.093
Household size - 0.001 0.987 0.040 - 0.000
Farming experience 0.028 0.032** 0.013 0.007
Farm size 0.037 0.188 0.028 0.010
Trainings - 0.149 0.586 0.274 - 0.039
Credit/financial support 0.885 0.000*** 0.251 0.229
Constant 0.153 0.868 0.919
*
Significant at 10%; ** Significant at 5%; ***Significant at 1%
Coef = Coefficient; Std Err = Standard Error; Wald chi2 (12) = 42.02;
Log pseudolikelihood = - 73.899867; Prob [ chi2 = 0.0000; Pseudo R2 = 0.2120

and unfair terms. Additionally, less educated farmers under
contract could be constrained when pests and diseases, and
climate shocks result to crop failure. Since farmers are
bounded by contracts to plant banana and sell exclusively
to the company, farmers could not easily diversify the farm
and may not have alternative source of income.
Farming Experience
Results show that farming experience has positive and
highly significant effect at 1% on contract farming partic-
ipation. This suggests that farmers who have been in the
industry for the longer time are more likely to participate in
contract farming. Results show that a unit increase in the
years of experience of a farmer results in 0.01 increase in
the probability of engaging in contracts. Longer years in
Cavendish production could mean more knowledge and
familiarity on how the industry works. Since contract
farmers have longer average farming experience of
16 years, it is justifiable that they may have had enough
experience to gain knowledge of the risks and benefits of
both contract farming and selling in the spot market.
Hence, removing some uncertainties towards participating
in contract faming, similar results were found by [5].
Credit/ Financial Support
The access to credit/financial support positively and sig-
nificantly influences contract farming participation. This
variable was significant at 1%, suggesting that farmers are

123

more likely to participate in contract because of credit/fi-
nancial support. Moreover, results show that the probability
of participating in contracts is increased by 0.01 due to
credit/financial support. Lack of financing may be a con-
straint in a farmer’s performance in the industry, hence
hindering them from accessing markets, participating in the
chain, and commercializing their products [4]. Results are
in contrast with previous studies [4, 22] which indicated
credit access to discourage contract farming participation
since it is a source of money for capital and farmers no
longer need to participate in contract farming for capital.
However, the spread of fusarium wilt and climate change
could increase production costs. Hence, it is highly justi-
fiable that credit/financial support would have positive
influence on contract farming participation since contracts
usually includes credit access and input provision.
Conclusions
Given the importance of the Cavendish banana industry,
production and marketing problems experienced by the
farmers consequently pose a threat to the industry in gen-
eral. The choice of participating in contract farming or
selling in the spot market comes with a number of risks and
benefits with potential impacts to a farmer’s performance
in the industry. Thus, this study identified the factors
affecting contract farming participation of the farmers and
to explore in which arrangement are farmers better off in
terms of profit.
Key results suggest farmers with longer farming expe-
rience, and access to credit/financial support are more
likely to participate into contracts while farmers with
higher education are discouraged to engage in contract
farming. These imply how important technical skills and
knowledge on the dynamics of the industry, and financial
support are in making decisions that could affect their
productivity. Moreover, results imply that contract farming
is more advantageous due to more access to credit/financial
support, more stable prices, and higher profit. However, the
issues within contract farming are not dismissible. Hence,
some farmers are continuously enticed to sell in the spot
market.
Considering all these, it is crucial to craft more effective
mechanisms to regulate contracts to help address the risks
faced by contract farmers. Additionally, results further
strengthen the need for a comprehensive training educating
farmers on the dynamics of the industry and sustainable
production amidst threats of climate change and diseases.
Means to provide financial support and access to reliable
credit source are also crucial to ensure that smallholder
farmers are able to sustain their production. Through this,
technical skills and knowledge are transferred even to
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Agric Res
independent farmers. All of these could be helpful in
ensuring the welfare of smallholders who play a crucial
role in the industry. With this, productivity and competi-
tiveness of the industry could be sustained.
Acknowledgements The authors would like to acknowledge the
support provided by the Commission on Higher Education (CHED)
through the research program ‘‘Sustainable Philippine Cavendish
Banana Value Chain: Exploring Local Markets and Processed Product
Development,’’ the World Bank, and the School of Management- UP
Mindanao for the provisions of additional resources such as the
facilities for the data processing and completion of this paper.
Author Contribution Larry Digal was responsible for the main
conceptual ideas, and the acquisition of the data. Melissa Loquias
aided in the data processing and analysis and lead the writing of the
manuscript. Carol Balgos and Ivi Jaquelyn Astronomo aided in the
collection and processing of data. Shemaiah Gail Placencia and
Marvin Louie Orbeta provided critical inputs in the manuscript.
Funding This paper was completed under the support of the Com-
mission on Higher Education (CHED).
Declarations
Conflict of interest The authors would wish to confirm that there are
no known conflicts of interest associated with this paper.
Ethical Approval The conduct of this study followed ethical stan-
dards. The dataset used was from a 2012 World Bank Survey while
supporting information for analyses were gathered under the CHED
funded research program ‘‘Sustainable Philippine Cavendish Banana
Value Chain: Exploring Local Markets and Processed Product
Development.’’
Informed Consent Informed consent was obtained from the indi-
vidual participants included in the survey.
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