Contracts between smallholders and private firms in Mozambique and their implications on food security
This working paper (PDF) by the United Nations University World Institute for Development Economics Research (UNU-WIDER) focuses on the role of contract farming agreements between smallholders and private investors in rural contexts. These contracts can take different forms, but in general are agreements under which producers commit to supply produce to a buyer firm. The focus of this paper is on contracts’ effects on food security in Mozambique. Contrasting effects may be expected: on the one hand, the effects of increased income, while, on the other, the effects of giving up food production and of monopsonistic market relations. Overall, the main findings of the paper indicate that selection in contracts is the main driver of the observed differences. Participating in contract farming increases household income, but has no effect on the variables measuring food security, nor on food production. Therefore, it is concluded that most of the observed differences are due to selection: more food secure households have higher probability of entering into contracts. Households that are able to enter into contract farming agreements are those households that are already food secure before the contract is established. The last conclusion is that contracts have a differentiation, not a specialization effect. They ‘add up’ to the usual livelihood strategy, but are not able to radically change it. This is consistent with other evidence in the continent since risk associated to a complete reliance on cash crops and on a monopsonistic buyer are too high.