Maize production under contract farming between Laos PDR and Thailand: returns and benefits of farmers

Abstract

Production of maize in Thailand and Lao PDR under the ACMECS-GMS strategic framework has been both successful and problematic. However, contracted maize production is a farming system that is still widely used in Lao PDR. It is commonly questioned whether the contracted production system actually benefits the farmers. This study aims to analyze the benefits of contracted maize production in the Lao PDR by surveying 211 cases in the northern region (Bokeo) and southern region (Champasak and Salavan). The analysis is based on two main factors, consisting of 1) economic benefits, which will assess cost and return and compare the benefits of contract-based maize production systems with the benefits of traditional crop production and 2) welfare benefits, which considers changes that occur at household and community levels for agriculturists and other persons involved. Assessment of economic benefits revealed that maize production profits increased by 913.57 thousand Lao Kip (LAK) per hectare during the dry season. However, farmers lose a lot of money during the rainy season, which was consistent with losses in the southern region as labor costs are a key component of cost and low average yield. Nonetheless, if farmers hired tractor services to help prepare land instead of buying tractors, initial costs could be reduced. Another possible solution is to increase production yield with support from contract partners. In addition, most farmers in both the north and the south indicated that welfare benefits have remained the same in all areas when compared with other crops. However, benefits are obvious as the economy of the communities have improved, providing more options for farmers, including the option to work within the community instead of relocating to seek other alternatives. In addition, those involved with the various processes of production are assured of productivity.