Farmers' preference for organic rice contract farming scheme: a discrete choice experiment in Indonesia

Contract farming schemes (CFSs) are essential for providing solutions for farmers due to their guaranteed prices, markets, and availability of inputs. However, numerous farmers quit and leave the contract because the schemes offered are less likely to consider the farmers' preferences. The formulation of a contract scheme based on farmers' preferences could provide the potential for better sustainability of cooperation, yet the information regarding food commodities in Indonesia is limited. This study aimed to analyze farmers' preferences for organic rice CFS. In this study, while the findings of the analysis of CFS-adopters are expected to provide management implications for keeping them in the contract, the preferences of non-adopters are anticipated to provide information regarding the key characteristics of contracts for enticing new farmers. This study included 277 farmers and used the discrete choice experiment (DCE) with the following attributes: payment schedule, input loan, technical assistance, and expected price. The results of the study revealed that CFS-adopters attach great importance to the price attribute, while non-adopters were more concerned with the input loan attribute from the company. Estimation of random parameter logit (RPL) main effect with interaction indicated that there were various relationships between farmer characteristics and the level of attributes. This research is expected to provide managerial implications for companies in preparing organic rice CFS offered to farmers in Indonesia and to provide policy recommendations related to sustainable agriculture.

Automated summary

Contract farming schemes are crucial for farmers, but many quit due to the lack of consideration for their preferences. This study analyzes farmers' preferences for organic rice contract farming schemes, providing management implications for maintaining existing farmers and information on key contract characteristics for attracting new farmers.