Ripe for contracts? Estimating the impact of an avocado producer organization contract farming intervention

Abstract

We evaluate the impact of a producer organization avocado contract farming intervention in Kenya that included (1) an agreement to sell to an avocado exporting company, (2) access to training, and (3) support to gain group-level Global Good Agricultural Practices (GLOBALG.A.P.) certification as main activities. Using a (nonexperimental) doubly robust difference-in-differences design with farm-level panel data from 2015 and 2017, we show that farmers began selling to the contracted company, were recently trained and received the GLOBALG.A.P. certification. However, the intervention's uptake was less than perfect, especially concerning the procurement aspect of the contract, suggesting widespread side selling. In terms of outcomes, contract farming nevertheless significantly improved sales prices and reported quality, increased direct sales to companies, and led to more planted trees, but also increased total production costs. The effects are driven by the Hass avocado variety, which is in higher demand in export markets and the contracted avocado variety. No significant income and other welfare effects were found.