Academic journal article Journal of Sustainable Development

Income Risk Perception and Management by Rural Farm Households, Taking Part in Sugarcane Contract Farming in Lao PDR

Academic journal article Journal of Sustainable Development

Income Risk Perception and Management by Rural Farm Households, Taking Part in Sugarcane Contract Farming in Lao PDR

Article excerpt


This research aimed to examine income risk perception and management of sugarcane contract farming at farm household level in Lao PDR. The study was conducted using a qualitative approach, employing purposive sampling with a total target group of thirty respondents that included older people from the village and heads of the sugarcane grower group as the key informants. The target group also included twenty five farm households who were planting and harvesting at least one hectare of contract farming sugarcane during a single season in 2014. In-depth interviews, group interviews and observation techniques were employed. Data collection was done during October-December, 2014. Content analysis was employed for the data analysis while descriptive analytic methods were used to present the results. The results indicated the sources of income risk to rural farm households engaging in sugarcane contract farming. These risks included the high cost of clearing land; in particular land containing large trees, the high cost of sugarcane stalk, which was often supplied contaminated with soil and tree branches, the high cost of fertilizer and also labor costs caused by annual inflation. Households were aware of the income risks from sugarcane contract farming and used their own strategies to manage them. These strategies would include reducing the amount of inputs, using their own labor, renting out their land to others and diversification in to other crops and livestock.

Keywords: income risk, Lao PDR, risk management, rural farm household, sugarcane contract farming

1. Introduction

Agriculture plays an important role within developing countries, including Laos, where the agriculture sector provided 28% of GDP in 2012 (World Bank, 2014) however, it is the case that the majority of the population relies upon agriculture for its subsistence. This majority is comprised of small farm households and those who live in rural areas. For many years, these households have been facing problems regarding low yields, the use of dated, conventional farming techniques, a lack of capital for purchasing inputs and an inability to access markets. Consequently, Laotian agriculture offers only a small proportion of its produce to the market and is mainly used for home consumption, leading to low household incomes.

Contract Farming (CF) in Lao PDR has been developed widely since 2002 (Fullbrook, 2007). CF offers an alternative approach to solving the problems faced by farm households and also provides a secure purchaser for their production. At the same time, the expansion of markets, particularly from cross-border investment and the promotion of agricultural products for sale through markets have been helpful. Contract farming is beneficial for both the households and the buyers. Households receive the necessary inputs for their farm, have a guaranteed market and receive advice on necessary farming techniques, while the buyers benefit from assured production from the CF.

Since the Mitr Lao Sugar Factory was established in 2007, sugarcane contract farming has provided an alternative approach for farm households to raise their income, diverse from rice production. Consequently, sugarcane has been promoted as a means of raising the income of rural farm households in the area. 'Sugarcane is a crop that requires high investment for inputs, the households rely mainly on the factory for these inputs and it requires very close farm management as it is a costly business' (Waswa, Netondo, Maina, Naisiko & Wanamati, 2009). Risk arises from the farm households not being used to sugarcane farming techniques and there being only one buyer in the area.

Khamsong Village, a fictitious name, Xaiburi District, Savannakhet Province, Lao PDR was selected as the study site as the households there have participated in sugarcane contract farming since 2008. It comprises of a group of forty five rural farm households planting sugarcane for contract farming. …

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