Contract farming in lentils and rice seed production

Empirical evidence on market-based intervention, such as contract farming, for low-value crops like lentils and HYV paddy seeds is scarce. This issue is addressed here with smallholder household-level data for lentils and HYV paddy seed growers in Nepal. Treatment effect models show that contract farming increases revenues, incomes and yields of smallholders in staple food crops (or low-value crops) like lentils and HYV paddy seeds. Analysis of farm sizes (small, medium and large) within smallholder farm households found that, on the one hand, very small farms (< 0.51 ha) tend to receive higher revenues and profits for both commodities. On the other hand, very small farms under contract farming have lower input and transportation costs.