Factors Influencing Malawian Tobacco Farmers\u27 Decisions regarding Contracting

Tobacco plays a very significant role in Malawi’s economy by being the largest foreign exchange earner for the economy. The Integrated Production System was implemented in 2012 to promote contract production and also improve quality of tobacco which would therefore fetch higher prices for farmers. Contract farming has been believed to be potentially beneficial, but many farmers still choose not to produce under contract. This study examines factors that influence farmers’ tobacco contracting decisions. 300 farmers were interviewed for the study using a structured questionnaire. Data was analyzed with logit model using SAS software. Expected auction market price, expected fertilizer cost for contract tobacco production, and the number of years farmers have grown tobacco are negatively related to producers’ adoption of contract production. Expected contract market prices, expected non-contract fertilizer cost, loan expectations, number of years farmer has previously contracted and offarm income are positively related to contract adoption