Staff Reporter
A NEW study has found that contract farming has not significantly improved the incomes of smallholder cattle farmers in Namibia’s Northern Communal Areas (NCAs), despite offering formal market access and input support. The research, conducted by scholars from the University of Namibia, suggests that structural market barriers and contract design limitations continue to constrain income growth among communal farmers.
The study evaluated the income effects of contract farming among cattle producers in eight regions north of the Veterinary Cordon Fence, commonly known as the Red Line. These areas account for nearly half of Namibia’s national cattle herd but record significantly lower formal market participation compared to the country’s southern regions.
Using data from 107 smallholder farmers — 41 contract participants and 66 non-participants — researchers applied Propensity Score Matching (PSM) and Ordinary Least Squares (OLS) regression to assess whether contract participation improved annual cattle income.
While contract farmers recorded higher average incomes, the difference was not statistically significant at the 5 per cent level. This means the variation in income could not be directly attributed to participation in the contract scheme.
According to the findings, several structural factors undermine the potential benefits of contract farming in the NCAs. These include veterinary restrictions linked to foot-and-mouth disease controls, high transaction costs, limited access to abattoirs, poor road infrastructure, and relatively low contract prices. Farmers were also limited to selling only five animals under the scheme, reducing the potential scale of income gains.
The study found that participation in contract farming was more common among married male farmers with higher education levels and greater farming experience. However, demographic characteristics such as age, gender, marital status and herd size were not significant determinants of cattle income.
Instead, income levels were primarily influenced by economic factors such as the number of cattle sold, average cattle prices, monthly income, and whether farming was the household’s main source of income. Each additional animal sold significantly increased annual cattle income, underscoring the importance of sales volume and market prices.
Researchers added that although contract farming provided benefits such as feed support and guaranteed market access under commodity-based trade protocols, the current pricing structure and contract limitations reduced its effectiveness in raising incomes.
The study concludes that contract farming, in its present form, is insufficient to generate meaningful economic improvement for most communal cattle farmers in northern Namibia. It recommends revising pricing mechanisms, increasing flexibility in the number of animals contracted, improving transparency, and strengthening farmer engagement to enhance the inclusiveness and effectiveness of the scheme.
The research contributes to growing evidence that contract farming outcomes are highly context-specific and that structural market constraints play a decisive role in shaping income impacts within communal livestock systems.
FIGURE: Map of the study area [Source: Madzingira et al. (2023)].
