ANALYSIS OF CONTRACTUAL AGREEMENT BETWEEN SORGHUM PRODUCERS AND INDUSTRIAL BUYERS IN KADUNASTATE, NIGERIA

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ANALYSIS OF CONTRACTUAL AGREEMENT BETWEEN SORGHUM PRODUCERS AND INDUSTRIAL BUYERS IN KADUNASTATE, NIGERIA

ABSTRACT

This study analyzed of contractual agreement between sorghum producers and industrial buyers in Kaduna State, Nigeria.Multistage sampling technique was employed for this study. The first stage involves purposive of Giwa, Markafi, and Ikara because of the predominance in sorghum production and firm‟s contract supplies.The second stage were purposive selected four villages from each Local Government Areas. The third stage, a random selection of the contract farmers was made through balloting system. Primary data were collected using structured questionnaire. The statistical tools used to analyze the data were descriptive statistics, multinomial logit model.The result of the analysis shows that (41%) of the respondents fell within the age range of 41-50years, 67% hadhousehold sizethat ranged from1-10 persons and majority of the farmers (59%) had formal education. About 61% do not had access to credit. About 74% did not had access to extension service, (53.9%) were not members of a cooperative society. About 36% had farming experience between 11-20 years while 87% of the farmers hadfarm size that range from 1-3 hectares. The distribution of sorghum producers by their preference characteristics revealed that 80% of the producers selected the preference alternative. Following the six (6) contract attributes identified between the sorghum producers and industrial buyer in the study area i.e, location of delivery, packaging of size, price setting, mode of payment, quality of grain and dispute resolution.80% of producers sold the harvests at their place and 16% at the market while 5% of producers found buyers at collection points. In terms of packaging size, about 73% of sorghum producers used 100 kg bags and 20% used 50 Kg while 7% of sorghum producers used 25 Kg bags. In terms of price levels, about 94% of the respondent use market price while 6% of the producers opted for market price plus premium for 20% of the sample. Cash transaction was dominant for majority of the producers (99%). While quality was systematically checked at sale (91%). 97% of producers resolved contract disputes through a third party while 3% required no third party. The result also shows that, producers generally preferred the following four levels of attributes: packaging size of 100 kg (100%), cash payment (100%), market price (90%) and dispute resolution with a third party (98%). The Pseudo R-squared value indicates that 53 percent of the variation in the farmers‟ preference of contract attributesof sorghum farmers is explained by the independent variables. The relatively small value may be due to measurement errors in the explanatory variables. The significant chi-square value of 53% indicates that the explanatory variables jointly influence the farmers‟ preference of contract attributes. Numerically and statistically, producers place (p<0.01), market price (p<0.10)and dispute resolution with third party (p<0.01) were the most influential determinant of farmers‟preference of contract attributes in the study area. The major constraints identified on sorghum contract farmers in the study area were high cost of fertilizer (96%), inadequate capital (91%), high cost of labour (85%), late commencement of preseason training (52%) while security were (35%). Small scale contract farmer‟s bargaining power should be enhanced in order to increase their benefit from contract farming.

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