Impact of Contract Farming on the Technical Efficiency of Broiler Farmers in Indonesia

Abstract

The objective of this paper is to estimate the effect of Contract Farming (CF) on the efficiency of broiler farmers in Indonesia. We used comprehensive socio-economic data of 438 broiler farmers in Indonesia. To achieve the objective we used causal-comparative research (CCR) design. Stochastic frontier production (SFP) employed to estimate farm efficiency. Then, the effect of CF on farm efficiency was estimated using propensity score matching (PSM). The results showed that the average technical efficiency of broiler farmers is 74.22%. Participation in CF increases TE by 7.4% and chick productivity by 12.5%. A policy that promotes farmer participation in CF is likely to improve the efficiency of broiler farmers since it is associated with improved input use intensity.