The contract farming in dairy offers the guarantee of supply of intermediate inputs, livestock services and market outlet for the smallholder producers, in exchange for the guarantee of supply of milk to the processor, through its intermediary. Birthal et al. (2006) reported that the contract farmers received higher profits per unit of output than independent farms. Also the farmer is insured for livestock mortality rates, beyond that farmer bears the risk of loss. This controls moral hazard and provides incentives for farmers to supply their best effort. Thus to analyse mik production efficiency under contract dairy farming system, this study was conducted.
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