Does Contract Farming Reduce Pesticide Use? : Panel Data Evidence From Smallholder Farmers in China

Abstract

The inappropriate and excessive use of pesticides poses a major threat to human and ecosystem health in the agri-food sector. While existing studies have examined the potential of contract farming to address this issue, most have focused on large-scale farms and relied on small or transactional datasets, often leaving the role of crop-specific characteristics underexplored. Consequently, the generalizability and policy applicability of these findings remain limited in the context of diverse, smallholder-dominated agricultural systems. To address this knowledge gap, the current study uses panel data collected at fixed rural observation points across 31 provincial regions in China between 2009 and 2017 (N = 158,850) to examine the impact of contract farming on pesticide use among smallholder farmers, both overall and by crop type. The results show that farmers who are engaged in commodity contracts for agricultural product sales use significantly less pesticide than those who are not, suggesting a net positive effect of contract farming on pesticide reduction. Further analysis reveals heterogeneous impacts across crop types: participation in contract farming is consistently associated with reduced pesticide use for rice, wheat, and corn, but not for fruits and vegetables. We discuss possible reasons for the crop-specific variations in the effects of commodity contracts on pesticide reduction and provide policy implications for optimizing the use of such contracts as part of a national pesticide reduction strategy.