Relationship between social and economic factors and income from contract farming of horticultural crops in Machakos County

Abstract

Contract farming is widely regarded as an institutional arrangement capable of enhancing agricultural productivity, stabilizing markets, and improving rural livelihoods. However, income outcomes for smallholder farmers remain inconsistent across contexts. This study examined the relationship between social and economic factors on income from horticultural contract farming in Machakos County, Kenya, focusing on how selected socio-economic characteristics affect annual income per acre under contractual arrangements. The study was guided by Transaction Cost Theory (TCT) and Resource Dependence Theory (RDT) to frame the role of efficiency, resource access, and interdependence in shaping income outcomes. A census approach was adopted, covering 350 horticultural farmers contracted by VegPro Kenya Limited. Primary data were analyzed using descriptive statistics, correlation analysis, and multiple regression techniques. The regression model was statistically significant and had moderate explanatory power, indicating that the selected variables explain a meaningful proportion of the variation in income per acre. Findings show that while farmers exhibit relatively homogeneous demographic characteristics—middle age, moderate education, and substantial farming experience—these social factors do not consistently influence income outcomes. Household size was the only social variable with a statistically significant positive effect, suggesting the importance of household labor availability. Economic factors showed stronger effects: production cost had a significant positive relationship with income per acre, implying that higher input investment enhances productivity, while farm size had a significant negative effect, indicating declining efficiency at larger scales. Household earnings showed a positive but statistically insignificant relationship, and output prices remained constant due to contractual pricing arrangements. The study concludes that income outcomes in horticultural contract farming are primarily driven by labor availability, production intensity, and land-use efficiency. While the findings provide partial empirical support for Transaction Cost Theory and Resource Dependence Theory—particularly regarding resource optimization and structured market access—these relationships are context-specific and not universally generalizable. The study is limited by its cross-sectional design, focus on a single contracting firm, and reliance on self-reported income and cost data, which may affect external validity and measurement accuracy. Future research should incorporate longitudinal data and comparative contract models to strengthen causal inference. Policy recommendations include strengthening contract design, enhancing farmer capacity in cost management, and improving access to productive inputs to maximize income benefits.