Soybean contract farming is increasingly encouraged for agricultural sustainability and transformation, and improved smallholder welfare in Ethiopia. Despite the contemporary significance and economic advantages of soybeans for farmers, current yields consistently fall short of their potential, and local sources struggle to meet growing demand. This research investigates the institutional and systemic constraints of the soybean contract in Metema, West Armachio, and Quara districts. Previous studies usually use a reductionist approach, investigating isolated factors and thus failing to explore the multifaceted interdependent nature of these farming systems. To address existing knowledge and methodological gaps, this research employs an inclusive, multilevel analytical apprpach within a transaction cost theoretical framework, utilizing a cross-sectional design. A multi-stage sampling procedure is employed to collect data from 369 smallholder farmers, comprising 170 contract farming participants and 199 non-participants. The bivariate Tobit model findings confirm that poor seed quality, lack of enforceability, low contract price, and limited market power are critical systemic constraints of soybean contract farming in the study areas. To address the problems, the responsible bodies should resolve oligopsony market issues by strengthening farmers’ multi-purpose cooperatives and employing anti-collusion measures to ensure market fairness. Policymakers must establish a clear legal framework that mandates strict contract enforceability, competitive pricing, and the use of collateral requirements to build farmer trust. Finally, securing good-quality inputs from certified suppliers through a fair contract model is crucial to promote sustainable growth and structural transformation within Ethiopian agriculture.
Abreham et al. (Mon,) studied this question.