Governance structures in wheat supply chains and their impacts on productivity and profitability of wheat producers in Ethiopia


This study aims to supplement the literature on the factors affecting wheat producer productivity and profitability by focusing on the role of governance structures and asymmetric information – an issue that is rarely discussed in developing countries. The study thoroughly explores the effect of governance structures and asymmetric information to model a hypothesis for Ethiopia. The study area enables an exemplary case study as it is one of the top wheat-producing areas in both Ethiopia and all of Africa. The study area has also been registered as a wheat belt region in Sub-Saharan Africa. This study used personal interviews to collect primary data from actors. Mixed sampling techniques (i.e., random, census, and purposive) were used to select sampling units. Multiple linear regression models were used to analyse the data. The results show that governance structures, Farm-gate transactions, and asymmetric information have a significant effect on wheat productivity and profitability. Asymmetric information significantly reduces the profit and yield of wheat producers. The study implies that the government should apply a policy related to institutional arrangements to enhance productivity and profitability in wheat supply chains.


governance structures; Farm-gate transactions; asymmetric information; wheat supply chain; wheat productivity; profitability

Abebe, G.K., Bijman, J., Kemp, R., Omta, O., Tsegaye, A. (2013). Contract farming configuration: Smallholders’ preferences for contract design attributes. Food Pol., 40, 14–24.
Akerlof, G. (1970). The market for lemons: Quality uncertainty and the market mechanism. Quart. J. Econ., 83(3), 488–500.
Alemu, A.E., Mathijs, E., Maertens, M., Deckers, J., Gegziabher, K., Bauer, H. Hiwot, K.G. (2012). Vertical coordination in the local food chains: Evidence from farmers’ in Ethiopia. Int. J. Econ. Fin. Stud., 4(1), 11–20.
Alemu, A.E., Maertens, M., Deckers, J., Bauer, H., Mathijs, E. (2016). Impact of supply chain coordination on honey farmers’ income in Tigray, Northern Ethiopia. Agric. Food Econ., 4(9), 1–21.
Barrett, C.B., Bachke, M.E., Bellemare, M.F., Michelson, H.C., Narayanan, S., Walker, T. F. (2012). Small-scale farmer participation in contract farming: Comparative evidence from five countries. World Dev., 40 (4), 715–730.
Bijman, J. (2008). Contract farming in developing countries: An overview, Working Paper. Wageningen: Department of Business Administration, Wageningen University.
Bogetoft, P., Olesen, H.B. (2002). Ten rules of thumb in contract design: Lessons from Danish agriculture. Eur. Rev. Agric. Econ., 29, 185–204.
Brousseau, E. (2008). From bilateral sets of incentives to the multi-level governance of relations. In: E. Brousseau, J.-M. Glachant (eds.), New Institutional Economics: A Guidebook (pp. 37–66). Cambridge: Cambridge University Press.
Cai, J., Setboonsarng, S., Dekker, H.C. (2003). Value chain analysis in inter-firm relationships: A field study. Manag. Account. Res., 14(1), 1–23.
DIIDRC (2011). Markets and rural poverty, upgrading in value chains. Earthscan: USA and Canada.
Dörr, A.C., Grote, U. (2009). The role of certification in the Brazilian fruit sector. Rev. Econ. Contem., 13(3), 539–571.
Dwyer, F.R., Schurr, P.H., Oh, S. (1987). Developing buyer seller relationships. J. Market., 51(2), 11–27.
Eaton, C., Shepherd, A.W. (2001). Contract farming: Partnerships for growth. FAO Agricultural services bulletin 145. Rome: Food and Agriculture Organization.
Edriss, A.K. (2013). Pears of applied statistics for social sciences and professional consulting: Theory and STATA applications with real data. Canada: International i-Publishers.
FAO (2014). Food Balance Sheets. Rome: FAOSTAT.
FAOSTAT (2018). Faostat data, available at: (accessed July 2018).
Girma, J., Gardebroek, C. (2015). The impact of contracts on organic honey producers’ incomes in southwestern Ethiopia. For. Pol. Econ., 50, 259–268.
Habte, Z., Legesse, B., Haji, J., Jaleta, M. (2020). Determinants of supply in the wheat value chain of Ethiopia. Eastern Africa Social Science Research Review, 36(1), 19–36.
Hennessy, D.A. (1996). Information asymmetry as a reason for food industry vertical integration. Am. J. Agric. Econ., 78, 1034–1043.
Herath, D., Weersink, A. (2009). From plantations to smallholder production: The role of policy in the reorganization of the Sri Lankan tea sector. World Development, 37, 1759–1772.
Holmstrom, B., Milgrom, P. (1994). The firm as an incentive system. Am. Econ. Rev., 84(4), 972–991.
Hueth, B., Ligon, E., Wolf, S., WU, S. (1999). Incentive instruments in fruit and vegetable contracts: Input control, monitoring, measuring, and price risk. Rev. Agric. Econ., 21(2), 374–389.
Jia, X., Bijman, J. (2013). Contract farming: Synthetic themes for linking farmers to demanding markets. In: C.A.B. da Silva, M. Rankin (eds.), Contract farming for inclusive market access (pp. 21–38). Rome, Italy: Food and Agriculture Organization.
Key, N., Runsten, D. (1999). Contract farming, smallholders, and rural development in Latin America: the organization of agro-processing firms and the scale of out grower production. World Dev., 27, 381–401.
Kirsten, J., Sartorius, K. (2002). Linking agribusiness and small-scale farmers in developing countries: is there a new role for contract farming?. Dev. South. Afr., 19, 503–529.
Kherallah, M., Kirsten, J. (2002). The new institutional economics: Applications for agricultural policy research in developing countries. Agrekon, 41(2), 110–133.
Little, P.D., Watts, M.J. (1994). Living under contract, University of Wisconsin Press, Madison.
Locke, C., Lloyd-Sherlock, P. (2011). Qualitative life course methodologies: Critical reflections from development studies. Dev. Chan., 42(5), 1131–1152.
Menar, C. (2007). Cooperatives: Hierarchies or hybrids? In: K. Karantininis., J. Nilsson (eds.), Vertical Markets and Cooperative Hierarchies (pp. 1–17). Springer.
Merlin, B. (2005). The Value Chain Approach in Development Cooperation. (2nd ed.).
Ménard, C. (2004). The economics of hybrid organizations. J. Inst. Theor. Econ., 160(3), 345–376;
Minot, N., Roy, D. (2007). Impact of high-value agriculture and modern marketing channels on poverty: An Analytical framework. IFPRI Food Policy Review. Washington, DC: International Food Policy Research Institute.
Minten, B., Randrianarison, L., Swinnen, J.F.M. (2009). Global retail chains and poor farmers: Evidence from Madagascar. World Dev., 37, 1728–1741.
Narayanan, S. (2012). Notional contracts: The moral economy of contract farming arrangements in India. Working Paper 2012-020. Mumbai: Indira Gandhi Institute of Development Research.
North, D. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.
Oya, C. (2012). Contract farming in Sub-Saharan Africa: A survey of approaches, debates and issues. J. Agrar. Chang., 12, 1–33. Poole, N.D., Del Campo Gomis, F.J., Juliá Igual, J.F., Vidal
Giménez, F. (1998). Formal contracts in fresh produce markets. Food Polic., 23, 131–142.
Smale, M., Just, R.E., Leathers, H.D. (1994). Land allocation in HYV adoption models: an investigation of alternative explanations. Am. J. Agric. Econ., 76, 535–546.
Shikur, H.Z., Legesse, B., Haji, J., Jaleta, M. (2020). Governance structures and incentives in the wheat value chain in Ethiopia. Afr. J. Agric. Res. Econ., 15(2), 157–176.
Williamson, O.E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York: Free Press.
Williamson, O.E. (1996). The mechanisms of governance. Oxford: Oxford University Press.
Williamson, O.E. (1999). Strategy research: governance and competence perspectives. Strat. Manag. J. 20(12), 1087–1108.
Wilson, J. (1986). The political economy of contract farming. Rev. Radic. Pol. Econ., 18, 47–70.
Wimmer, B.S, Chezum, B. (2003). An empirical examination of quality certification in a ‘lemons’ market. Econ. Inq., 41(2), 279–291.
Wolf, S., Hueth, B., Ligon, E. (2001). Policing mechanisms in agricultural contracts. Rural Soc., 66(3), 359–381.

Published : 2021-07-04

Shikur, Z. (2021). Governance structures in wheat supply chains and their impacts on productivity and profitability of wheat producers in Ethiopia. Journal of Agribusiness and Rural Development, 60(2), 203-212.

Zewdie Habte Shikur
Wolaita Sodo University  Ethiopia

CitedBy Crossref

CitedBy Scopus

HTML tutorial

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

This journal permits and encourages authors to post items submitted to the journal on personal websites or institutional repositories both prior to and after publication, while providing bibliographic details that credit, if applicable, its publication in this journal.