Influence of contract farming on black tea value chain: a case study in Phu Tho province, Vietnam

Black tea product contributes 80% of exported tea in Phu Tho province. Black tea has been
being one of the high valued commodities and brought high income for tea producers. However, the black tea industry has been facing on many difficulties such as low price, perishable cash crop, weak cooperation between stakeholders and low competitiveness. In value chain, contract farming has been viewed as an instrument for improving value chain performance by building the tight integration among actors. Therefore, the study focused on comparing value chains of contract farmers to those of worker farmers and non-contract farmers in order to analyze the influence of contract farming on black tea value chain. The data collection based on semi-structure interviews and 1 1 0 standard questionnaires in Thanh Son and Doan Hung districts. By adopting financial analysis, the paper explored the cost and the benefits of actors and the linkages among the actors of the black tea value chain. The results showed that the value added (VA) was 10.88 million VND/ton of black tea for groups of worker, 10.62 million VND/ton of black tea for contract farmers and 11.40 million VND/ton of black tea for non contract farmers. However, the VA of whole chain of worker farmers and contract farmers (29%) is higher than the non-contract farmers(18%). Therefore, worker farmers and contract farmers chains are more comparative and sustainable than non contract farmers chain. Based on the results, it could indicated that contract farming could promote the black tea value chain in Phu Tho province.