Theoretical and Empirical Analysis of Vertical Backward Contracting in Algerian Agriculture

The Algerian agricultural sector faces a continuous process of institutional change, which has important consequences on farmers decision of organizational choices in farming. One of consistent ways to understand this process, and to support related policy making, is by analyzing the determinants of vertical integration of agricultural production. In this study, the determinants of vertical backward integration are analyzed with a maximum-likelihood logistic regression model. By using a farm-level data, the analysis estimates the effect of main factors on the likelihood of a farmer for the backward input contracting. Results suggest that the important factors affecting significantly the farmers decision for vertical backward integration are farm size, off-farm activities, participation in government programs, ownership structure, and geographical location. The results confirm the effective relationship hypothesized between the likelihood for backward contracting and farm characteristics. Policy implications are drawn for provision of enabling socio economic environment for the performance of agricultural cooperatives.