Factors Influencing Sheep Farmers’ Decisions to Contract Farming in East Java Province, Indonesia

This study investigates the factors influencing the choice of institutional models in sheep farming, specifically focusing on contract and non-contract models in East Java, Indonesia. The primary objective of this research is to identify the factors that influence farmers’ decisions when selecting between these two institutional models and to evaluate the differences in characteristics between farmers engaged in contract and non-contract farming.

In this study, a quantitative approach employing a survey design was utilized for data collection. The survey encompassed 90 sheep farmers across three principal sheep-producing districts in East Java Province, namely Lumajang, Jember and Bondowoso. Data processing was conducted at the University of Jember over the period of November 2023 to April 2024. To examine the dataset, a binary logit model was employed to analyze and identify the determinants influencing farmers’ decision-making processes. The variables considered included farming experience, educational attainment, age, cage capacity, baseline market prices and access to financial resources.

The study’s findings reveal that farmers’ decisions to adopt the contract model are significantly influenced by base price and farming experience. Specifically, farmers with greater experience are more likely to avoid the contract model, whereas those with higher base prices are more inclined to opt for the contract model. Additionally, farmers with higher base prices are more inclined to opt for it. Formal education did not show a significant effect on the choice between contract and non-contract models. This study concludes that ensuring price stability through the contract model can provide risk management benefits for farmers, particularly for those with larger herds or limited market access. The research contributes to the existing literature by offering valuable insights into the factors that influence the selection of institutional models in sheep farming and provides recommendations for policymakers to promote the adoption of advantageous institutional models within the livestock sector.