Farmer-trader vertical coordination: drivers and impact on the lotus-grain value chains in central Vietnam

Lotus plants have emerged as a relatively new commodity in the food industry in Vietnam, with significant economic potential from its diverse applications in medicine, cosmetics, food, and decoration. Vertical coordination, involving strategic alignment and collaboration among different actors in the value chain, plays a critical role in supporting the small-grain grower-trader relationship. This study aimed to investigate the factors driving the adoption of vertical coordination mechanisms within lotus-grain value chains and to assess the impact of different coordination strategies applied by farmers on their well-being in central Vietnam. Employing a multinomial endogenous switching regression methodology, the study offers nuanced insights into the adoption patterns and impacts of various coordination strategies, controlling for both sample selection bias and unobservable factors. The results highlight the importance of trust, input management, and strategic decision-making in enhancing yield and revenue outcomes among smallholder farming households. Trust between farmers and traders significantly influences the adoption of such strategies in agricultural transactions. Higher trust levels correlate with an increased likelihood of adopting verbal, input, or written contracts. The positive impacts of input contracts on lotus grain yield and revenue, highlighting the importance of effective input management. These findings deepen our understanding of vertical coordination within lotus-grain value chains and assist stakeholders in making evidence-based decisions when selecting vertical coordination strategies for sustainable value chain management. Vertical coordination between farmers and traders has emerged as a promising strategy for enhancing efficiency, promoting mutual benefits, and improving livelihoods within Central Vietnam's lotus grain value chain. By addressing existing challenges and charting future directions, vertical coordination holds the potential to significantly contribute to the sustainable development of the lotus grain industry in the region. This study highlights the importance of trust, input management, and strategic decision-making in enhancing yield and revenue. Trust between farmers and traders significantly influences the adoption of verbal, input, or written contracts. The positive impacts of input contracts on lotus grain yield and revenue underscore the importance of effective input management. These findings assist stakeholders in making evidence-based decisions for sustainable value chain management.