This paper attempted to examine the existing maize Contract Farming
(CF) system in Anuradhapura district of Sri Lanka as a strategy of
market stabilization through public - private partnership (PPP). Study
applied principal component analysis (PCA) to explain the factors
affected in adoption. It was revealed that full time farmers who have
higher proportion of agricultural income, higher agricultural land
holdings as well as agricultural experience and family labour
participation were more prominent in adopting the contract farming
system. Moreover, statistically significant higher yield by maize
contract farmers over non - contract farmers was believed to be
achieved due to efficient input delivery mechanism of the buyer.
Further, adopters have earned about two times higher agricultural
income than non-adopters. Inability to sell the whole harvest through
CF system was the main obstacle faced by the contract farmers.
Among the constraints faced by contract farmers, price instability was
not a significant problem. In contrast, non-contract farmers have
mentioned price instability as the most critical problem they have
encountered. Therefore, it appears that, contract farming system has
been effective as a market based instrument of price stabilization, in
the context of maize contract farming in Sri Lanka. Further, it was
revealed that unavailability of an authorized body to regulate the
contract farming process and lack of a crop insurance scheme have
slowed down the progress of spreading the contract farming system
throughout the country.