Globally, contract farming has received strong recognition as it is proved to increase smallholder farmers' access to input and output markets, production and productivity and income. This study investigates the welfare gains of participation in contract farming by smallholder malt barley growers. We use propensity score matching techniques to estimate the effect of contract farming on smallholder's net revenue from malt barley production. Our analysis shows that participation in contract farming significantly (p=0. 001) improved farmers' annual net revenue by 557 to 687 ETB ($26. 34 to $32. 46) compared to selling malt barley in the open market. This income effect is attributed to the premium price the contract offers to farmers for high quality malt barley produced under contract farming. Therefore, policies or projects involving in malt barley value chains should target improving farmers' access to market information, access to extension services, access to credit and training to increase farmers' participation in malt barley contract farming and to improve their net revenue earning level in the study area.
