Abstract: Contract farming has been increasingly found to benefit smallholders in developing countries, yet much less is known about its role in the poultry industry where economies of scale could be more prominent.  This study aims to narrow this gap by analysing the choice of contract farming among Chinese broiler producers using a nationally representative survey.  Simply cost-benefit analysis and multinomial logit regression modelling are jointly employed to explain contract farming decision making especially among small producers.  In contrast to many recent studies, we find that small producers, though not passively excluded, usually opt out of contract farming due to limited profitability when large producers are coexistent.  Such relationship is appropriately identified through a control function approach to correct for possible endogeneity.  Therefore, contract farming may not help achieve higher welfare goals for small broiler producers who actually instead seek alternative market opportunities that better realise their comparative advantages. 

Key words: contract farming ,  broiler ,  price ,  multinomial logit ,  China