The last two decades are characterized by international trade expansion in agricultural products.This is partly due to removal of trade barriers,market liberalization,new technologies and change in consumers food habits in both developed and developing countries.This profoundly affect the way firms access inputs and the vertical relation of farmers and agribusiness firms in many ways.(Simmons,Winters and Patrick,2005; Warning and Key,2002).Vertical integration in production and marketing existed for long time already and nowadays its importance is dramatically increasing(Guo,Jolly and Zhu,2007).In agriculture this is particularly the case for perishable products,products with technical requirements and economical importance(Bijman,2008).Smallholders market participation has a number of benefits.Market participation assists smallholders to specialize on crops that they have comparative advantage and to purchase others which are costly for them to produce.The poorest segment of smallholders are those who produce for their own consumption,however,those who participate in markets and specialize their production,are relatively well-off.However,in the presence of constraints like,high transportation cost,poor infrastructure,and lack of market information,the market participation of smallholders is both costly and risky.These situation leave smallholders disconnected from market(Minot and Hill,2007).Contract farming is developing as a new institutional innovation to improve the livelihood of smallholders through facilitating market linkages,providing support and sharing risks(PingSun,Sununtar and Adam,2008).There is a long line of research which finds that participation in contract farming increase smallholders income and productivity.