The
terms of a contract can establish a minimum price level
or a minimum price premium for AW products that fulfill
certain quality requirements. In this way, part of a
farmer’s price risks are eliminated, but farmers are still
be left with considerable freedom in management decisions.
Stronger forms of vertical coordination include
production contracts and vertical integration, in which
the type of resources (for example, feed and antibiotics)
that farmers can use are usually regulated and the integrator
or buyer makes some of the production decisions.
All such instruments focus on reducing price volatility
and, in turn, decrease downside risk at the farm level.
However, these instruments also limit entrepreneurial
freedom to a smaller or a larger extent
Theterms of a contract can establish a minimum price levelor a minimum price premium for AW products that fulfillcertain quality requirements. In this way, part of afarmer’s price risks are eliminated, but farmers are stillbe left with considerable freedom in management decisions.Stronger forms of vertical coordination includeproduction contracts and vertical integration, in whichthe type of resources (for example, feed and antibiotics)that farmers can use are usually regulated and the integratoror buyer makes some of the production decisions.All such instruments focus on reducing price volatilityand, in turn, decrease downside risk at the farm level.However, these instruments also limit entrepreneurialfreedom to a smaller or a larger extent
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