risk of contractual hold-ups. Just as a firm may be prone to renege on
contractual terms when market conditions change, a farmer may be compelled
to sell all, or part of his or her production, to a third party, when prices are
perceived to be higher outside the contractual bond. This is especially
problematic where alternative markets for the crop or livestock grown under
contracts are easily accessible and where contractual enforcement is weak.
Contractual hold-ups by farmers are known to be the reason for the failure of
contract farming in many such schemes.