If this was not the case, differences in farmers’ risk attitudes
became important and, in turn, the use of potential risk
management instruments should be considered. Price
risks are largely determined outside the farm. Hence,
part of these risks could be managed outside the farm,
such as by vertical coordination including contracts
(Harwood et al., 1999; Hardaker et al., 2004). 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