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Designing coordination contracts to support efficient flow-scheduling in pork chain

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  • Niemi, Jarkko K.
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    Abstract

    Risk management and efficient, well coordinated, flow-scheduling have an increasingly important role in the competitive pork production networks. Changes in input and output prices have resulted in distortions in the Finnish pig markets during the last years. The goal of this study is to estimate how different price or quantity-fixing contracts affect the values of pig and sow space unit under price risk. The values are estimated with two stochastic dynamic programming models. The results suggest that a contract which is able to control both the pattern of changes in piglet prices and the option to suspend production temporarily has a value and it can help to improve the competitiveness of the pig sector. However, it is feasible to have incentives towards the contract commitment when market situation upon accepting the commitment is favourable.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 125208.

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    Date of creation: Jun 2012
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    Handle: RePEc:ags:aaea12:125208

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    Keywords: Pigmeat; piglet; price feed; contract; market distortions; risk; Agribusiness; Farm Management; Livestock Production/Industries; Risk and Uncertainty; Q12; Q13; C61;

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    1. Zheng Xiaoyong & Vukina Tomislav & Shin Changmock, 2008. "The Role of Farmers' Risk aversion for Contract Choice in the US Hog Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-22, June.
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    6. Jalvingh, A. W. & Dijkhuizen, A. A. & van Arendonk, J. A. M., 1992. "Dynamic probabilistic modelling of reproduction and replacement management in sow herds. General aspects and model description," Agricultural Systems, Elsevier, vol. 39(2), pages 133-152.
    7. Martin Odening & Oliver Mu�hoff & Alfons Balmann, 2005. "Investment decisions in hog finishing: an application of the real options approach," Agricultural Economics, International Association of Agricultural Economists, vol. 32(1), pages 47-60, 01.
    8. Joost M. E. Pennings, 2004. "Channel Contract Behavior: The Role of Risk Attitudes, Risk Perceptions, And Channel Members' Market Structures," The Journal of Business, University of Chicago Press, vol. 77(4), pages 697-724, October.
    9. Jan Hinrichs & Oliver Musshoff & Martin Odening, 2008. "Economic hysteresis in hog production," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 333-340.
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