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

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  • Niemi, Jarkko K.

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.

Suggested Citation

  • Niemi, Jarkko K., 2012. "Designing coordination contracts to support efficient flow-scheduling in pork chain," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125208, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:125208
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    File URL: http://purl.umn.edu/125208
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    References listed on IDEAS

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    1. 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.
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    3. Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(02), August.
    4. Dubois, Pierre & Vukina, Tomislav, 2009. "Optimal incentives under moral hazard and heterogeneous agents: Evidence from production contracts data," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 489-500, July.
    5. Vukina Tomislav & Shin Changmok & Zheng Xiaoyong, 2009. "Complementarity among Alternative Procurement Arrangements in the Pork Packing Industry," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(1), pages 1-24, March.
    6. Huirne, R. B. M. & Dijkhuizen, A. A. & van Beek, P. & Hendriks, Th. H. B., 1993. "Stochastic dynamic programming to support sow replacement decisions," European Journal of Operational Research, Elsevier, vol. 67(2), pages 161-171, June.
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    More about this item

    Keywords

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

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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