From informal to formal contracts : Public incentive mechanisms and food security in Algeria dairy farming

As many developing countries, Algeria tries to develop a local dairy production as an alternative to powder milk imports to ensure both food security and food sovereignty. In 1995, a specific and still ongoing milk incentive program LDPRH (Local Dairy Production Rehabilitation Program) has been implemented. The main objective of the program was the fostering of the milk local production, joint with an increase of the food safety standard. Indeed, 80% of the local milk production is still marketed through informal contracts with no minimal food safety standard. In the main leading dairy regions, farmers may have access to a package of subsidies and incentives to increase their production (subsidy by quantity produced, subsidies for the purchase of high genetic potential dairy cows, dairy farming equipment, ...), provided that they adopt one of the public milk safety standards by signing a formal (written) contract. Our paper aims at assessing the impact of the public incentive program on the food security. We first analyze the e↵ect of the program on the probability of adopting public food safety standards and formal contracts instead of no (public) safety standards and informal contracts (oral and spot contracting). Then we assess its impact on the milk production level and the farmer income, depending on the type of contract chosen. To do so, we use a 90 farming contract database in the region of Souk Ahras, one of the leading region where farmers may have access to the program. To analyze the contract relationship, we have recourse to the New Institutional Economics Approach and we derive some hypotheses on the contract form that we test using our database. We test if the public regulation has only a direct e↵ect on the food security (food safety, production level and farmer income) or its impact goes through an indirect and systemic change of the attributes of the transaction and the relationships in the dairy supply chain.