Role, Usage, and Motivations of Contracts in Agriculture.

Claude Menard (University of Paris (Pantheon-Sorbonne))
Pavel Vavra (OECD)

Abstract: Among the rapid changes in the agri-food sector, the development of new modes of organization (e.g. supply change systems) has been particularly spectacular and raises important questions with respect to public policies and regulatory practices. Notwithstanding the fact that very few data are available, recent surveys suggest an increasing role of contracts in these organizational changes. Beside vertical integration which has also developed, contracting practices provide alternative governance mechanisms for improving the efficiency of food supply chains. However, despite the heightening interest for the role of contracts in a context of rapidly changing governance structure along the food supply chain, very little is known about the exact extent and significance of what is happening. The ongoing research project on which this paper is based is oriented towards establishing the role of contracts as means of coordination in a changing environment, and towards identifying the impact these new arrangements may have on public policies. The paper is organized in six sections. Section II summarizes some empirical observations about the significance and motivation of contracting practices in the agri-food sector. Section III develops our analytical framework. Section IV derives from this framework questions to be explored, with a special emphasis on policy issue. Section V presents preliminary results based on the (partial) data already collected. Section VI concludes.