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Price Risk Management In Hog Production Through The Vertical Coordination Theoretical And Practical Approach

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  • MIRONESCU, Alexandra
  • STEPIEN, Sebastian

Abstract

Vertical coordination is a form of price risk management which mitigates the negative effects of hog cycle, associated with price and supply fluctuations on the pig market and is aims to stabilize farm incomes. It can take the form of contracts or full vertical integration, however the level of farmers commitment results from the estimated production risk and ability to fulfill agreements provisions. The aim of this paper is to identify the nature and effects of price risk management in hog production through the vertical integration. The authors argue that the properly coordinated production process can reduce the risk of price and production volatility and helps to stabilize farms income. It may also be beneficial to the environment and local community, strengthening the vitality of rural communities. It seems that this solution may become a dynamic trend in modern food system in developed countries.

Suggested Citation

  • MIRONESCU, Alexandra & STEPIEN, Sebastian, 2012. "Price Risk Management In Hog Production Through The Vertical Coordination Theoretical And Practical Approach," Holistic Marketing Management Journal, Holistic Marketing Management, vol. 2(4), pages 19-25, September.
    • Handle: RePEc:hmm:journl:v:2:y:2012:i:4:p:19-25
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    References listed on IDEAS

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    1. Silke Boger, 2001. "Quality and contractual choice: a transaction cost approach to the polish hog market," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 28(3), pages 241-262, October.
    2. Martinez, Stephen W., 2002. "A Comparison of Vertical Coordination in the U.S. Poultry, Egg, and Pork Industries," Agricultural Information Bulletins 33773, United States Department of Agriculture, Economic Research Service.
    3. Martinez, Stephen W., 2002. "Vertical Coordination Of Marketing Systems: Lessons From The Poultry, Egg, And Pork Industries," Agricultural Economic Reports 34051, United States Department of Agriculture, Economic Research Service.
    4. Lawrence, John D. & Rhodes, V. James & Hayenga, Marvin L., 1997. "Vertical Coordination in the U.S. Pork Industry: Status Motivations, and Expectations," Staff General Research Papers Archive 5003, Iowa State University, Department of Economics.
    5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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    More about this item

    Keywords

    risk management; price fluctuations; vertical integration;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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