The Role of Marketing Contracts in the Adoption of Low-Input Production Practices in the Presence of Income Supports: An Application in Southwestern France

Abstract

This paper analyzes the link between choices of production technologies and marketing contracts. We first develop an analytical model showing that both decisions are linked and influenced by risk and direct payments. Then, a numerical application based on a stochastic farm model is implemented on a representative farm from southwestern France. Among other things, we find that a wide availability of marketing contracts reduces the impact of agricultural policies on agricultural practices. Moreover, marketing contracts can encourage farmers to adopt green practices, which areÑin FranceÑriskier than conventional techniques.

Keywords

• crop farming
• forwarding contracts
• multiperiodic farm model
• risk analysis
• stochastic simulation