Materialization of contract theory in practical farming activities

Issue № 12, 2024, article № 10, pages 87-96

Language: Russian

Original language title: МАТЕРИАЛИЗАЦИЯ КОНТРАКТНОЙ ТЕОРИИ В ПРАКТИЧЕСКОЙ ДЕЯТЕЛЬНОСТИ ФЕРМЕРСТВА

Keywords: CONTRACT FARMING, MOTIVATION OF THE PARTIES, MEASUREMENT PROBLEMS, INFORMATION ASYMMETRY, OBLIGATIONS AND LIMITATIONS OF THE PARTIES, RESIDUAL INCOME

Abstract: A new approach in contract theory is considered, it is noted that the parties to the contract are legally separate interested parties. Contract farming is active in developing and developed countries and has become an important part of the mainstream of modern agricultural research. An agricultural contract is considered as an agreement between farmers and buyers of production and marketing conditions in the form of participation in various schemes.This leads to a discussion about the motives for the loss of independence in the open spot market. Empirical research is aimed at detecting a positive impact on the technological development of farms, enhanced coordination and control in the agri-food chain, reduced risks, increased profitability, market power and market capture, availability of loans in the absence of collateral.The contract, as an element of filtration, helps to distinguish a higher-quality product from a lower-quality one. Measurement issues are central to the assignment of the subject of the contract, pre-agreed cultivation schemes and subsequent control will ensure traceability of the quality of the goods.We are considering marketing contracts based on the purchase and sale mechanism. The asymmetry is due to the fact that the agent, as the owner of land and products, knows the technological process better, we note that the principal can limit the agent's freedom and direct production in an intensive direction. The limited market leads to the need for price coordination.In production contracts, the principal is the owner of the land, as well as products at all stages of cultivation, knows the production process better, assigning the agent the function of an employee. The nature of the relationship changes when the principal decides to retire, and the agent signals his production and management experience in the business plan. The distributive mechanism of cost and income participation generates discussions about the contribution of the parties to investment and operating expenses.At the financial level, the cash flows of the contract are fixed in the budget. Ranking of financial aggregates — basic payments to the contractor, basic income of the principal, residual income, allows you to estimate the total income of the agent and the total income of the principal. The budget helps to make a decision to give preference to contract farming or return to the spot market.

Authors: Potokina Elena Sergeevna