Pilati, Luciano and Boatto, Vasco (2003) Contratto d'area cooperativo contro il rischio sistemico di produzione in agricoltura. UNSPECIFIED. (Unpublished)
Abstract
Farms that deliver production to processing, storage and marketing cooperatives are doubly exposed to the economic risk deriving from climatic and environmental adversities: besides the direct loss due to reduced output, with unfavourable climatic conditions they also suffer an indirect loss due to the effect on the price of the lower quantity processed by the cooperative. When farm production falls short of the processing capacity of the cooperative, in fact, there occurs an increase in the average fixed operating cost and, ceteris paribus, a reduction in the price paid to the members. However, cooperatives for the processing, storage and marketing of agricultural products may also perform an active role in mitigating the members’ production risk. By means of the area yield insurance contract, cooperatives are able to mitigate the systemic component of their members’ production risk, thereby increasing efficiency. The aim of this paper is to set out the model of the area yield insurance contract and to explain the possible contribution of the processing, storage and marketing cooperative to removing information asymmetry. Cooperatives usually comprise a great deal of information about the members’ production: quantities produced, crop areas and varieties cultivated, production quality, price levels. This valuable stock of information relative to the productions of the members over the years can be managed by the cooperative without significant transaction costs in order to remedy certain weaknesses in the area crop insurance contract. When processing, storage and marketing cooperatives form a territorial system, the area yield insurance contract can be enhanced with a two-stage specification so as to benefit from both the information possessed by the cooperatives and from the organizational role of the consortium.
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