The contractual relationships in the Italian durum wheat chain: empirical survey evidence

Abstract

The paper investigates the vertical relations along the Italian durum wheat chain and the factors affecting farmers’ behavior in adopting contractual agreements. Sale/crop-growing contracts in the durum wheat sector are analyzed through a direct survey to a sample of 261 durum wheat farmers. The questionnaire collected data on downstream relations and contract terms between farmers and processing and/or marketing firms along the durum wheat chain. A logit model is used to identify factors affecting the likelihood of contract farming between farms and processors. One of the main issues emerging is the low frequency of written contractual forms between durum wheat farmers and downstream operators. In most cases the farmers do not want constraints and reveal a lack of trust in contracts. They prefer to sell their product to a local downstream operator with whom they have a long-standing and solid relationship of trust. Moreover, results of a logistic model show that certain farm features, such as turnover and degree of specialization in durum wheat production, play an important role in driving the decision to adopt written contracts.