How do Farmers interact with Input Suppliers: Some Evidence from the Dairy Sector in Poland

Abstract

The extensive and growing literature on food supply chain has been mainly focused on relations between farmers, processing and retail sectors. Various studies have investigated for example the determinants of supply chain relationships (e.g. Dries et al., 2014) and a situation of small-scale producers in the face of rapid supply chain restructuring (e.g. Briones, 2015; Vorley et al., 2007). However, a systematic understanding of how farmers interact with input suppliers is very scarce. In response to this, the paper aims at improving our knowledge about farmers’ relations with input suppliers.
The specific example that we examine comes from the Polish dairy sector, which seems to be particularly well suited for investigating relationships within the food value chain. On the one hand, fragmented structure of local farms, and poor income situation of small agricultural holdings are frequently emphasised (Milczarek-Andrzejewska, 2014). On the other hand, Polish dairy and feed sectors have undergone a thorough modernisation (Dries et al., 2011; Piwowar 2013). Rising farmer demand (due to production technology change being necessitated by milk productivity improvement) and increased competition in the feed sector have led to new vertical relations between the farm and feed production segments. Vertical coordination took many forms, including contracting, advisory programs, financial support etc. However, the existing theoretical and empitical literature on vertical spillovers through backward linkages (i.e. from buyers to suppliers) is scarce and focused on manufacturing (Kuijpers, Swinnen, 2016; Jarzębowski, 2013).
A study on the relationship between dairy farmers and feed producers means that we examine also the relations between two agri-food chains. These two – dairy and feed – supply chains are vertically connected. The feed supply chain ends at the farm level where the feed is finally used in the milk production process, and where the dairy supply chain starts. Our study allows then to characterize the “boundary” segments of supply chains.