Farmers Relations with Input Suppliers – Some Evidence from the Dairy Sector in Poland

Abstract

The paper aims at improving our knowledge about farmers’ relations with input suppliers and analyses the backward vertical spillovers between the “boundary” chains. It uses a micro-data on dairy sector in Poland to elicit farmers’ opinions on their cooperation with feed suppliers and confront them with farmers’ actual behaviors. We find that dairy farmers have on average a long and stable cooperation with feed suppliers. A great majority of the respondents perceive their relationship with feed supplier as either good or very good. The relation between farmer and feed supplier is usually not formal (over 90% of farmers do not have any written contract). Price level and the quality of feed is the most important feature of the relation mentioned by farmers. However, we observe significant differences in the farm characteristics, obtained discounts, possibilities of the price negotiations, etc. depending on the channel of the feed supply. Despite no significant difference in farmland size, farmers who purchase feed directly from feed producer have a significantly larger milk production and receive significantly higher discount from the feed supplier than farmers purchasing feed from an intermediary. This group of farmers is also more active in price negotiations and more often considers changing their supplier.