Finding the right price: supply chain contracts as a tool to guarantee sustainable economic viability of organic farms

Abstract

The aim of this study is to analyse the volatility of agricultural commodity prices and assess the effectiveness of supply chain contracts as possible tools to prevent it. The study refers to the cereal sector, which is of vital importance for the agri-food system of the Mediterranean area. Since Italy is the world’s largest producer of durum wheat semolina, the proper functioning of the Italian durum wheat supply chain is central to this investigation. The study was conducted following two different paths of analysis: (1) the calculation of volatility indices using annual and monthly data of durum wheat prices, both organic and industrial, observed in the Bologna Commodity Exchange (AGER); (2) the analysis of two organic durum wheat supply chain contracts, defined by a cooperative involving hundreds of Italian farms mainly from the Marche region and by an agricultural consortium operating in the Adriatic regions. Despite the limited number of cases examined, the present study shows how supply chain contracts can be valid tools for building stable relationships between the various players, from production to processing and distribution, guaranteeing farms fairer and more remunerative raw material purchase prices and higher quality standards.