Governing of Marketing in Bulgarian Farms
11 Pages Posted: 22 May 2006
Date Written: 2004
Attempt has been made to identify dominant forms and factors for output realization in Bulgarian farms. New Institutional and Transaction Costs Economics framework is used to estimate comparative efficiency of various modes for realization of farm outputs in farms of different type (unregistered, cooperative, agro-firms) and various sizes (small, middle-size, large). Study is based on a large-scale microeconomic data collected through interviews with managers of 0.5% of commercial farms in the country. Big institutional, economic, and behavioral uncertainty combined with high assets specificity and low recurrence of transactions, have blocked formation of agrarian markets in the country. Market has "failed" to organize significant part of inputs supply and outputs realization transactions. However, agrarian agents have developed various private modes to overcome transacting difficulties and to govern their dependent transactions. A great variety of in-farm production and processing, personal contacts, long-term marketing contracts, and interlinked modes etc. have come to existence and they characterize dominant structures for outputs realization in Bulgarian farming today. Major type of farming outputs realization (household consumption and giving to friends and relatives; production in-farm consumption; additional processing in-farm; long-term contract for outside processing; sell) in farms of different types and sizes has been identified and their relative share in brut farm output determined. Product specificity (grain, vegetables, fruits and grape, live animals and meat, milk, others) and its relation to specific organizational choice of outputs realization (member cooperative; other farm, cooperative or firms; retail trade; wholesale trade to store, hotel, restaurant; commodity exchange; wholesale market; in-farm processing; state reserve; direct export) have been identified and microeconomic factors for governance choice discussed. Importance of diverse factors for preferring a particular buyer or mode for realization of farm outputs (lack of alternative buyer; best prices; maximum profit; minimum risk; cheapest way; maximum security; high trust; tradition; frequency of transactions with the same partner) have been specified. Prominence of various transacting problems for realization (lack of buyers; low prices; unstable prices; no price information; no buyer information; buyer is better informed; unreliable partner; not-fulfillment of negotiated terms; controlling and enforcement of contracts; non-business factors etc.) for main farming products and type of farms have been specified. In the same way the significance of chief factors for successful realization (mutual benefits for partners; written contract; oral agreement; third-party assistance; good will of partners; tradition; trust; beneficial for farm prices; lack of competition) have been identified. High marketing costs along with the big enforcement costs of contracts in general, and enormous credit supply costs are the major factors restricting farm enlargement of Bulgarian farms as present stage. Besides, the most important factors for farm development in future relate to improvement of institutional environment (guaranteed marketing, enforcement of Laws and private contracts, macro-economic stability, legislation framework, access to free markets), and own and family experience in farm management.
Keywords: governing of output realization and marketing, transaction cost economics, transitional farm organization, Bulgarian farming
JEL Classification: D23, L22, M13, M31, 017, Q13
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