Journal of
Development and Agricultural Economics

  • Abbreviation: J. Dev. Agric. Econ.
  • Language: English
  • ISSN: 2006-9774
  • DOI: 10.5897/JDAE
  • Start Year: 2009
  • Published Articles: 531

Full Length Research Paper

Contracts for Grain Biosecurity and Grain Quality

Hoda Abougamos
  • Hoda Abougamos
  • School of Agriculture and Resource Economics, University of Western Australia, Perth, Western Australia, Australia.
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Ben White
  • Ben White
  • School of Agriculture and Resource Economics, University of Western Australia, Perth, Western Australia, Australia.
  • Google Scholar
Rohan Sadler
  • Rohan Sadler
  • School of Agriculture and Resource Economics, University of Western Australia, Perth, Western Australia, Australia.
  • Google Scholar


  •  Received: 26 October 2016
  •  Accepted: 25 January 2017
  •  Published: 31 March 2017

Abstract

The export of grain from Western Australia depends on a grain supply network that takes grain from farms to port through Cooperative Bulk Handling (CBH) receival and storage sites. The ability of the network to deliver pest free grain to port and ship depends on the quality of grain delivered by farmers and the efficacy of phosphine based fumigation in controlling stored grain pests. Unfortunately, over time, common stored grain pests have developed resistance to phosphine. There is some evidence that phosphine resistance, develops on farm due to inadequate biosecurity management. This paper considers the design of farm biosecurity contracts using a principal agent approach. An optimizing non-linear programming model with different effort levels of Cooperative Bulk Handling (principal) and farmer (agent) is developed to determine: (i) whether the farmer’s effort level affect the CBH’s profit function, and (ii) whether increasing monitoring effort by the CBH has an impact on farmer’s performance on farm. Results show that; (i) the optimal effort level of farmer is higher for perfect information assumption than moral hazard one. Meanwhile, (ii) under moral hazard assumption, when Bulk Handler is engaged in intensive monitoring level, the farmer is engaged in a higher level of effort. Price premium represents the incentive for farmers, while cost-reduction represents the incentive for Grain Bulk Handler.

Key words: Principal-agent model, biosecurity contracts, asymmetric information, stored grain, effort levels, farmer, grain bulk handler.