Preprint Article Version 1 This version is not peer-reviewed

Who Bear the Most Risk? Risk and Risk Shifting in Indonesian Broiler Contract

Version 1 : Received: 1 October 2018 / Approved: 1 October 2018 / Online: 1 October 2018 (17:07:21 CEST)

How to cite: Khasan, A.; Rondhi, M.; Aji, J.M.M. Who Bear the Most Risk? Risk and Risk Shifting in Indonesian Broiler Contract. Preprints 2018, 2018100020 (doi: 10.20944/preprints201810.0020.v1). Khasan, A.; Rondhi, M.; Aji, J.M.M. Who Bear the Most Risk? Risk and Risk Shifting in Indonesian Broiler Contract. Preprints 2018, 2018100020 (doi: 10.20944/preprints201810.0020.v1).

Abstract

Contract between grower and integrator has been used extensively in broiler industry all over the world. One important advantages of contract is risk management, in which contract shifts a portion of grower risk to integrator. Thus, this paper attempted to measure the amount of risk shifted from grower to integrator and the consequences of this benefit to grower. Using a panel data of actual production records of 46 Indonesian broiler growers for the period of January 2014 through December 2017, we systematically measure the amount of risk shifted to integrator and its consequences to grower. The results showed that 78.43% grower risk is shifted to integrator. However, to acquire this benefit grower receive 15% less income. Furthermore, grower face the possibility of losing their asset and stopping their production as the consequences of entering contract.

Subject Areas

Risk shifting, broiler contract, panel data

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