A Latent Class Cluster Analysis of Farmers' Attitudes Towards Contract Design in the Dairy Industry

Abstract

As a result of a number of recent developments, such as the milk strike in several European countries in 2008 and the planned expiration of the European milk quota scheme in 2015, it is necessary to redesign contractual relationships in the dairy industry. However, fostering acceptance of new stipulations (e.g., volume control, pricing systems) requires that the attitudes of farmers be taken into consideration. Thus, in this article, the authors analyze how dairy farmers attitudes vary towards both contracting in general and specific contract attributes. Using a survey of 161 dairy farm managers, the research question is addressed by means of a latent class cluster analysis. Three clusters are identified. Their attitudes are heterogeneous, ranging from suppliers who are clearly convinced of the value of contractual relationships to farmers who reject contracts explicitly. Results may be utilized to match the preferences of farmers regarding contracts with modified dairy marketing contracts. [EconLit Classification: Q130].