Farmer-buyer relationships and sustainable agricultural practices in the food supply chain: The case of vegetables in Chile

This study investigates how the relationship between farmers and buyers affects the adoption of sustainable agricultural practices (SAPs) in the vegetable sector in Chile. Specifically, we focus on the dyadic relationships between farmers and different types of buyers, including besides lead firms, intermediaries, and wholesalers, which have received little attention in the scientific literature. Our analysis focuses on formal and informal contracts as governance forms between farmers and buyers, and explores the correlation between contract provisions (e.g., quality, quantity, and the provision of services), relationship attributes (i.e., satisfaction, trust, and opportunism) and adoption of SAPs. We gathered survey data from 352 vegetable farmers in Chile and employed analysis of variance and logit modeling for our analysis. Our findings indicate that small-scale farmers primarily engage with intermediaries using informal contracts, while medium-scale farmers trade with wholesalers through spot markets, and large-scale farmers with lead firms using formal contracts. We also found that farmers who traded through informal contracts, mainly with intermediaries, reported greater satisfaction in the farmer-buyer relationship than farmers trading through formal contracts. However, farmers engaging in informal contracts were less likely to adopt SAPs than farmers trading through formal contracts. Our results suggest that the governance form (contracts or spot market) adopted for the relationship between farmers and buyers influences the adoption of SAPs, while the impact of relationship attributes on SAP adoption is less clear. A deeper understanding of buyers and their relationship with farmers is essential to enhance policies encouraging SAP adoption in regional and local fresh food supply chains. [EconLit Citations: Q13, Q15, Q56].