Coordination Of Agricultural Supply Chain Considering The Influence Of Weather Under Contract Farming Mode

The No.1documents of the central government have been focusing on the “threerural issues” over the past ten years, which indicates that it becomes one of the mostimportant problem for the government to solve. A new agricultural industrializationmode to solve the problem is contract farming mode consisting of companies andfarmers. However, negative effects of weather and uncontrollable risk may lead to alack of motivation for both the parties to fulfill the contract, which may further lowerthe stability of the supply chain system and heavily constrain the scale and healthydevelopment of contract farming. Therefore, considering the impact of weather, thispaper concentrates on how to design effective contracts to coordinate the conflicts ofrisk&revenue sharing between the company and the farmer under the contract farmingmode.First of all, aiming at the fact that uncontrollable weather will simultaneouslyaffect the agricultural yields and quality during the production process,a compensationcontract related to the degree of weather index is designed to coordinate the risk sharingbetween company and farmer. The incentive mechanism is testified throughconstructing dynamic game model and profit decision model. The mechanism canencourage both parties to fulfill the contract and improve the stability of agriculturalsupply chain. Besides, it’s also proved that under the compensation contract, theweather has no influence on, the coordination state of supply chain, which can ensurethe stable supply of agricultural products to a certain degree. A numerical example isutilized to further testify the effectiveness and efficiency of this compensation contract.Secondly, from the perspective of a risk-averse farmer,, this paper aims at a twostage agricultural supply chain consists of a risk-averse farmer and risk-neutralcompany and studies the supply chain coordination under the influence of weather. Animproved revenue sharing contract based on the weather index and the degree offarmer’s risk averse is designed. By building a dynamic game model and a CVaR model,this contract is proved to be successful in encouraging both parties to fulfill the orderingcontract, which can improve the stability of the agricultural supply chain. Under thedesigned contract, for the purpose of reducing the negative impact of weather, thesupply chain decision makers can adjust the contract parameter to encourage bothcompany and farmer to achieve risk and revenue sharing. At last, based on the previous research, this paper aims to break the isolation ofcontract farming transaction system by using weather derivatives. The coordination ofagricultural supply chain based on weather option is studied. Take the example ofweather like green winter, a coordination contract related to the weather index (weathercall option+risk compensation+join gold) is designed by using weather option. Thecontract is proved to be effective in encouraging both company and farmer to fulfill theordering contract and achieve optimal system profit by constructing dynamic gamemodel. The result showsthatunder the designed coordination contract, supply chaindecision-makers can hedge the risk of adverse weather by buying call option of weather.