Research On Leasing Mode Of "Company+Farmers" Risk Averse And Revenue Decision Problem

As leading operation pattern in the industrialization of agriculture, the pattern of “Company + Farmer” has become an invisible tie linking farmers to markets and greatly enhance the added value of agricultural products. In modern day agricultural production, it diversifies risks, makes full use of agricultural resources and boosts the development of agricultural industrialization. The model of company + farmer is an essential force that revolutionizes and promotes the economic growth of Chinese agriculture. However, in real practice, there are serious conflicts of interests between companies and farmers and prevalent contract breach, giving rise to a series of uncertain factors to stakeholders of this new agriculture supply chain partners. This in the end hinders the process of industrialization of agriculture.This article delves into the bilateral profit of Company + Farmer and analyses few patterns to guarantee the honoring of contracts. With focus on both sides how to decide the optimal output according to their own interests, this essay analyses the relationship between labor cost, production cost, rents from companies and salary of farmers in the context of company+ farmer model. According to the conclusion, under model of lease, free trading is not fit for the transactions between companies and farmers. The production of farmers is related not only to labor costs, but also to salary systems. To better picture the influence of risks on the decisions of farmers and companies, risk assessment tool like CVa R is used to explain the function of farmers’ production output and comes to the conclusion that farmers face zero risk under lease model. Principal-agent Theory is also used to analyze the relationship between excitation coefficient and rents. The market demands, fluctuation as well as the effect of land output on optimal rent are also covered. This essay suggests more analysis considering the loss of agricultural land.This essay ends with possibilities for future researches, with focus on bringing financial derivatives to contract models.