Abstract
To solve the financing problem of the food producers, we consider a two-echelon contract food supply chain composed of a family farm with capital constraints and a food processing enterprise. With no capital constraints as the benchmark model, we analyze optimal decisions of the family farm and the food processing enterprise in the case of bank financing with bank participation only and bank financing with “government, bank, and insurance” coparticipation. Then, we discuss how the risk of yield uncertainty influences the optimal decisions and profits of the family farm and the food processing enterprise under different financing situation. Meanwhile, the reason why the government subsidizes agriculture is explored, and the policy of minimum purchase price of the food is initiated when the market price is too low. Finally, the numerical examples and sensitivity analysis are presented. The results show that the bank financing with “government, bank, and insurance” coparticipation improves the welfare of supply chain members more obviously than the bank financing with bank participation only; when the rice price is too low, the policy of minimum purchase price of food is initiated, which increases the revenue and the growing enthusiasm of the family farm; the profits of the family farm and the food processing enterprise will decrease as the risk of yield uncertainty increases in the case of bank financing, and the risk of yield uncertainty will be reduced for the family farm when bank financing with “government, bank, and insurance” coparticipation.
Highlights
As the Chinese saying goes “Hunger breeds discontentment,” food security is self-evident to a country and is the foundation of national security
The optimal bank financing decisions for a twoechelon contract food supply chain composed of a family farm with capital constraints and a food processing enterprise are analyzed
The case of sufficient supply chain funds is used as the benchmark model, and we find that the profits of supply chain members in the benchmark case are far greater than that in the financing case, which indicates that the financing cost cannot be ignored. is is consistent with the actual operation of enterprises, where “financing difficulty” and “financing expensive” are common, especially for smalland medium-sized enterprises (SMEs). e yield random factor is introduced into the model to measure yield uncertainty, which is different from the measurement of yield uncertainty by Huang and Lin [7]
Summary
As the Chinese saying goes “Hunger breeds discontentment,” food security is self-evident to a country and is the foundation of national security. Huang and Lin [7] analyzed the dynamic game among the government, the bank, the companies, and farmers in the case of uncertain yield and made a case analysis of the new agricultural loan model of “government-bank-insurance” in Sanshui District, Foshan City, Guangdong Province, China, and put forward suggestions for improvement. Huang and Lin [7] mainly discuss the government subsidy mechanism in the contract farming supply chain financing in which the yield is uncertain, and the yield uncertainty is measured by the probability of occurrence in bumper years and disaster years in their study. We focus on the optimal decision of supply chain members in the contract food supply chain with capital constraints, and we introduce a random variable to measure the uncertainty of yield which is different from Huang and Lin [7]. The food in our study is the bulk agricultural products with different characteristics from the general agricultural products, so we conduct a theoretical analysis of the government’s participation in food production
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