If the production costs are increased by let's say 5% there will be a proportionate increase in prices per litre of milk, and in case of decreased production costs there will be a proportionate reduction in prices.
I am asking farmers about this kind of forward/future contract. What percentage of your production of milk are you willing to give on a contract of this type?
Dear Muhammad, first of all, we should take into account what will be the effect of such contract on the market prices. Also, it is important to focus on feedback effect.
If we have contract on a small amount of milk, it may not affect the market price.
What do you think, is it possible to maintain competitiveness on the market using such contract?
As there is a risk in diary product (damaged in low temperarture, harmful without pasteurazation, etc), I think it is worthwhile contarct for managing price risk in dairy products, Let's say, you may have contarct of managing price together with your partners in business, as there is a risk in it. Or, boith parties are responsible when in certain time, say within 2 weeks the products are not sold 100 %, so the rest of the products will make changes in price and the changes of price can be responsible for both parties (producers and sellers).It is because the shelflife of diary product is limited, and it is a risk too
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