The Research Of Internal Financing Between Leading Enterprises And Farmers In Pig Supply Chain Based On The Perspective Of Farmers

With the rapid development of agriculture industrialization in our country, the planting and breeding scope in modern agriculture has broken through that in traditional agriculture. With the planting and breeding industry as its center and extending to pre-production and post-production, an agro-product supply chain system has been formed preliminarily, covering links like the supply of production means of agro-products, planting and breeding production, agro-product processing, and agro-product distribution, etc.There are many kinds of agro-product supply chains. The e pig supply chain, as a typical kind in agro-product supply chains, has aroused much attention in the development of agriculture industrialization. China is the No.1pork producing country in the world. The number of live pigs being bred is immense, and pork consumption is accounting for the highest proportion in meat consumption of inhabitants. Till the end of2010, the national total meat output is79.25million tons, in which pork output is50.7million tons, beef output6.53million tons, and lamb output3.98million tons. At the end of the year the amount of live pigs on hand is464.4million, and that for slaughter is667million. Hence live pig breeding is leading the stockbreeding industry.Farmers is one of the main body in pig supply chain, mainly engaged in pig production. Pig breeding demand for money is bigger, because the farmers limited financial resources, to ensure the normal conduct of pig production, farmers external financing is required. Their financial status and information are not transparent. They lack effective montage or guarantee and have high risk of production and operation. At the same time the transaction costs of credit services offered by formal financial institutions are high. Therefore farmers are liable to credit constraint from formal financial institutions. For many years the state has taken many reform measures to formal financial institutions, but farmers are still seriously constrained in credit. The behavior of sparing loans to farmers from formal financial institutions is quite extrusive. Contrary to sparing loans to farmers from formal financial institutions, the leading enterprises on live pig supply chain provide loans to farmers through signing order contracts with farmers, selling investment goods on credit, or supplying productive funds, or paying part of purchasing funds for future agro-products in advance. Why don’t formal financial institutions have strong will to supply loan to farmers, while the leading enterprises on live pig supply chain are willing to sign order contracts including credit services to provide internal financing? It’s a question worthy of attention how to study the relationship between internal financing in the supply chain and loan availability of farmers.Hence, the general target of the study is:Based on the theories of interconnection contracts, transaction costs, credit rationing, and information asymmetry, etc., the relationship between internal financing in live pig supply chain and loan availability of farmers from the perspective of farmers is studied to provide theoretical and empirical foundation for solving the problem of funds flow tightness of farmers in present agro-products supply chains through internal financing.Study content I:Study the internal financing system in live pig supply chain. Applying the theories such as interconnection contracts, transaction costs, credit rationing, and information asymmetry, etc., make a qualitative research on the will and feasibility of providing internal financing from the leading enterprises in live pig supply chain, the possibility of farmers participating in internal financing in live pig supply chain, operating mechanism and functioning system of internal financing in live pig supply chain, and costs and benefits of leading enterprises and farmers, etc. The research results show that leading enterprises and farmers benefit more from participating in internal financing in supply chain than directly from outside market transaction, hence the welfare of leading enterprises and farmers is enhanced. A close cooperative relationship between leading enterprises and farmers is formed through the pattern of internal financing in supply chain, and the stable operation of supply chain is promoted. As for famers, the credit constraint is relieved, product quality is improved and the problem of agro-products sale is solved. And leading enterprises have obtained stable and high-quality supply of raw materials, with transaction costs reduced.Study content II:Study the factors influencing farmer’s involvement in internal financing in supply chain. Applying field survey data from farmers on live pig chain, the decisive factors of influencing farmers to participate in internal financing in supply chain are empirically analyzed based on farmer behavior selection model. The research results show that in explanatory variables reflecting the individual features of farmers, the risk favor of farmers has passed significance test, and the influence is negative. In explanatory variables reflecting productive and operative features of farmers, the two variables of farmers’breeding scale and anticipative price fluctuating range of agro-products have passed significance test, and the influence is positive. The bank credit that farmers have obtained has passed the significance test, and the influence is negative. The three explanatory variables, the order pricing approach and pricing settlement clause which reflect the benefit distribution fairness between cooperation parties of internal financing in supply chain in order clause features, and breach compensation clause reflecting benefit guarantee level of both cooperative parties of internal financing in supply chain, have passed the significance test, and the influence is positive. The results of the research prove the research hypothesis1of the thesis.Study content III:Study the factors influencing of internal financing environment in supply chain on farmer credit availability. Based on Heckman model, applying field survey data from farmers on live pig supply chain, the influence of internal financing in supply chain on farmer credit availability is analyzed empirically. The research results show that in the explanatory variables reflecting the individual features of farmers, the two variables of whether a farmer is a native and whether a farmer is a village cadre have passed the significance test, and the influence is positive; in the explanatory variables reflecting farmers’productive and operative features and financial features, farmers’breeding scale has passed the significance test, and the influence is positive. The two variables of farmers’ family total assets and bank credit obtained have passed the significance test, and the influence is negative. The regression results of the model show that the substitution level between internal financing in supply chain and bank credit is61.04%, which shows that internal financing in supply chain is an important channel to widen farmer credit availability and it can significantly relieve the credit constraint to farmers. The research hypothesis2of the thesis is proved. In the explanatory variables reflecting the features of the relationship between farmers and leading enterprises, the two variables of order fulfillment proportion and number of communication times have passed the significance test, and the influence is positive. The results of the research prove the research hypothesis3of the thesis.