The movement towards specialized production and much greater integration with input suppliers or processors means farmers can no longer view themselves as independent. The emergence of niche markets, for instance, not only creates a need for specialized inputs, both by processors and by farmers, but it also demands that decisions at the farm input level, farm production level, and processing level be co-ordinated to achieve economies of scale. As long as these activities remain independent, all players fail to achieve an optimal scale. The result is that farmers can expect increasing levels of contracting and vertical integration. The emergence of greater contracting and vertical integration, however, raises questions about control and power.
Farmers can expect increasingly to give up control over farm-level production decisions.
Because of the information agribusiness firms possess about product quality and its importance, these firms are likely to have the power to set contract terms. With greater contracting, farmers also face new risks, such as the possibility that a processor, for instance, will change the contract terms once farm production has occurred. This risk increases as the assets needed for agricultural production become more and more specific to a particular product. The changes and ramifications outlined above suggest that farmers need to become more involved in the provision of agricultural inputs and the processing of agricultural products than they have been to date. Lower prices for grain and oilseed products, for instance, mean that farmers that continue to be involved only in farm-level production will find themselves being increasingly subject to control from input suppliers or agricultural processors.