Contractual arrangements in the cattle beef chain: an analysis of trust

Abstract

In Brazil, the conflict between cattlemen and the slaughterhouse industry is evident and historic in the beef cattle Agribusiness System, in which opportunistic behavior is commonplace. Accordingly, the role of trust is significant in trade decisions, which makes the analysis of trust in the construction process of governance structure an important factor. The present article aimed to identify the influence of trust in selecting the contractual arrangement in transactions between cattle ranchers and abattoirs. This qualitative and descriptive study used semi-structured interviews, done in loco, along with 30 beef cattle ranchers and five abattoirs in the west of São Paulo State. It was observed that transactions involve opportunistic behavior, and that trust is critical in selecting the contractual arrangement.

Social capital in transactions: The role of economic and social trust in the specialty beef production system in Brazil

“…However, there are chains in which this apparatus is insufficient, which is the case of the Brazilian beef production system, which lacks efficient institutions to support transactions between agents (Farina and Nunes, 2003;Shanoyan et al, 2019;Colares-Santos et al, 2020). A long history of economic and legal disputes between beef cattle producers and the processing industry sheds light on inefficiencies within that system (Caleman et al, 2008;Caleman and Monteiro, 2013;Oliveira et al, 2019;Santos and Batalha, 2023).…”

“…This, in turn, significantly influences the governance structure adopted by agents (Barzel, 2005;Cuypers et al, 2020;Sudré et al, 2021;Williamson, 1985). The increased dependence between agents necessitates the adoption of more effective coordination mechanisms to ensure efficient transactions (Caleman et al, 2008;Colares-Santos et al, 2020;Saes and Silveira, 2014;Shanoyan et al, 2019).…”

“…Our theoretical and qualitative hypotheses is that when considering the influence of social capital, transactions should be viewed as exchange relationships permeated by a social context in which social interactions between individuals and groups interfere. Previous studies have highlighted the relevance of social aspects, such as trust, in beef production systems (Colares-Santos et al, 2020;Dinku et al, 2021;Guimarães et al, 2021;Javornicky et al, 2021;Shanoyan et al, 2019). The influence of social capital in the analysis of economic behavior impacts the decisions of the agents, as these decisions cannot be solely based on economic considerations but must also consider social aspects to avoid a loss of efficiency.…”