Finantial evaluation of risks and transation costs involved into internalization of the feed in swine confinement

Abstract

By using the evaluation of the financial viability associated with techniques of risk analysis and transaction costs, this study investigated both benefits and attractiveness of the internalization of the animal feed manufacture in swine confinement at Zona da Mata Mineira. The data refer to the first half of 2007 and were based on real technical coefficients, which used as a benchmark farms in the region of study. In the deterministic scenery, the internalization showed viability. However, ‘to the light of the risk theory’, the viability was questioned, since the internalization generates profitable benefits, brings the risk incorporation that before were from producer feed and not of the swine producer. The information asymmetry and the opportunist and strategic behavior of the market agents were observed in the swine confinement. Although, the occurrence of risks, the possible costs generated by specific assets might be diluted through the time horizon of the investment project, since transactions are recurring. Thus, the decision between buying or producing is not limited only to the production costs, but mainly between the risks and transaction costs involved.