Institutional arrangements in the emerging biodiesel industry: Case studies from Minas Gerais—Brazil

Connecting (small) family farmers to the emerging biodiesel industry requires careful design of the institutional arrangements between the producers of oil crops and the processing companies. According to institutional economics theory, the design of effective and efficient arrangements depends on production and transaction characteristics, the institutional environment, and the organizational environment supporting the transaction between producers and the industry. This paper presents a comparative study on two cases in the feedstock-for-biodiesel industry in the state of Minas Gerais, Brazil. The two case studies represent the production and transaction system of soybeans (Glycine max L. Merrill) and castor beans (Ricinus communis L.). Important elements of effective and efficient institutional arrangements are farmer collective action, availability of technical and financial support, and farmer experience with particular crops.

► We study institutional arrangements for feedstock transactions between family farmers and the biodiesel industry.
► We focussed on soybean and castor bean production and transaction systems.
► Institutional arrangements are affected by product and production characteristics.
► They are also affected by collective actions organizations such as cooperatives.
► Soybean involves lower transaction costs and therefore more simple arrangement than castor bean.