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Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets

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  • Wilson, William W.
  • Dahl, Bruce L.

Abstract

One of the impacts of higher prices along with greater volatility in futures and basis is that there is pressure for an escalation in cash contracting for grain. This volatility has resulted in an unprecedented level of contracting with growers in recent years. There is a wide array of cash contracts with varying terms. There is also a growing realization of growers not delivering on contracts, in part due to escalation in postcontract prices. These are evolving as major strategic issues for buyers and the marketing system, particularly as buyers seek to use such contracting strategies as an element of risk mitigation. There are three purposes of this article. First is to provide a broad survey of contract terms used in grain contracting with growers. Second, we illustrate some issues in contracting of some of the grains (durum, malting barley) in the upper Midwest. Third, we show some of the common contract clauses being adapted in these contracts. Finally, we summarize these issues with respect to industry implications.

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Bibliographic Info

Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 41 (2009)
Issue (Month): 02 (August)
Pages:

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Handle: RePEc:ags:joaaec:53082

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Web page: http://www.saea.org/jaae/jaae.htm
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Related research

Keywords: grain contracting; risk; volatility; Agribusiness; Crop Production/Industries; Farm Management; Production Economics; Risk and Uncertainty; C15; D81; Q12;

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Cited by:
  1. Wilson, William W. & Bruce, Dahl, 2010. "Contracting for Canola in the Great Plains States," Agribusiness & Applied Economics Report 95751, North Dakota State University, Department of Agribusiness and Applied Economics.

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