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Does The Existence Of Market Power Affect Marketing Loan Programs?

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  • Revoredo-Giha, Cesar
  • Fletcher, Stanley M.

Abstract

The paper analyzes the effects that a demand with oligopsonistic power may have on the operation of a marketing loan program (especially on the program cost). We measure these effects using a model for the US peanut market where evidence indicates that the demand is highly concentrated. Our results show that the USDA strategy of keeping a repayment rate above the market-clearing price set by the demand is not a sustainable strategy, since the demand can follow a hand-to-mouth strategy, postponing its purchases of peanuts, letting USDA accumulate stocks and forcing it to reduce the price.

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File URL: http://purl.umn.edu/22241
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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2003 Annual meeting, July 27-30, Montreal, Canada with number 22241.

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Date of creation: 2003
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Handle: RePEc:ags:aaea03:22241

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Keywords: Agricultural Finance;

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  1. Salanie, Bernard, 1991. "Wage and Price Adjustment in a Multimarket Disequilibrium Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(1), pages 1-15, Jan.-Marc.
  2. Grossman, Herschel I, 1974. "The Nature of Quantities in Market Disequilibrium," American Economic Review, American Economic Association, vol. 64(3), pages 509-14, June.
  3. Westcott, Paul C. & Price, J. Michael, 2001. "Analysis Of The U.S. Commodity Loan Program With Marketing Loan Provisions," Agricultural Economics Reports 34035, United States Department of Agriculture, Economic Research Service.
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