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Agricultural Contracts and Alternative Marketing Options: A Matching Analysis

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  • Katchova, Ani L.

Abstract

The increasing use of agricultural contracts and processor concentration raises concerns that processors may offer lower contract prices in absence of competition from other local contractors and spot markets. This study examines the price competitiveness of marketing and production contracts depending on the availability of alternative marketing options. A propensity score matching method is used to compare prices using contract data from a farm-level national survey. The results show that the absence of other contractors or spot markets in producers’ areas does not lead to significant price differences in agricultural contracts for most commodities, providing evidence that most agricultural processors do not exercise market power by reducing prices when other local buyers are not available.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6336.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:6336

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Keywords: alternative marketing options; local competition; marketing contracts; production contracts; agricultural prices; propensity score matching; Agribusiness; Marketing;

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  1. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  2. Daniel O. Gilligan & John Hoddinott, 2007. "Is There Persistence in the Impact of Emergency Food Aid? Evidence on Consumption, Food Security, and Assets in Rural Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 225-242.
  3. Nigel Key, 2005. "How much do farmers value their independence?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 117-126, 07.
  4. Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 88-102.
  5. Tian Xia & Richard J. Sexton, 2004. "The Competitive Implications of Top-of-the-Market and Related Contract-Pricing Clauses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 124-138.
  6. MacDonald, James M. & Korb, Penelope J., 2006. "Agricultural Contracting Update: Contracts in 2003," Economic Information Bulletin 33903, United States Department of Agriculture, Economic Research Service.
  7. Christopher G. Davis & Jeffrey M. Gillespie, 2007. "Factors Affecting the Selection of Business Arrangements by U.S. Hog Farmers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 331-348.
  8. Lori Lynch & Wayne Gray & Jacqueline Geoghegan, 2007. "Are Farmland Preservation Program Easement Restrictions Capitalized into Farmland Prices? What Can a Propensity Score Matching Analysis Tell Us? ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 502-509.
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Cited by:
  1. Jan Fałkowski & Pavel Ciaian & d'Artis Kancs, 2009. "Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies," Working Papers 2009-12, Faculty of Economic Sciences, University of Warsaw.
  2. Todd H. Kuethe & Mitch Morehart, 2012. "The profit impacts of risk management tool adoption," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 104-116, March.

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