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Quality Premiums and the Post-Harvest Spot Market Thinness: The Case of U.S. Peanuts

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  • Nadolnyak, Denis A.
  • Fletcher, Stanley M.

Abstract

In the paper, we analyze two issues that are important in the U.S. peanut markets: the absence of explicit quality premiums in the crop contracts, and the thinness of the postharvest cash/spot markets, which obstructs the operation of current production support policies. We argue that introduction of quality differentials in the form of either fixed premium or rank-order tournament contracts may kill two birds with one stone by increasing the spot market turnover and providing incentives for increasing crop quality. In addition, this arrangement is likely to reduce the costs of the federal support programs.

Suggested Citation

  • Nadolnyak, Denis A. & Fletcher, Stanley M., 2006. "Quality Premiums and the Post-Harvest Spot Market Thinness: The Case of U.S. Peanuts," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25274, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25274
    DOI: 10.22004/ag.econ.25274
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Westcott, Paul C. & Price, J. Michael, 2001. "Analysis Of The U.S. Commodity Loan Program With Marketing Loan Provisions," Agricultural Economic Reports 34035, United States Department of Agriculture, Economic Research Service.
    3. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-364, June.
    4. Michael Sykuta & Joseph Parcell, 2003. "Contract Structure and Design in Identity-Preserved Soybean Production," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 332-350.
    5. Theofanis Tsoulouhas & Tomislav Vukina, 2001. "Regulating Broiler Contracts: Tournaments Versus Fixed Performance Standards," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1062-1073.
    6. Revoredo-Giha, Cesar & Fletcher, Stanley M., 2005. "Supplier reputation and price premium: the case of groundnuts in Rotterdam," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 6(2), pages 1-12.
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