Advanced Search
MyIDEAS: Login to save this paper or follow this series

Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities

Contents:

Author Info

  • MacDonald, James M.
  • Perry, Janet E.
  • Ahearn, Mary Clare
  • Banker, David E.
  • Chambers, William
  • Dimitri, Carolyn
  • Key, Nigel D.
  • Nelson, Kenneth E.
  • Southard, Leland W.

Abstract

Production and marketing contracts govern 36 percent of the value of U.S. agricultural production, up from 12 percent in 1969. Contracts are now the primary method of handling sales of many livestock commodities, including milk, hogs, and broilers, and of major crops such as sugar beets, fruit, and processing tomatoes. Use of contracts is closely related to farm size; farms with $1 million or more in sales have nearly half their production under contract. For producers, contracting can reduce income risks of price and production variability, ensure market access, and provide higher returns for differentiated farm products. For processors and other buyers, vertical coordination through contracting is a way to ensure the flow of products and to obtain differentiated products, ensure traceability for health concerns, and guarantee certain methods of production. The traditional spot market-though it still governs nearly 60 percent of the value of agricultural production —has difficulty providing accurate price signals for products geared to new consumer demands (such as produce raised and certified as organic or identity-preserved crops modified for special attributes). We are likely to see a continuing shift to more explicit forms of vertical coordination, through contracts and processor ownership, as a means to ensure more consistent product quantity and quality.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://purl.umn.edu/34013
Download Restriction: no

Bibliographic Info

Paper provided by United States Department of Agriculture, Economic Research Service in its series Agricultural Economics Reports with number 34013.

as in new window
Length:
Date of creation: 2004
Date of revision:
Handle: RePEc:ags:uerser:34013

Contact details of provider:
Postal: 1400 Independence Ave.,SW, Mail Stop 1800, Washington, DC 20250-1800
Phone: 202-694-5050
Fax: 202-694-5700
Email:
Web page: http://www.ers.usda.gov/
More information through EDIRC

Related research

Keywords: Marketing; Production Economics;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
  2. Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-40, December.
  3. 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.
  4. Innes, Robert & Sexton, Richard J, 1994. "Strategic Buyers and Exclusionary Contracts," American Economic Review, American Economic Association, vol. 84(3), pages 566-84, June.
  5. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economics Reports 33971, United States Department of Agriculture, Economic Research Service.
  6. Stefanadis, Christodoulos, 1998. "Selective Contracts, Foreclosure, and the Chicago School View," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 429-50, October.
  7. Hueth, Brent & Ligon, Ethan, 2003. "On the Efficacy of Contractual Provisions for Processing Tomatoes," 2003 Annual meeting, July 27-30, Montreal, Canada 21990, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Cheryl J. Wachenheim & Eric A. DeVuyst, 2001. "Strategic response to mandatory reporting legislation in the U.S. livestock and meat industries: Are collusive opportunities enhanced?," Agribusiness, John Wiley & Sons, Ltd., vol. 17(2), pages 177-195.
  9. Allen, Douglas W & Lueck, Dean, 1998. "The Nature of the Farm," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 343-86, October.
  10. Douglas W. Allen & Dean Lueck, 2004. "The Nature of the Farm: Contracts, Risk, and Organization in Agriculture," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511851, December.
  11. Martinez, Stephen W., 1999. "Vertical Coordination in the Pork and Broiler Industries: Implications for Pork and Chicken Products," Agricultural Economics Reports 34031, United States Department of Agriculture, Economic Research Service.
  12. David M. Cutler & Jonathan Gruber & Raymond S. Hartman & Mary Beth Landrum & Joseph P. Newhouse & Meredith B. Rosenthal, 2002. "The Economic impacts of the tobacco settlement," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(1), pages 1-19.
  13. Key, Nigel D., 2002. "How Much Do Farmers Value Their Independence? Estimating The Risk And Autonomy Premia Associated With Production Contracts," 2002 Annual meeting, July 28-31, Long Beach, CA 19688, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  14. Martinez, Stephen W., 2002. "Vertical Coordination Of Marketing Systems: Lessons From The Poultry, Egg, And Pork Industries," Agricultural Economics Reports 34051, United States Department of Agriculture, Economic Research Service.
  15. Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-45, December.
  16. Nigel Key & William McBride, 2003. "Production Contracts and Productivity in the U.S. Hog Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 121-133.
  17. David K. Lambert & William W. Wilson, 2003. "Valuing Varieties with Imperfect Output Quality Measurement," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 95-107.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Nadolnyak, Denis A. & Fletcher, Stanley M. & Revoredo-Giha, Cesar, 2005. "Can Rank-Order Tournaments Improve Efficiency of Quality Differentiated Crop Markets Under Marketing Loan Program Operation? The Case of U.S. Peanuts," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24703, European Association of Agricultural Economists.
  2. Otieno, David Jakinda & Hubbard, Lionel J. & Ruto, Eric, 2011. "Technical efficiency and technology gaps in beef cattle production systems in Kenya: A stochastic metafrontier analysis," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108947, Agricultural Economics Society.
  3. Sykuta, Michael E. & Klein, Peter G. & James, Harvey S., Jr., 2005. "Markets, Contracts, or Integration? The Adoption, Diffusion, and Evolution of Organizational Form," 2005 Annual meeting, July 24-27, Providence, RI 19390, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Salas, Paula Cordero, 2012. "Does Contract Enforcement Limit the Distribution of Bargaining Power? An Experimental Study," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124503, Agricultural and Applied Economics Association.
  5. Gabrielyan, Gnel & Marsh, Thomas L., 2012. "Domestic and Export Price Formation of U.S. Hops," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124722, Agricultural and Applied Economics Association.
  6. Revoredo-Giha, Cesar & Nadolnyak, Denis A. & Fletcher, Stanley M., 2005. "Contract Marketing after the 2002 Farm Act: The Case of Peanuts," 2005 Annual meeting, July 24-27, Providence, RI 19187, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Yu, Jianyu, 2009. "Quality Provision and Farmer Inclusion of Agricultural Cooperatives," 2009 Conference, August 16-22, 2009, Beijing, China 51553, International Association of Agricultural Economists.
  8. Key, Nigel D. & McBride, William D., 2008. "Do Production Contracts Raise Farm Productivity? An Instrumental Variables Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
  9. Fan, Maoyong & Lee, Myoungki & Wu, Steven Y., 2004. "Balancing Grower Protection Against Agency Concerns: An Economic Analysis of Contract Termination Damages," 2004 Annual meeting, August 1-4, Denver, CO 20392, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Park, Moon-Soo & Love, H. Alan & Jin, Yanhong H., 2006. "Contract Pricing and Packer Competition in Fed Cattle Market," 2006 Annual meeting, July 23-26, Long Beach, CA 21356, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Elanor Starmer, Aimee Witteman and Timothy A. Wise, . "06-03 "Feeding the Factory Farm: Implicit Subsidies to the Broiler Chicken Industry"," GDAE Working Papers 06-03, GDAE, Tufts University.
  12. Ahumada, Omar & Villalobos, J. Rene, 2009. "Application of planning models in the agri-food supply chain: A review," European Journal of Operational Research, Elsevier, vol. 196(1), pages 1-20, July.
  13. Bodo E. Steiner, 2007. "Negotiated transfer pricing: Theory and implications for value chains in agribusiness," Agribusiness, John Wiley & Sons, Ltd., vol. 23(2), pages 279-292.
  14. Elliott, Matthew & James Jr., Harvey, 2013. "Nature Of The Farm: Revisited," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150726, Agricultural and Applied Economics Association.
  15. Ronald Rich, 2008. "Fecal free: Biology and authority in industrialized Midwestern pork production," Agriculture and Human Values, Springer, vol. 25(1), pages 79-93, January.
  16. Gabor G. Szabo & Krisztina Bardos, 2005. "Vertical Coordination by Contracts in Agribusiness - An Empirical Research in the Hungarian Dairy Sector," IEHAS Discussion Papers 0515, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  17. Jaenicke, Edward C. & Shields, Martin & Kelsey, Timothy W., 2007. "Food Processors’ Use of Contracts to Purchase Agricultural Inputs: Evidence from a Pennsylvania Survey," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 36(2), October.
  18. Vassalos, Michael & Hu, Wuyang & Woods, Timothy A. & Schieffer, Jack & Dillon, Carl R., 2013. "Fresh Vegetable Growers' Risk Perception, Risk Preference and Choice of Marketing Contracts: A Choice Experiment," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142506, Southern Agricultural Economics Association.
  19. Liang, Jing & Jensen, Helen H., 2008. "Marketing Agreement, Food Safety and Contract Design," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6434, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ags:uerser:34013. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.