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

Agricultural Contracting and Agrifood Competition

Contents:

Author Info

  • Katchova, Ani L.
Registered author(s):

    Abstract

    The industrialization of agriculture is associated with tighter supply chains where vertical coordination between farmers and processors is facilitated by the use of agricultural contracts. An overview is provided on the recent trends in the use and structure of agricultural contracts followed by an examination of how the competition among processors may affect agricultural contracts. Many reasons exist for using agricultural contracts, including improved risk management and reduced transaction cost. On the other hand, the growing use of agricultural contracts and processor concentration raises concerns that processors may exercise market power, for example by offering lower contract prices in absence of local competition. Previous studies using the new empirical industrial organization models show that processing industries are not perfectly competitive but the price distortions are very small. The focus here is on examining price competition from a farmer’s instead of an industry’s point of view. Recent studies using farm-level data that show that the absence of other contractors or spot markets in producers’ areas does not lead to statistically significant price differences in agricultural contracts for most commodities. These findings provide evidence that most agricultural processors do not exercise market power by reducing prices when other local buyers are not available. Therefore, the recent trends of industrialization and increased vertical coordination in agriculture are likely occurring for reasons other than processors exercising market power.

    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/164515
    Download Restriction: no

    Bibliographic Info

    Paper provided by University of Kentucky, Department of Agricultural Economics in its series Staff Papers with number 164515.

    as in new window
    Length:
    Date of creation: 2013
    Date of revision:
    Handle: RePEc:ags:ukysps:164515

    Contact details of provider:
    Postal: 400 Agricultural Engineering Bldg., Lexington, KY 40546-0276
    Phone: (859) 257-5762
    Fax: (859) 323-1913
    Web page: http://www.uky.edu/Ag/AgEcon
    More information through EDIRC

    Related research

    Keywords: agricultural contracts; marketing contracts; production contracts; agrifood competition; Agricultural Finance; Marketing; Q13;

    Find related papers by JEL classification:

    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. 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.
    2. 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.
    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. 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.
    5. Ahearn, Mary Clare & Korb, Penelope J. & Banker, David E., 2005. "Industrialization and Contracting in U.S. Agriculture," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(02), August.
    6. Nigel Key, 2005. "How much do farmers value their independence?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 117-126, 07.
    7. Paulson, Nicholas D., 2010. "An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans," Staff General Research Papers 31523, Iowa State University, Department of Economics.
    8. Michael E. Sykuta & Michael L. Cook, 2001. "A New Institutional Economics Approach to Contracts and Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1273-1279.
    9. 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.
    10. Zhang, Mingxia & Sexton, Richard J., 2000. "Captive Supplies And The Cash Market Price: A Spatial Markets Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July.
    11. Key, Nigel D., 2004. "Agricultural Contracting and the Scale of Production," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(2), October.
    12. Allen, Douglas W & Lueck, Dean, 1995. "Risk Preferences and the Economics of Contracts," American Economic Review, American Economic Association, vol. 85(2), pages 447-51, May.
    13. Hueth, Brent & Ligon, Ethan & Dimitri, Carolyn, 2007. "AJAE Appendix: Agricultural Contracts: Data and Research Needs," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 89(5), December.
    14. Sartwelle, James D., III & O'Brien, Daniel M. & Tierney, William I., Jr. & Eggers, Tim, 2000. "The Effect Of Personal And Farm Characteristics Upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(01), April.
    15. Ward, Clement E., 2005. "Beef Packers’ Captive Supplies: An Upward Trend? A Pricing Edge?," Choices, Agricultural and Applied Economics Association, vol. 20(2).
    16. Yanguo Wang & Edward C. Jaenicke, 2006. "Simulating the Impacts of Contract Supplies in a Spot Market-Contract Market Equilibrium Setting," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 1062-1077.
    17. Brent Hueth & Ethan Ligon & Carolyn Dimitri, 2007. "Agricultural Contracts: Data and Research Needs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(5), pages 1276-1281.
    Full references (including those not matched with items on IDEAS)

    Citations

    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:ukysps:164515. 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.