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Ledger Provision in Hog Marketing Contracts

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Author Info
David A. Hennessy () (Center for Agricultural and Rural Development (CARD))
Donald Lien

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Abstract

Some long-term marketing contracts in the North American hog sector provide for price-dependent loan agreements at low rates. We show that these provisions linking pricing with financing are hybrids between forward rate agreements and commodity options. This observation presents approaches for valuing the stipulations. We suggest that the ledger arrangement is transaction-cost efficient, especially for a packer with a natural partial pass-through hedge from retail market positions.

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File URL: http://www.card.iastate.edu/publications/DBS/PDFFiles/03wp336.pdf
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File URL: http://www.card.iastate.edu/publications/synopsis.aspx?id=485
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Publisher Info
Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 03-wp336.

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Date of creation: Jun 2003
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Handle: RePEc:ias:cpaper:03-wp336

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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.:
  1. Drew Fudenberg & Bengt Holmstrom & Paul Milgrom, 1987. "Short-Term Contracts and Long-Term Agency Relationships," Working papers 468, Massachusetts Institute of Technology (MIT), Department of Economics.
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  2. David Dickinson & DeeVon Bailey, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Working Papers 2002-07, Utah State University, Department of Economics. [Downloadable!]
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  3. Eric Maskin & Chenggang Xu, 2001. "Soft budget constraint theories: From centralization to the market," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 1-27, March. [Downloadable!] (restricted)
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  4. Hall, Brian J. & Murphy, Kevin J., 2002. "Stock options for undiversified executives," Journal of Accounting and Economics, Elsevier, vol. 33(1), pages 3-42, February. [Downloadable!] (restricted)
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  5. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Blackwell Publishing, vol. 59(3), pages 473-94, July. [Downloadable!] (restricted)
  6. Nigel Key & William McBride, 2003. "Production Contracts and Productivity in the U.S. Hog Sector," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(1), pages 121-133, 02. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Donald Lien & David A. Hennessy, 2005. "Evaluating the Saskatchewan Short-Term Hog Loan Program," Center for Agricultural and Rural Development (CARD) Publications 05-wp385, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
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