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Modeling the Market and Welfare Effects of Mexico's “Agriculture by Contract” Program

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  • Lence, Sergio H

Abstract

“Agriculture by contract” () is the main Mexican government program aimed at mitigating price risks for agricultural producers in Mexico. [Math Processing Error] has unique features involving forward contracts and the provision of basis subsidies and subsidized exchange-traded futures options for both producers and intermediaries. A simulation model is developed to analyze the market and welfare effects of [Math Processing Error]. When applied to corn, results show that [Math Processing Error] exerts substantial impacts and causes large transfers across sectors. Even if [Math Processing Error] reduced intermediaries' market power to the largest extent feasible, results indicate that it would still cause important losses in aggregate welfare.

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  • Lence, Sergio H, 2015. "Modeling the Market and Welfare Effects of Mexico's “Agriculture by Contract” Program," ISU General Staff Papers 201501010800001064, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201501010800001064
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