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Contract Marketing in the US after the 2002 Farm Act: The Case of Peanuts

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  • Cesar L. Revoredo Giha

    ()
    (Department of Land Economy, University of Cambridge, UK)

  • Denis A. Nadolnyak

    (Department of Agricultural and Applied Economics, University of Georgia, USA)

  • Stanley M. Fletcher

    (Department of Agricultural and Applied Economics, University of Georgia, USA)

Abstract

The elimination of the marketing quota system that regulated the peanut market since the 1930s has been accompanied by the emergence of marketing contracts between farmers and peanut buyers (mainly peanut shellers). Two types of contracts have been observed, forward contracts for delivery at harvest or at a later date and “option to purchase” contracts. We analyze the clauses of contracts used by major shellers in order to infer the motivation behind these contracts (i.e., risk sharing, reduction of transaction costs, improve coordination, exercise of market power, etc.). The analysis points out that the main role of the contracts is to replace the marketing structure existing prior the 2002 Farm Act, where peanut marketing was quite regulated. In this sense, the reduction of transaction costs associated to the need for coordinating a continuous supply of homogeneous quality seems to be the most plausible explanation.

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Bibliographic Info

Paper provided by University of Cambridge, Department of Land Economics in its series Environmental Economy and Policy Research Working Papers with number 11.2005.

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Date of creation: 2005
Date of revision: 2005
Handle: RePEc:lnd:wpaper:200511

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Keywords: US agriculture; agricultural marketing; peanuts; economics of agricultural contracts;

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