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Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets

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  • Wilson, William W.
  • Dahl, Bruce L.

Abstract

One of the impacts of higher prices along with greater volatility in futures and basis is that there is pressure for an escalation in cash contracting for grain. This volatility has resulted in an unprecedented level of contracting with growers in recent years. There is a wide array of cash contracts with varying terms. There is also a growing realization of growers not delivering on contracts, in part due to escalation in postcontract prices. These are evolving as major strategic issues for buyers and the marketing system, particularly as buyers seek to use such contracting strategies as an element of risk mitigation. There are three purposes of this article. First is to provide a broad survey of contract terms used in grain contracting with growers. Second, we illustrate some issues in contracting of some of the grains (durum, malting barley) in the upper Midwest. Third, we show some of the common contract clauses being adapted in these contracts. Finally, we summarize these issues with respect to industry implications.

Suggested Citation

  • Wilson, William W. & Dahl, Bruce L., 2009. "Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(02), August.
  • Handle: RePEc:ags:joaaec:53082
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    Cited by:

    1. William W. Wilson & Bruce Dahl, 2014. "Contracting for Canola in the Great Plains States," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(1), pages 89-106, March.

    More about this item

    Keywords

    grain contracting; risk; volatility; Agribusiness; Crop Production/Industries; Farm Management; Production Economics; Risk and Uncertainty; C15; D81; Q12;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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