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How much do farmers value their independence?

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  • Nigel Key

Abstract

A farmer's decision to contract or produce independently depends on the distribution of income and the nonpecuniary attributes associated with both business arrangements. The benefits to growers from contracting (such as risk reduction) may be overestimated if the nonpecuniary benefits enjoyed by independent producers (such as the right to make management decisions and own the commodity produced) are not accounted for. This study uses data from a U.S. national survey of hog producers to estimate (1) the difference in expected net returns between contracting and independent production, (2) the premium a representative farmer would pay for the risk reduction provided by a contract, and (3) the premium a farmer would pay for the nonpecuniary benefits associated with independent production. Results indicate that growers have a strong preference for autonomy-with moderately risk-averse growers being willing to pay more for the attributes of independent production than they would for the risk-reducing benefits of a contract. Copyright 2005 International Association of Agricultural Economics.

Suggested Citation

  • Nigel Key, 2005. "How much do farmers value their independence?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 117-126, July.
  • Handle: RePEc:bla:agecon:v:33:y:2005:i:1:p:117-126
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1574-0862.2005.00339.x
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    References listed on IDEAS

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    1. Hayenga, Marvin L. & Rhodes, V. James & Grimes, Glenn & Lawrence, John D., 1996. "Vertical Coordination in Hog Production," Staff General Research Papers Archive 10561, Iowa State University, Department of Economics.
    2. McBride, William D. & Key, Nigel D., 2003. "Economic And Structural Relationships In U.S. Hog Production," Agricultural Economics Reports 33971, United States Department of Agriculture, Economic Research Service.
    3. Mishra, Ashok K. & El-Osta, Hisham S. & Morehart, Mitchell J. & Johnson, James D. & Hopkins, Jeffrey W., 2002. "Income, Wealth, And The Economic Well-Being Of Farm Households," Agricultural Economics Reports 33967, United States Department of Agriculture, Economic Research Service.
    4. Hayenga, Marvin L., 2000. "Meat Packer Vertical Integration and Contract Linkages in the Beef and Pork Industries: An Economic Perspective," Staff General Research Papers Archive 10564, Iowa State University, Department of Economics.
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    Cited by:

    1. Katchova, Ani L., 2010. "Agricultural Contracts and Alternative Marketing Options: A Matching Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(02), May.
    2. Lips, Markus & Gazzarin, Christian, 2008. "What are the preferences of Dairy Farmers regarding their Work? A Discrete Choice Experiment in the Eastern Part of Switzerland," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44132, European Association of Agricultural Economists.
    3. Granoszewski, Karol & Spiller, Achim, 2013. "Vertragliche Zusammenarbeit bei der energetischen Biomasselieferung: Einstellungen und Bindungsbereitschaften von deutschen Landwirten," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156131, German Association of Agricultural Economists (GEWISOLA).
    4. Tocco,Barbara & Bailey, Alastair & Davidova, Sophia, 2013. "Determinants to Leave Agriculture and Change Occupational Sector: Evidence from an Enlarged EU," Factor Markets Working Papers 158, Centre for European Policy Studies.
    5. Sabine Duvaleix-Tréguer & Carl Gaigné, 2016. "On the nature and magnitude of cost economies in hog production," Agricultural Economics, International Association of Agricultural Economists, vol. 47(4), pages 465-476, July.
    6. Granoszewski, Karol & Spiller, Achim, 2013. "Langfristige Rohstoffsicherung in der Supply Chain Biogas: Status Quo und Potenziale vertraglicher Zusammenarbeit," DARE Discussion Papers 1303, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    7. Volpe, Richard J., III, 2006. "Exploring the Potential Effects of Organic Production on Contracting in American Agribusiness," 2006 Annual meeting, July 23-26, Long Beach, CA 21086, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Størdal, Ståle & Lien, Gudbrand & Baardsen, Sjur, 2008. "Analyzing determinants of forest owners' decision-making using a sample selection framework," Journal of Forest Economics, Elsevier, vol. 14(3), pages 159-176, June.
    9. Reise, Christian & Liebe, Ulf & Musshoff, Oliver, 2012. "Design of substrate supply contracts for biogas plants," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124428, Australian Agricultural and Resource Economics Society.
    10. Lee L. Schulz & Glynn T. Tonsor, 2010. "Cow-Calf Producer Preferences for Voluntary Traceability Systems," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(1), pages 138-162.
    11. Theuvsen, Ludwig & Franz, Annabell, 2007. "The Role and Success Factors of Livestock Trading Cooperatives: Lessons from German Pork Production," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 10(03).
    12. Ryan, Mary & O'Donoghue, Cathal & Upton, Vincent & Handgraaf, Michael, 2015. "Heterogeneous Economic and Behavioural Drivers of the Farm Afforestation Decision," 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK 204237, Agricultural Economics Society.
    13. Frasa, Stefanie & Carlberg, Jared & Hogan, Robert, 2015. "Use of Contracts by Prairie Agricultural Producers," Working Papers 232328, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    14. Howley, Peter, 2015. "The Happy Farmer: The Effect Of Non-Pecuniary Benefits On Farmers’ Behavior," 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK 204289, Agricultural Economics Society.
    15. Howley, Peter & Breen, James P. & Donoghue, Cathal O. & Hennessy, Thia, 2012. "Does the single farm payment affect farmers’ behaviour? A macro and micro analysis," International Journal of Agricultural Management, Institute of Agricultural Management;International Farm Management Association, vol. 2(1), October.
    16. Lavee, Doron, 2010. "The effect of water supply uncertainty on farmers' choice of crop portfolio," Agricultural Water Management, Elsevier, vol. 97(11), pages 1847-1854, November.
    17. Peter Howley & Emma Dillon & Thia Hennessy, 2012. "The role of non-pecuniary benefits in the labour allocation decision of farmers," Working Papers 1202, Rural Economy and Development Programme,Teagasc.
    18. Katchova, Ani L., 2013. "Agricultural Contracting and Agrifood Competition," Staff Papers 164515, University of Kentucky, Department of Agricultural Economics.
    19. Musshoff, Oliver & Hirschauer, Norbert, 2011. "Naive Deckungsbeitragsvergleiche führen bei Vorverträgen in die Irre - Lieferung von Industrierüben zur Bioethanolherstellung," 51st Annual Conference, Halle, Germany, September 28-30, 2011 114488, German Association of Agricultural Economists (GEWISOLA).
    20. Howley, Peter & Buckley, Cathal & O Donoghue, Cathal & Ryan, Mary, 2015. "Explaining the economic ‘irrationality’ of farmers' land use behaviour: The role of productivist attitudes and non-pecuniary benefits," Ecological Economics, Elsevier, vol. 109(C), pages 186-193.
    21. Peter Howley & Trevor Donnellan & Kevin Hanrahan, 2009. "The 2003 CAP reform: Do decoupled payments affect agricultural production?," Working Papers 0901, Rural Economy and Development Programme,Teagasc.
    22. Peter Howley & Trevor Donnellan & Kevin Hanrahan, 2009. "Cap reform: implications for Ireland," Working Papers 0904, Rural Economy and Development Programme,Teagasc.
    23. repec:bla:jageco:v:68:y:2017:i:2:p:553-578 is not listed on IDEAS
    24. Sudha Narayanan, 2012. "Safe gambles? Farmer perceptions of transactional certainty and risk-return tradeoffs in contract farming schemes in Southern India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-021, Indira Gandhi Institute of Development Research, Mumbai, India.
    25. Peter Howley & Emma Dillon & Thia Hennessy, 2014. "It’s not all about the money: understanding farmers’ labor allocation choices," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 31(2), pages 261-271, June.

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