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The Competitive Impact of Cooperatives on the Spot Market: A Spatial Analysis of Iowa Corn Prices

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  • Grashuis Jasper

    (University of Missouri, Columbia, Missouri 65211, USA)

Abstract

Imperfect competition in the agricultural input procurement market is prevalent, especially at the local and regional scale. While there is much theoretical work on the positive effect of cooperatives on spatial competition, applied research is relatively scarce. We address the gap in the literature with an empirical study of cash prices in the Iowa corn market. With 589 observations from the 2018 harvest season, we construct a spatial model of price competition among grain handlers within a 20-mile radius. Among other findings, we conclude the ownership structure of Iowa grain handlers is important to explain the spatial dependence in corn cash prices. On average, cooperative grain handlers offer a lower corn cash price as compared to corporate grain handlers (¢1.20–1.72 per bushel), which is likely offset by refunds and dividends at the end of the fiscal year. At the same time, cooperative grain handlers force an adjustment in the behaviour and pricing strategy of nearby competitors. Cooperative grain handlers on average facilitate a significant increase of ¢0.65–2.08 per bushel in the corn cash price of competitors within a 5–17 mile radius. Our novel findings inform recommendations in terms of spatial entry and location decisions by cooperative grain handlers.

Suggested Citation

  • Grashuis Jasper, 2020. "The Competitive Impact of Cooperatives on the Spot Market: A Spatial Analysis of Iowa Corn Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 18(2), pages 1-11, November.
    • Handle: RePEc:bpj:bjafio:v:18:y:2020:i:2:p:11:n:9
    DOI: 10.1515/jafio-2019-0063
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    References listed on IDEAS

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    More about this item

    Keywords

    spatial competition; agricultural cooperative; yardstick effect;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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