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Agricultural Contracts and Alternative Marketing Options: A Matching Analysis

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  • Katchova, Ani L.

Abstract

The increasing use of agricultural contracts and processor concentration raises concerns that processors may offer lower contract prices in absence of competition from other local contractors and spot markets. This study examines the price competitiveness of marketing and production contracts depending on the availability of alternative marketing options. A propensity score matching method is used to compare prices using contract data from a farm-level national survey. The results show that the absence of other contractors or spot markets in producers’ areas does not lead to significant price differences in agricultural contracts for most commodities, providing evidence that most agricultural processors do not exercise market power by reducing prices when other local buyers are not available.

Suggested Citation

  • Katchova, Ani L., 2008. "Agricultural Contracts and Alternative Marketing Options: A Matching Analysis," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6336, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea08:6336
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    File URL: http://purl.umn.edu/6336
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    References listed on IDEAS

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    1. MacDonald, James M. & Korb, Penelope J., 2006. "Agricultural Contracting Update: Contracts in 2003," Economic Information Bulletin 33903, United States Department of Agriculture, Economic Research Service.
    2. Tian Xia & Richard J. Sexton, 2004. "The Competitive Implications of Top-of-the-Market and Related Contract-Pricing Clauses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 124-138.
    3. Lori Lynch & Wayne Gray & Jacqueline Geoghegan, 2007. "Are Farmland Preservation Program Easement Restrictions Capitalized into Farmland Prices? What Can a Propensity Score Matching Analysis Tell Us?," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 502-509.
    4. Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 88-102.
    5. Daniel O. Gilligan & John Hoddinott, 2007. "Is There Persistence in the Impact of Emergency Food Aid? Evidence on Consumption, Food Security, and Assets in Rural Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 225-242.
    6. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
    7. repec:oup:revage:v:29:y:2007:i:2:p:331-348. is not listed on IDEAS
    8. Nigel Key, 2005. "How much do farmers value their independence?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 117-126, July.
    9. Christopher G. Davis & Jeffrey M. Gillespie, 2007. "Factors Affecting the Selection of Business Arrangements by U.S. Hog Farmers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 331-348.
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    Cited by:

    1. repec:spr:eurase:v:7:y:2017:i:1:d:10.1007_s40822-016-0060-y is not listed on IDEAS
    2. Kausar Yasmeen & Mohd Zaini Abd Karim, 2014. "Impact of Interaction Term between Education and Loan Size on Women’s Decision Making," Journal of Entrepreneurship and Business Innovation, Macrothink Institute, Journal of Entrepreneurship and Business Innovation, vol. 1(1), pages 123-141, June.
    3. Ifft, Jennifer & Kuethe, Todd & Morehart, Mitch, 2015. "Does Federal Crop Insurance lead to higher farm debt use? Evidence from the Agricultural Resource Management Survey," Working Papers 250011, Cornell University, Department of Applied Economics and Management.
    4. Todd H. Kuethe & Mitch Morehart, 2012. "The profit impacts of risk management tool adoption," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 104-116, May.
    5. Weber, Olaf & Ahmad, Adnan, 2014. "Empowerment Through Microfinance: The Relation Between Loan Cycle and Level of Empowerment," World Development, Elsevier, vol. 62(C), pages 75-87.

    More about this item

    Keywords

    alternative marketing options; local competition; marketing contracts; production contracts; agricultural prices; propensity score matching; Agribusiness; Marketing;

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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