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Effects of streaming loans for commodity producers

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  • Bell, Peter Newton

Abstract

This paper analyzes a source of financing for commodity producers known as a streaming loan, where the producer makes periodic payments in proportion to their level of production. Streaming loans functions like a cropshare contract, whereas fixed rate debt is like a wage contract. Thus, producers can reduce the variance of profits by financing with streaming loans rather than debt. I establish this result when commodity prices are constant or random, but independent from the quantity of production.

Suggested Citation

  • Bell, Peter Newton, 2014. "Effects of streaming loans for commodity producers," MPRA Paper 59818, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59818
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    File URL: https://mpra.ub.uni-muenchen.de/59818/1/MPRA_paper_59818.pdf
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    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 2002. "Information and the Change in the Paradigm in Economics," American Economic Review, American Economic Association, vol. 92(3), pages 460-501, June.
    2. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 219-255.
    3. Douglas W. Allen & Dean Lueck, 1993. "Transaction Costs and the Design of Cropshare Contracts," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 78-100, Spring.
    4. Hallagan, William S., 1978. "Share contracting for California Gold," Explorations in Economic History, Elsevier, vol. 15(2), pages 196-210, April.
    5. Ricard Gil & Francine Lafontaine, 2012. "Using Revenue Sharing to Implement Flexible Prices: Evidence from Movie Exhibition Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 187-219, June.
    6. Douglas W. Allen & Dean Lueck, 2009. "Customs and Incentives in Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 880-894.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Bell, Peter Newton, 2018. "Evaluating the Kemess Stream sold by Centerra Gold in 2018," MPRA Paper 87014, University Library of Munich, Germany.

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    More about this item

    Keywords

    Streaming loan; cropshare; contract; capital structure; profitability.;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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