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Marketing and Production Contracts Are Widely Used in U.S. Agriculture

Author

Listed:
  • MacDonald, James M.
  • Burns, Christopher

Abstract

Contracts are widely used in the production and sale of U.S agricultural commodities. Contracts provide farmers with a tool for managing income risks, obtaining compensation for higher product quality, and providing assurance for debt financing. Processors use contracts to maintain timely flows of products with desired attributes and greater control over the characteristics and consistency of the products they acquire. In 2017, 49 percent of the value of livestock production was raised under contract agreements—usually between farmers and processors—while contracts governed 21 percent of crop production. The share of crops produced under contract has declined in recent years as farmers turned to other methods for managing risks, such as diversification, hedging through futures markets, and investing in storage.

Suggested Citation

  • MacDonald, James M. & Burns, Christopher, 2019. "Marketing and Production Contracts Are Widely Used in U.S. Agriculture," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, vol. 0(06), July.
    • Handle: RePEc:ags:uersaw:302725
    DOI: 10.22004/ag.econ.302725
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    File URL: https://ageconsearch.umn.edu/record/302725/files/USDA%20ERS%20-%20Marketing%20and%20Production%20Contracts%20Are%20Widely%20Used%20in%20U.S.%20Agriculture.pdf
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    Citations

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    Cited by:

    1. Qing Zhang & Juan Li & Tiaojun Xiao, 2022. "Contract design for technology sharing between two farmers," Annals of Operations Research, Springer, vol. 314(2), pages 677-707, July.
    2. Franken, Jason & Cook, Michael L., 2022. "Conditions Conducive for Collective Action: What’s Different about Agriculture?," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322416, Agricultural and Applied Economics Association.
    3. Wu, Steven Y., 2021. "Determinants of Relational Contract Performance: Experimental Evidence," 2021 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 3-5, 2021, San Diego, California 308455, Agricultural and Applied Economics Association.

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