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An Economic Analysis Of Contracting Arrangements Used By The Minnesota Turkey Industry

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  • Dornbush, Calvin W.
  • Boehlje, Michael

Abstract

The objective of this report is to summarize knowledge about contracts used in the turkey industry which may be helpful in initiating contracts in other agricultural enterprises. Characteristics common to all Minnesota contracts are described. Contracts are divided into three main categories and similarities of contracts within those categories are described. Budgets developed at the University of Minnesota were used to calculate the return to labor and management (RLM) for each type of contract. Feed costs were set at six levels to show how risk and return are shared as feed costs change. Historic wholesale prices were used to establish a probability distribution for effective prices paid to growers. The Agricultural Risk Management Simulator (ARMS) program used this price distribution to calculate cumulative distributions of returns to labor and management (RLM) for each level of feed costs. Contracts were evaluated at each level of feed costs using stochastic dominance techniques.

Suggested Citation

  • Dornbush, Calvin W. & Boehlje, Michael, 1988. "An Economic Analysis Of Contracting Arrangements Used By The Minnesota Turkey Industry," Staff Papers 13447, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaesp:13447
    DOI: 10.22004/ag.econ.13447
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    File URL: https://ageconsearch.umn.edu/record/13447/files/p88-17.pdf
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    References listed on IDEAS

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    1. Anderson, Jock R. & Dillon, John L. & Hardaker, Brian, 1977. "Agricultural Decision Analysis," Monographs: Applied Economics, AgEcon Search, number 288652, November.
    2. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 44, pages 2343-2378, Elsevier.
    3. Gallimore, William W., 1965. "Contracting and Other Integrating Arrangements in the Turkey Industry," Marketing Research Reports 312185, United States Department of Agriculture, Agricultural Marketing Service, Transportation and Marketing Program.
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    Cited by:

    1. Johnson, C. Scott & Foster, Kenneth A., 1994. "Risk Preferences And Contracting In The U.S. Hog Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(2), pages 1-13, December.
    2. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.

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