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An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans

Paulson, Nicholas D, Katchova, Ani L, Lence, Sergio H
Journal of agricultural & food industrial organization 2010 v.8 no.1 pp. 25
Agricultural Resource Management Survey, USDA, corn, crop production, marketing, models, risk, soybeans
Contracts serve as coordination mechanisms which allocate value, risk, and decision rights across buyers and sellers. The use of marketing contracts in agriculture, specifically for crop production, has been increasing over the past decade. This study investigates the determinants of agricultural marketing contract design employing data from the USDA's Agricultural Resource Management Survey. Models are estimated to analyze the association between producer and contractor characteristics, the decision to produce under contract, and the types of contract structures observed in practice, while controlling for the potential for endogenous matching between contracting parties. Results indicate that while certain producer characteristics are significantly associated with the decision to produce corn or soybeans under contract, there is no significant association between those characteristics and specific contract attributes.