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Agricultural Contracts and Alternative Marketing Options: A Matching Analysis

Published online by Cambridge University Press:  26 January 2015

Ani L. Katchova
Ani L. Katchova*
Affiliation:
Department of Agricultural Economics, University of Kentucky, Lexington, KY
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Abstract

The increasing use of agricultural contracts and processor concentration raises concerns that processors may offer lower contract prices in absence of local competition. 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 statistically 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.

Keywords

agricultural pricesalternative marketing optionslocal competition, marketing contractsproduction contractspropensity score matchingQ13
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 42 , Issue 2 , May 2010 , pp. 261 - 276
Copyright
Copyright © Southern Agricultural Economics Association 2010

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