Effects of Forward Sales on Spot Markets: Pre-commitment Sales and Prices for Fresh Strawberries

Sandeep Mohapatra, Rachael Goodhue, Colin Carter and James Chalfant ()

American Journal of Agricultural Economics, 2010, vol. 92, issue 1, 152-163

Abstract: Increasingly, agricultural markets are vertically coordinated. Often a thinning spot market coexists with coordinated transactions, raising the question of how private coordination affects the market as a whole. One of the greatest challenges when analyzing such market-level effects is obtaining information on private transactions. We utilize publicly available data to evaluate how informal contracts in the fresh strawberry market affect spot market prices using a generalized autoregressive conditional heteroskedastic in mean (GARCH-M) model. We find that these informal contracts increased spot prices, as argued by some industry members, while the effect on spot price volatility varied by production region. Copyright 2010, Oxford University Press.

Date: 2010
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