DOES THE EXISTENCE OF MARKET POWER AFFECT MARKETING LOAN PROGRAMS?

Cesar Revoredo-Giha and Stanley M. Fletcher

No 22241, 2003 Annual meeting, July 27-30, Montreal, Canada from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The paper analyzes the effects that a demand with oligopsonistic power may have on the operation of a marketing loan program (especially on the program cost). We measure these effects using a model for the US peanut market where evidence indicates that the demand is highly concentrated. Our results show that the USDA strategy of keeping a repayment rate above the market-clearing price set by the demand is not a sustainable strategy, since the demand can follow a hand-to-mouth strategy, postponing its purchases of peanuts, letting USDA accumulate stocks and forcing it to reduce the price.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Pages: 27
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea03:22241

DOI: 10.22004/ag.econ.22241

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