Modeling the Market and Welfare Effects of Mexico's “Agriculture by Contract” Program

Sergio Lence

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: "Agriculture by contract" ( A×C) is the main government program aimed at mitigating price risks for agricultural producers in Mexico. A×C has unique features, involving forward contracts, and the provision of basis subsidies and subsidized exchange-traded futures options for both producers and intermediaries. A simulation model is developed to analyze the market and welfare effects of A×C. When applied to corn, results show that A×C exerts substantial impacts,and causes large transfers across sectors. Even if A ×C reduced intermediaries' market power to the largest extent feasible, results indicate that it would still cause important losses in aggregate welfare.

Date: 2015-08-28
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Related works:
Journal Article: Modeling the Market and Welfare Effects of Mexico's "Agriculture by Contract" Program (2016)
Working Paper: Modeling the Market and Welfare Effects of Mexico's “Agriculture by Contract” Program (2015)
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