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Contract Marketing in the US after the 2002 Farm Act: The Case of Peanuts

Cesar Revoredo-Giha, Denis Nadolnyak and Stanley Fletcher
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Denis Nadolnyak: Department of Agricultural and Applied Economics, University of Georgia, USA
Stanley Fletcher: Department of Agricultural and Applied Economics, University of Georgia, USA

No 11.2005, Environmental Economy and Policy Research Working Papers from University of Cambridge, Department of Land Economics

Abstract: The elimination of the marketing quota system that regulated the peanut market since the 1930s has been accompanied by the emergence of marketing contracts between farmers and peanut buyers (mainly peanut shellers). Two types of contracts have been observed, forward contracts for delivery at harvest or at a later date and “option to purchase” contracts. We analyze the clauses of contracts used by major shellers in order to infer the motivation behind these contracts (i.e., risk sharing, reduction of transaction costs, improve coordination, exercise of market power, etc.). The analysis points out that the main role of the contracts is to replace the marketing structure existing prior the 2002 Farm Act, where peanut marketing was quite regulated. In this sense, the reduction of transaction costs associated to the need for coordinating a continuous supply of homogeneous quality seems to be the most plausible explanation.

Keywords: US agriculture; agricultural marketing; peanuts; economics of agricultural contracts (search for similar items in EconPapers)
Date: 2005, Revised 2005
New Economics Papers: this item is included in nep-agr and nep-mkt
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Working Paper: CONTRACT MARKETING IN THE US AFTER THE 2002 FARM ACT: THE CASE OF PEANUTS (2005) Downloads
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