Agricultural Contracting and the Scale of Production

This study presents evidence that contracting is positively associated with the scale of production for six major U.S. agricultural commodities. Specifically, contract producers tend to operate at a larger scale than do independent producers, and the likelihood of an operation contracting increases with its scale. This relationship is strongest in the cattle and hog sectors, where it persists even among large commercial operations. Six theoretical explanations for the observed correlation between scale and contracting are proposed, including imperfect capital markets, contractor transaction costs, input leverage, grower risk aversion, asset specificity, and technological change. Information from five annual national surveys is used to examine the validity of three of the proposed mechanisms.


Issue Date:
2004-10
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/31273
Published in:
Agricultural and Resource Economics Review, Volume 33, Number 2
Page range:
255-271
Total Pages:
17




 Record created 2017-04-01, last modified 2018-01-22

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