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Quantifying the benefits associated with the use of alternative marketing arrangements by US farmers

Quantifying the benefits associated with the use of alternative marketing arrangements by US farmers Purpose – The purpose of this paper is to quantify the benefits to farmers from using alternative marketing arrangements (AMAs) in the USA. The authors first estimate a behavioral model explaining farmers' joint decisions on which commodities to produce and which marketing channels to use when selling their outputs. The authors then use the estimated model to quantify the benefits to farmers from using AMAs. Design/methodology/approach – The authors use the discrete choice random utility maximization model to examine farmers' choices on production regimes, where a regime is defined as a possible combination of all the individual commodity/marketing arrangement channels that the farmer can choose to use. The farmer is assumed to compare the utilities he gets from each of the possible production regimes and then selects the production regime that yields the highest utility to him. The benefit of having access to a particular AMA is measured as the negative of the welfare loss associated with forcing the farmer to abandon that particular AMA. Findings – The results indicate that AMAs yield an economically significant amount of benefits to farmers who rely on them to market their outputs. At the national level, the benefit of using production contracts to hog farmers is valued at $336.4 million. The benefits of using marketing contracts are valued at $374.2, $156.6 and $92.1 million for corn, soybeans and wheat producers. Originality/value – The paper is the first study that uses the farm‐level data to study the welfare effects of marketing contracts in the grain sector. The results show that considering a multi‐enterprises farm, farmers' welfare loss might be smaller when the hog production contract is no longer existed. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Agricultural Economic Review Emerald Publishing

Quantifying the benefits associated with the use of alternative marketing arrangements by US farmers

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References (21)

Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1756-137X
DOI
10.1108/CAER-10-2011-0147
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to quantify the benefits to farmers from using alternative marketing arrangements (AMAs) in the USA. The authors first estimate a behavioral model explaining farmers' joint decisions on which commodities to produce and which marketing channels to use when selling their outputs. The authors then use the estimated model to quantify the benefits to farmers from using AMAs. Design/methodology/approach – The authors use the discrete choice random utility maximization model to examine farmers' choices on production regimes, where a regime is defined as a possible combination of all the individual commodity/marketing arrangement channels that the farmer can choose to use. The farmer is assumed to compare the utilities he gets from each of the possible production regimes and then selects the production regime that yields the highest utility to him. The benefit of having access to a particular AMA is measured as the negative of the welfare loss associated with forcing the farmer to abandon that particular AMA. Findings – The results indicate that AMAs yield an economically significant amount of benefits to farmers who rely on them to market their outputs. At the national level, the benefit of using production contracts to hog farmers is valued at $336.4 million. The benefits of using marketing contracts are valued at $374.2, $156.6 and $92.1 million for corn, soybeans and wheat producers. Originality/value – The paper is the first study that uses the farm‐level data to study the welfare effects of marketing contracts in the grain sector. The results show that considering a multi‐enterprises farm, farmers' welfare loss might be smaller when the hog production contract is no longer existed.

Journal

China Agricultural Economic ReviewEmerald Publishing

Published: Jan 28, 2014

Keywords: Agricultural marketing; Food policy; Agricultural policy; Alternative marketing arrangements

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