Agricultural Contracting Update, 2005

by James M. MacDonald and Penni Korb

More than half of all transactions for U.S. agricultural products are still conducted through spot market exchanges, in which commodities are bought and sold in open market transactions for immediate delivery. But a growing share of U.S. farm production is produced and sold under agricultural contracts. Such contracts between farmers and their buyers are reached prior to harvest (or before the completion stage for livestock) and govern the terms under which products are transferred from the farm. The shift of production to contracting coincides with shifts of production to larger farms. Contracts are far more likely to be used on large farms than on small ones. Marketing and production contracts covered 41 percent of the value of U.S. agricultural production in 2005, up from 39 percent in 2003, 36 percent in 2001, and a substantial increase over 28 percent in 1991 and 11 percent in 1969.

Keywords: Production contracts, marketing contracts, farm structure, farm size, contracting, Agricultural Resource Management Survey, ARMS, risk analysis

In this publication...

• Entire Report
• Report summary
• Abstract, Contents, and Summary
• Introduction
• Why Use Contracts?
• Data on Contracting
• The Continued Expansion of Contracting
• The Use of Contracts in Selected Major Commodities
• Conclusions
• References
• Appendix table