Farmers' Use of Marketing and Production Contracts
by Farm Business Economics Branch, Rural Economy Division, ERS
Agricultural Economic Report No. (AER-747) 32 pp, December 1996
Contracts are an integral part of the production and marketing of selected livestock commodities, such as broilers, turkeys, eggs, and milk. Such crops as fruit, vegetables, and sugar beets and cane are mostly produced under contracts. In the past, farm receipts were assumed to be distributed across all farm families in proportion to their production. Today, contractors receive a large share of farm receipts, formerly assumed to go to the operator's family. Contractors typically bear a large share of production and price risk, and earn the majority of net income from the commodity's production. Farmers may benefit by being able to expand their operations more rapidly than otherwise possible--perhaps with less debt and fewer financial risks.
Keywords: marketing contracts, production contracts, net farm income, Farm Costs and Returns Survey, farm financial condition, production specialty, livestock, region, farm financial characteristics
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