The impact of organizational form on producer contracting decisions

Kimberly A. Zeuli, Robert P. King

Research output: Contribution to journalArticlepeer-review

Abstract

A variable that has not yet been considered in the contracting literature is the impact of agribusiness organizational form on the producer's contracting decision. Contracts with cooperatives are more complicated decisions for producers than a standard marketing contract with noncooperatives because of the requisite membership capital investment in the firm. Contracting with cooperatives requires producers to make a dual supply and investment decision. Individual membership equity holdings in all agricultural cooperatives are increasing, but they are generally most substantial in the value-added, new-generation cooperatives. Portfolio theory is used to analyze the producer's decision to contract with three alternatively structured value-added processing organizations in an uncertain environment: a traditional cooperative, a new-generation cooperative and an investor-oriented firm. In the cooperative cases, the contract requires both supply and equity investment.

Original languageEnglish (US)
Pages (from-to)147-164
Number of pages18
JournalCanadian Journal of Agricultural Economics
Volume52
Issue number2
DOIs
StatePublished - Jul 2004

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