An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans

Contracts serve as coordination mechanisms which allocate value, risk, and decision rightsacross buyers and sellers. The use of marketing contracts in agriculture, specifically for crop production,has been increasing over the past decade. This study investigates the determinants ofagricultural marketing contract design employing data from the USDA’s Agricultural ResourceManagement Survey. Models are estimated to analyze the association between producer and contractorcharacteristics, the decision to produce under contract, and the types of contract structuresobserved in practice, while controlling for the potential for endogenous matching betweencontracting parties. Results indicate that while certain producer characteristics are significantlyassociated with the decision to produce corn or soybeans under contract, there is no significantassociation between those characteristics and specific contract attributes.