Effect of Contract Farming on the Farmers' Average Return - The Case of the Grain Industry in the U.S.A.

In the literature, the effect of contract farming on the productivity efficiency or profitability is rarely studied, especially in the crop sector. In this paper, we use a farm-level dataset (Agriculture and Resource Management Survey) to examine the effect of contract farming on the farmers' average return for the corn, soybean and wheat producers. The results of the matching estimation show that without matching, the effect of contract farming on the average returns of the corn and soybean producers might be underestimated, and contract farming might have a negligible (statistically insignificant) effect on the average return of the wheat producer.