Alternative Marketing Arrangements Research Articles

“Safer to plant corn and beans”? Navigating the challenges and opportunities of agricultural diversification in the U.S. Corn Belt

AbstractAgricultural diversification in the Midwestern Corn Belt has the potential to improve socioeconomic and environmental outcomes by buffering farmers from environmental and economic shocks and improving soil, water, and air quality. However, complex barriers related to agricultural markets, individual behavior, social norms, and government policy constrain diversification in this region. This study examines farmer perspectives regarding the challenges and opportunities for both corn and soybean production and agricultural diversification strategies. We analyze data from 20 focus groups with 100 participants conducted in Indiana, Illinois, and Iowa through a combined inductive and deductive approach, drawing upon interpretive grounded theory. Our results suggest that when identifying challenges and opportunities, participants center economics and market considerations, particularly income, productivity, and market access. These themes are emphasized both as benefits of the current corn-soybean system, as well as challenges for diversification. Additionally, logistical, resource and behavioral hurdles– including the comparative difficulty and time required to diversify, and constraints in accessing land, labor, and technical support– are emphasized by participants as key barriers to diversification. Agricultural policies shape these challenges, enhancing the comparative advantage and decreasing the risk of producing corn and soybeans as compared to diversified products. Meanwhile, alternative marketing arrangements, farmer networks, family relationships, and improved soil health are highlighted as important opportunities for diversification. We contextualize our findings within the theories of reasoned action and diffusion of innovation, and explore their implications for farmer engagement, markets, and agricultural policy, and the development of additional resources for business and technical support.

91 Key Economic and Marketing Trends in fed Cattle and High-Quality Beef

Abstract This presentation provides a descriptive overview of economic and marketing trends and key changes in cattle feeding over the last two decades. The focus will highlight four major areas: aspects of beef demand (domestic and foreign), market-driven carcass characteristics, economically driven producer production trends, and marketing arrangements. The last two decades have brought unique challenges and opportunities to the beef industry through demand changes and production technologies. Consumer diet trends, the rise and fall of saturated fat, and the expansion into the global marketplace have all shaped the beef demand profile. New technologies also have shaped feedlot management and marketing. Over the last two decades, changes have revolutionized fed cattle marketing, rewarding quality through alternative marketing arrangements, especially formula pricing, including grid pricing. Evolutionary changes have been seen in carcass grading characteristics (e.g., Choice/Select price spread) and helped focus production practices to zero in on producing higher-quality beef. Trends at the feedlot such as carcass weights, days on feed, and other productivity measures have also been shaped by in-part by economics. Last, we will offer a few comments on emerging issues and trends.

Recognizing Determinants to Smallholders’ Market Orientation and Marketing Arrangements: Building on a Case of Dairy Farming in Rural Kenya

Smallholder commercialization is central to international development policy and practice. As a result, several arrangements to foster market linkages are being implemented. Especially popular are farmers’ organizations, which are believed to be owned, controlled, and financed by smallholders. As such, their design is considered inclusive given every household in a community is theoretically allowed to become a member, and the governance and management structure encourage participatory decision-making. However, even in the context in which farmers’ organizations are actively promoted, a notable proportion of smallholders may not be able to engage in market-oriented production or may opt for the existing alternative marketing arrangements, as dictated by individual households’ socioeconomic characteristics. Focusing on the case of smallholder farming in Olenguruone, Nakuru county, Kenya, where a donor funded dairy farmers’ cooperative marketing arrangement is promoted alongside existing marketing opportunities, the present research investigated the factors that determine smallholders’ commercial farming orientation and marketing arrangements. It employed a case study approach, combining both quantitative and qualitative research methods for a more complete empirical inquiry. The findings demonstrate that irrespective of the external support provided through marketing opportunities such as farmer organizations, smallholders’ engagement in commercial farming and marketing is dictated by the socioeconomic attributes and market perceptions that are heterogeneous among households in a smallholder community.

Seasonality in Fed Cattle Transactions and the Role of Negotiated Cash

First paragraph: Alternative Marketing Arrangements (AMA) have once again taken center stage in the cattle market over the last several weeks. It is common knowledge that the use of AMAs varies by geographical region with Southern Plains feedlots using a larger share relative to Northern Plains feedlots. A long-standing issue is whether each geographical region is contributing a perceived appropriate amount of negotiated cash trade to aid in price discovery. This issue has intensified as the national level of negotiated cattle continues to decline. Lower cash prices and increased volatility due to COVID-19 government quarantine measures and the Holcomb Fire have appeared to intensify this issue among market participants. Last paragraph: Both proposed bills put forth by the U.S. Senate have stated that need for more price discovery due to the Holcomb Fire and COVID-19 market disruptions. Figures 1-5 graphically show that the national level of negotiated cash was likely not significantly impacted by either market disruptions. The current concern surrounding AMA’s (i.e. formula/grid pricing) has more to do with lower cash prices received by producers due to market reactions to major market disruptions than the role of AMA’s role in thinly traded markets. While both bills would bring increased negotiated cash price discovery and transparency in the feedlot-packer market interface, neither are likely to increase the cash price received by producers since they do not fundamentally change the supply of fed cattle nor the demand for wholesale beef. Further, it is unlikely that if these bills were implemented prior to either the Holcomb Fire or COVID-19 it would have prevented the backlog in cattle nor affected the demand for wholesale beef. If implemented, these policies would create additional transparency but potentially creating increased costs and reducing profitability for the entire beef complex. Consistent with the economic theory of derived demand, the additional costs of these policies are likely to predominately carried by the cow-calf industry.

Changing Grid Premiums and Discounts Due to Underlying Changes in the Fed Cattle Industry

In recent weeks there has been increased attention given to the role of Alternative Marketing Arrangements, commonly referred to as AMA's, in the fed cattle market. The use of these AMA’s varies greatly by region and some of the more common AMA’s used include grid and formula pricing. AMA’s pay producers premiums and discounts from a ‘base price’ based on a combination of the yield grade, quality grade, and weight of dressed cattle. It is common for the negotiated cash price to serve as the ‘base price’ for AMA’s using the either the geographical region or the 5-market average. The decline in negotiated cash trade has varied by geographical region causing some market participants to wonder if the ‘base price’ truly reflects the local demand for cattle. For example, cattle formula priced in Texas using the 5-market average could, in certain weeks, be heavily weighted towards Nebraska and Iowa prices.

A Tidal Wave of Inevitable Data? Assetization in the Consumer Genomics Testing Industry

We bring together recent discussions on data capitalism and biocapitalization by studying value flows in consumer genomics firms—an industry at the intersection between health care and technology realms. Consumer genomics companies market genomic testing services to consumers as a source of fun, altruism, belonging and knowledge. But by maintaining a multisided or platform business model, these firms also engage in digital capitalism, creating financial profit from data brokerage. This is a precarious balance to strike: If these companies’ business models consist of assetizing the pool of genomic data that they assemble, then part of their work has to revolve around obscuring to consumers any uncertainties that would potentially impinge on these processes of assemblage. We reflect on the nature of these practices and the market relationships that enable them, and we relate this reflection to debates around alternative market arrangements that would potentially mitigate the extractive tendencies of these and other digital health firms.

Complementing the Dominant Social Paradigm with Sustainability

The dominant social paradigm (DSP) defines the basic belief structures and practices of marketplace actors and is manifested in existing exchange structures. Sustainability – a so-called megatrend – challenges the DSP by questioning its underlying assumptions, resulting in tensions or conflicts for different marketplace actors. This study examines a specific case of an alternative market arrangement that bridges tensions between the DSP and environmental concerns. Ethnography in the context of retail food waste disposition reveals tensions experienced by several marketplace actors – namely consumers, retail firms and regulators – and investigates an alternative market arrangement that alleviates those tensions by connecting the actors and their practices in a creative new way. We identify complementarity as the underlying mechanism of connection and resolution. Compared to previously identified alternative market arrangements that are either oppositional or parallel to the DSP, complementarity opens another path toward greater environmental sustainability through market-level solutions.

Differences in prices and price risk across alternative marketing arrangements used in the fed cattle industry

Information on prices and price risk differences across marketing arrangements aids fed cattle producers in making choices about marketing methods. As part of the congressionally mandated Livestock and Meat Marketing Study, we investigated fed cattle price and price risk differences across marketing arrangements. The analysis uses data representing cattle purchased by 29 large beef packing plants from October 2002 through March 2005. Results indicate that marketing agreements offered the best tradeoff between price level and price risk. Forward contracts had the lowest average yet highly volatile prices. Auction barn prices were higher than other methods but also the most volatile.

The role of risk and risk-aversion in adoption of alternative marketing arrangements by the US farmers

The objective of this article is to analyse the relationship between farmers’ risk-aversions and the riskiness of various agricultural enterprises to see which marketing arrangements would typically emerge. Relying on the basic agency theory model, we hypothesize the prevalence of alternative marketing arrangements (AMAs) in situations with high risk-averse farmers and high-risk enterprises and the prevalence of spot (cash) markets for low risk-averse participants and less risky enterprises. Our empirical tests are carried out using the 2004 Agricultural Resource Management Survey (ARMS). The empirical results are largely supportive of the agency theory of contract choice.

Quantifying the benefits associated with the use of alternative marketing arrangements by US farmers

Purpose – The purpose of this paper is to quantify the benefits to farmers from using alternative marketing arrangements (AMAs) in the USA. The authors first estimate a behavioral model explaining farmers' joint decisions on which commodities to produce and which marketing channels to use when selling their outputs. The authors then use the estimated model to quantify the benefits to farmers from using AMAs. Design/methodology/approach – The authors use the discrete choice random utility maximization model to examine farmers' choices on production regimes, where a regime is defined as a possible combination of all the individual commodity/marketing arrangement channels that the farmer can choose to use. The farmer is assumed to compare the utilities he gets from each of the possible production regimes and then selects the production regime that yields the highest utility to him. The benefit of having access to a particular AMA is measured as the negative of the welfare loss associated with forcing the farmer to abandon that particular AMA. Findings – The results indicate that AMAs yield an economically significant amount of benefits to farmers who rely on them to market their outputs. At the national level, the benefit of using production contracts to hog farmers is valued at $336.4 million. The benefits of using marketing contracts are valued at $374.2, $156.6 and $92.1 million for corn, soybeans and wheat producers. Originality/value – The paper is the first study that uses the farm-level data to study the welfare effects of marketing contracts in the grain sector. The results show that considering a multi-enterprises farm, farmers' welfare loss might be smaller when the hog production contract is no longer existed.

Committed Procurement in Privately Negotiated Markets: Evidence from Laboratory Markets

AbstractPrevious research suggests an increase in committed procurement can result in lower cash market prices for livestock. There is a paucity of research that ascertains prices received by market agents trading in a prior bargaining session via alternative marketing arrangements versus those who have not. We use laboratory market experiments to analyze the potential impacts of committed procurement on privately negotiated transactions when some traders have two windows of negotiation and others have one. Results illustrate that those who do not engage in prior trading are at a bargaining disadvantage due to matching and inventory loss risks.

Competition in the US Meatpacking Industry

This article reviews and evaluates the recent literature on competition in the US meatpacking industry. Studies on market power in meatpacking indicate that concentration in procurement of livestock (cattle or hogs) has not adversely affected prices received by producers or prices paid by consumers. Indeed, there is evidence that producers may be better off because of lower processing costs due to the concentration and introduction of new technical innovations. Policies to restrict alternative marketing arrangements such as those proposed by GIPSA would make producers and consumers worse off. The beef and pork industries are quite complex and contain both spatial and temporal dimensions that can affect the level of competition. Fringe producers because of locational shift of industry and thin markets may be worse off. Establishment of niche enterprises may benefit these producers. In the future, incentives are to maintain steady long-run supplies of livestock to fully operate slaughtering and processing facilities.

Modeling the Effects of Restricting Packer‐Owned Livestock in the U.S. Swine Industry

AbstractAn imperfectly competitive model of processor (packer) behavior is formulated to estimate welfare effects from restricting alternative marketing arrangements of livestock procured by packers. Pork was aggregated into a composite good and hog supply was partitioned into negotiated (spot), contract, and packer‐owned. The model was estimated with the dynamic SUR method using weekly Mandatory Price Reporting (MPR) hog and pork data from 2001 to 2005. The model incorporates production uncertainty by modeling expected pork output as expected output in the input demand functions. The welfare effects from banning packer‐owned hogs indicate that independent producers, consumers, and packers all would lose.

Evidence of the role of marketing arrangements and valuation methods in improving beef quality

AbstractLow and inconsistent beef quality has been blamed by some for the losses of beef's share of total meat consumption. Tighter vertical coordination through use of alternative marketing arrangements and more precise price signaling through use of different cattle valuation methods may help improve beef quality because these mechanisms facilitate information exchange enabling producers to respond better to consumer demand. For the congressionally mandated Livestock and Meat Marketing Study, we modeled differences in levels and variances of cattle quality associated with particular marketing arrangements and valuation methods using fed cattle purchase data from 29 large U.S. beef packing plants for October 2002 through March 2005. Results indicate fed cattle procured through marketing agreements and packer ownership had higher and more consistent quality compared to other types of arrangements. Auction market cattle quality was the most inconsistent. Fed cattle valued using carcass weight with a grid were associated with higher and more consistent quality. [EconLit Citation: Q13]. © 2009 Wiley Periodicals, Inc.

Do Alternative Marketing Arrangements Increase Pork Packers' Market Power?

AbstractIn this article we use structural econometrics to formally test whether the use of the alternative marketing arrangements (AMAs) by pork packers is the source of their market power on the spot (cash) market for live hogs. We specify the pork packers' conjectures of the change in the industry total market procurement of live hogs through the spot market with respect to their AMAs stocks. The test is carried out using the mandatory price reporting data. Our results show that pork packers have statistically significant market power on the spot market for live hogs, but the source of that market power cannot be narrowed down to the existence of AMAs stocks.

Family farm sustainability in southern Brazil: An application of agri-environmental indicators

This paper investigates the sustainability of agroecological and conventional agriculture on small farms in southern Brazil. A methodology was developed to identify agri-environmental indicators of the environmental, economic and social dimensions of the farming systems. The criteria used for selecting sustainability indicators were policy relevance, measurability, validity/analytical soundness, level of aggregation/communication to the user. Based on these criteria indicators were selected for natural, financial, physical, human, and social capital assets. The research identified ‘external’ indicators, those relevant to researcher/policy makers, and ‘internal’ indicators, those relevant to the resource users. The two sets were combined and data relevant to the selected indicators were collected from secondary sources and also direct from farmers through a small-scale sample survey. After analysing the data, indicators were selected for each capital asset to generate a multi-criteria assessment of sustainability at three scales: farm, local and regional. The analysis provided evidence of ecological and social advantages of ecological farms, but financial disadvantages associated with the cost of alternative marketing arrangements for agroecological produce. The paper draws conclusions about the usefulness of indicators in the assessment of farming sustainability and possibilities for wider application.

Contract Choice in Modern Agriculture: Cash Rent versus Cropshare

E CONOMISTS have expended enormous effort examining the rationale for various contractual arrangements in agriculture, particularly sharecropping. While economists have made considerable theoretical efforts to understand agricultural contracts, few empirical studies have been undertaken. The dearth of empirical analyses of agricultural contracts is particularly striking for modern Western agriculture.' This is an important omission, not only because the existing empirical work tends to focus on the question of efficiency, but also because the theoretical models tend to examine contracts that bear little resemblance to those found in the United States today.

Notes on a review of the report of the committee of enquiry into alternative marketing arrangements for maize

Notes on a review of the report of the committee of enquiry into alternative marketing arrangements for maize

Review of the report of the Committee of Enquiry into alternative marketing arrangements for maize

Problems in the maize industry induced the Minister of Agriculture to appoint a Committee of Enquiry into maize marketing arrangements. Maize and winter grains are marketed under one‐channel fixed price schemes operated by the Maize and Wheat Boards, which are statutory monopolies. Floor prices are used in sorghum marketing. The Committee recommends retention of one‐channel marketing for all grains, operating under a single selling organization. It also recommends the creation of a grain floor where buyers can negotiate with the sole selling agency, which will also control exports and imports. The proposals amount to further monopolization in grain marketing. It is argued that these proposals will induce greater inefficiency in the grain sector; the important problems will not be solved. The Committee gives attention to neither food problems of the poorer part of the population nor production problems nor cross‐subsidiation. Long— term market effects are not sufficiently addressed; nor are international d...

Alternative market arrangements for technology transfer

With the rapid expansion of markets for telecommunications services and equipment, both national and international, one sees an increasing frequency of alliances in which each of two firms seeks to use the other to complete its portfolio strengths. Often this combination enables firms to achieve the product differentiation that seems to be the key to competitive advantage in modern telecommunications markets. This alliance may take the form of a « joint venture », which in the paper includes as limiting cases a subsidiary wholly owned by one firm, a technology licensing arrangement, and direct exporting. The model of such a venture presented here, although simple, is rich enough to illustrate the influence of four types of factors on the negotiations that set up the venture: demand, costs, risk, and regulatory constraints. We characterize the sets of acceptable and efficient arrangements, under various assumptions about exogeneous factors. The partners must choose among these by some form of bargaining.