Extension Number

ASL R1401

Topic

Management/Economics

Publication Date

1997

Abstract

Two alternative long-term marketing contracts between producers and packers were compared over a 10-year period. Contracts offered in the industry differ greatly. The two contracts considered here represent a cost-plus contract and a $38-48 window price contract. They were compared using actual prices from 1986-1996 and at prices that were five percent lower than actual prices. Both contracts reduced the variabillity of prices and produced higher minimum prices than were offered in the cash market.

The appeal of the contract depends on the producers' outlook for price levels in the future. At prices equal to those of the previous 10 years, both contracts resulted in lower average prices. At 5% lower prices, the cost-plus contract was higher and the window price contract was lower than the cash price.

Copyright Owner

Iowa State University

Language

en

File Format

application/pdf

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