Value of Selected Commodities Produced Under Contracts statistics

[59,826 represents $59,826,000,000. Marketing contracts refer to verbal or written agreements between a buyer--generally a food processing and/or marketing company--and a grower that set a price (or pricing mechanism) and determine an outlet for a specified quantity of a commodity before harvest or before the farmer markets the commodity. Production contracts involve paying the farmer a fee for providing management, labor, facilities, and equipment, while assigning ownership of the product to the contractor. The contract specifies in detail the production inputs supplied by the contractor, which may be a processor, feed mill, or another farm operation or business. The contract also specifies the quality and quantity of the particular commodity. Survey based estimates (see source) exclude Alaska and Hawaii and do not represent official U.S. Dept. of Agriculture estimates of farm sector activity]


		1997			1998

	Value of			Value of
	production		Percent	production		Percent
Commodity	under		of	under		of
	contract		total	contract		total
	(mil. dol.)		production ¹	(mil. dol.)		production ¹

Total	59,826	²	31	67,090	²	35
Marketing contracts ³	41,610	²	22	39,878	²	21
Cattle	2,735		9	1,472		5
Corn	1,720		8	2,385		13
Cotton	1,923		33	2,031		51
Fruits	7,199		59	5,605		55
Soybeans	1,672		9	2,078		12
Sugar beets	973		82	984		76
Vegetables	3,374		24	3,939		36
Production contracts ³	18,215	²	10	27,212	²	14
Poultry and eggs ⁴	6,664		99	15,051		88
Cattle	4,280		14	6,406		21
Hogs	3,097		33	3,437		40
Vegetables	1,145		8	1,085		10

1 Represents percent of production under contract as percent of total commodity production, except as noted.
2 Percent of total value of agricultural production.
3 Includes other commodities not shown separately.
4 Data not available to estimate value of production for broilers

Source: U.S. Dept. of Agriculture, Economic Research Service, "Managing Risk in Farming: Concepts, Research, and Analysis", Agricultural Economic Report No. 774, March 1999; and unpublished data from 1998 Agricultural Resource Management Study, phase 3, version 1.

http://www.ers.usda.gov/

Marketing contracts refer to verbal or written agreements between a buyer--generally a food processing and/or marketing company--and a grower that set a price (or pricing mechanism) and determine an outlet for a specified quantity of a commodity before harvest or before the farmer markets the commodity. Most management decisions remain with the grower, who retains product ownership during the production process. The contractee assumes all risks of production, but shares price risk with the contractor.

Marketing contracts can take many forms, including: forward sales of a growing crop, where the contract provides for later delivery and establishes a price before delivery; price setting after delivery based on a formula that considers grade and yield; and pre-harvest pooling arrangements, in which the amount of payment received is determined by the net pool receipts for the quantity sold.

Since the farmer incurs the costs of production, the farmer retains the income generated from sale of the commodity.

Production contracts involve paying the farmer a fee for providing management, labor, facilities, and equipment, while assigning ownership of the product to the contractor. The contract specifies in detail the production inputs supplied by the contractor, which may be a processor, feed mill, or another farm operation or business. The contract also specifies the quality and quantity of the particular commodity. Because the contractor controls the amount produced and the production practices, the contractor often dominates the terms of the contract.

Advantages of production contracts for farmers include the sharing of production and marketing risks with the contractor and the availability of financing--either directly from the contractor or indirectly through other lenders who are more assured of loan repayment under this arrangement. Farms can have both marketing and production contracts.

http://www.allcountries.org/uscensus/1115_value_of_selected_commodities_produced_under.html

These tables are based on figures supplied by the United States Census Bureau, U.S. Department of Commerce and are subject to revision by the Census Bureau.

Copyright © 2006 Photius Coutsoukis and Information Technology Associates, all rights reserved.