CROSS-COMMODITY PERSPECTIVE ON CONTRACTING: EVIDENCE FROM MISSISSIPPI

Cross-Commodity Perspective on Contracting: Evidenc e from Mississippi

Pr(CON = 1) = f(CV P; HOURS;P REF; EASE; ASSET SP; EDU; OF FINC; AGE);

where CON = 1 if the producer is engaged in contract agricultural pro duction for their
primary product; CON = 0 otherwise.  In the first estimated model, contract production

was assumed to be cash forward contracts, marketing pools, resource providing contracts,
and production management contracts. The variables PREF and EASE are Liekert scale
questions.

• PREF - “I prefer to concentrate on farming/producing relative to marketing my prod-
ucts.”

• EASE - “C ontracting is easier to do than sell my products in the open market.”

These variables were scaled as 1 being strongly agree to 5 being strongly disagree to these
statements. EDU is the level of education of the respondent: EDU = 1 if respondent was a
college graduate; EDU = 0 otherwise. Finally, AGE is the age of the respondent in years.

The results of the regression model are presented in Table 5. The results suggest that
price risk is not an important factor in determining contract participation, which appears
consistent with the results above. These results also lend further support to the hypothesis
of Allen and Lueck that risk is not important in contracting.  It is important to note that

this does not mean that producers are risk neutral, it simply implies that other factors are
more imp ortant than price risk in participation in contracting.

The coe¢cient on the HOURS variable is positive and statistically significant, sug-
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