CROSS-COMMODITY PERSPECTIVE ON CONTRACTING: EVIDENCE FROM MISSISSIPPI

Cross-Commodity Perspective on Contracting: Evidenc e from Mississippi

the productive resources). Contracts are typically viewed as lying close to spot transactions,
but some contract types such as resource providing and production management contracts
(Kohls and Uhl) take on characteristics of quasi-integration.  Kohls and Uhl provide the

following definitions for these contracts:

• Resource providing contract-a contract with terms that often specify certain pro-
duction resources to be used and the place of their purchase.  The contractor usually

provides the producer with financing ranging from operational to fixed investment fi-
nancing, and a degree of managerial assistance and supervision.  Pro duct prices are

usually based on the open market, and income guarantees are minimal.  In such con-

tracts, the contractor may influence the technology and size of operations of the pro-
ducer in order to increase and stabilize the market for their own pro ducts.  Examples

of these may lie in some fruit, nut, vegetable, and ornamental horticulture contracts.

• Production management contract-a contract with terms that often include mar-
keting and production stipulations of both the resource providing and market (cash
forward) contracts.  In addition, they provide for the transferring of part or all of the

market price and income risks from the pro ducer to the contractor.  This is usually

done by paying the producer a prearranged return per unit of product or by guarantee-
ing against market-oriented financial loss. In these contracts, the contractor assumes
a substantial part of the managerial responsibility of the producer. These contracts
come closest to obtaining the managerial andfinancial control and risk that occurs when
the integration is effected through complete ownership (complete vertical integration).

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