New Publication: Valuing Buyer and Contract Characteristics

Kathryn Boys, Assistant Professor in the Department of Agricultural and Resource Economics, along with Michael Barrowclough and Carlos Carpio, an NC State alumni, published research funded by the Federal-State Marketing Improvement Program grant. The journal article, “Benefits, Challenges and Trade-Offs: Buyer and Contract Characteristics Valued by Small Farm Suppliers to Wholesale Marketing Channels” (Journal of Agricultural and Resource Economics 44(3):605-623) identifies and quantifies key contract characteristics and buyer attributes valued by small-scale produce farmers who are currently or are considering marketing into wholesale channels. The researches conducted surveys with farmers in Virginia and North Carolina.

This study explores the relative importance of and trade-offs among contract attributes and buyer business characteristics for small scale specialty crop (SSC) farms’ willingness to enter into contractual agreements. Information concerning farmers’ use of contracts, preferences for specific contract terms and buyer attributes, and perceptions regarding contract use were collected through surveys. Findings indicate that the surveyed farmers in Virginia and North Carolina had mixed attitudes regarding the use of contracts.

While they expressed concern about specific aspects of contracts, producers were overall receptive to the idea of using contracts as a viable marketing alternative. For SSC farmers, the security offered by contracts of a guaranteed buyer comes with important trade-offs. Primary among these are concerns about price and payment terms. Farmers who market through direct-to-consumer outlets, such as farmers’ markets, are used to selling at retail prices and receiving immediate (frequently cash)payment. Producers who currently market through wholesaler channels, where prices are typically lower, were the most open to using contracts. Despite these and other concerns, however, producers overwhelmingly reported that using marketing contracts would be benefit their farming operations.