A General Equilibrium Theory of Contracts in Community Supported Agriculture. (14th May 2015)

• Record Type: Journal Article
• Authors: Sproul, Thomas W.; Kropp, Jaclyn D.
• Is Part Of: American journal of agricultural economics. Volume 97:Number 5(2015)
• Page Start: 1345
• Page End: 1359
• Publication Date: 2015-05-14
• Subjects: Agricultural marketing -- direct marketing -- community supported agriculture -- CSA -- contract prices -- local food -- risk premium -- risk‐sharing; Agriculture -- Economic aspects -- Periodicals; Agriculture -- Periodicals; 338.105
• DOI: 10.1093/ajae/aav029
• Languages: English
• ISSNs: 0002-9092

Abstract

Abstract : Community Supported Agriculture (CSA) contracts allow consumers to buy claims on a farm's future production. In turn, the consumer provides working capital to the farm during the growing season. CSA contracts also provide risk management for farmers with limited access to Federal crop insurance by transferring part of the farm's risk to the consumer. We derive a theory of CSA contract pricing for the two most prevalent types of CSA contracts: yield contracts, in which consumers receive a percentage of the farm's production, and weight contracts, in which consumers receive fixed quantities. We develop a two‐period model in which expected utility maximizing producers and consumers engage in CSA contracting in the first period based on anticipation of yields and spot prices in the second period. Using the model, we generate several testable hypotheses to be explored in future research. Additionally, we present an overview of the data necessary to test the propositions and potential challenges that might arise in related empirical work.