Open marketing is the traditional method used by many producers to sell their commodities as price takers. The focus of this publication is on contract production and marketing, and integration through cooperatives and public companies. The objective is to provide an overview of contracting and integration and discuss risk factors associated with these two methods of vertical coordination. Contract Production and Marketing Contract production and marketing refers to a firm committing to purchase a commodity from a producer at a price formula established in advance of the purchase. A contractual relationship between producers and processors is a form of vertical coordination.
Various contracts involve different levels of producer and processor responsibility.
Although these may not seem like significant changes, the 3.5 percent increase between 1990 and 1997 is almost equal to the entire value of Kansas farm production in 1997. The most dramatic increase occurred in hogs, feed grains, and food grains. Increased exposure to risk has likely led producers to further increase the use of contracts. This text was extracted from the publication, MF2431.