Effects of Forward Sales on Spot Markets: Pre-Commitment Sales and Prices for Fresh Strawberries

Posted: 8 Mar 2010

See all articles by Sandeep Mohapatra

Sandeep Mohapatra

University of Alberta - Faculty of Agriculture, Forestry & Home Economics - Department of Rural Economy

Rachael E. Goodhue

University of California, Davis - Department of Agricultural and Resource Economics

Colin A. Carter

University of California, Davis - Department of Agricultural and Resource Economics

James A. Chalfant

University of California, Davis - Department of Agricultural and Resource Economics

Date Written: January 2010

Abstract

Increasingly, agricultural markets are vertically coordinated. Often a thinning spot market coexists with coordinated transactions, raising the question of how private coordination affects the market as a whole. One of the greatest challenges when analyzing such market-level effects is obtaining information on private transactions. We utilize publicly available data to evaluate how informal contracts in the fresh strawberry market affect spot market prices using a generalized autoregressive conditional heteroskedastic in mean (GARCH-M) model. We find that these informal contracts increased spot prices, as argued by some industry members, while the effect on spot price volatility varied by production region.

Keywords: agricultural contracts, forward sales, GARCH-M, spot markets, strawberry market, vertical coordination., D4, L14, Q13

Suggested Citation

Mohapatra, Sandeep and Goodhue, Rachael E. and Carter, Colin A. and Chalfant, James A., Effects of Forward Sales on Spot Markets: Pre-Commitment Sales and Prices for Fresh Strawberries (January 2010). American Journal of Agricultural Economics, Vol. 92, Issue 1, pp. 152-163, 2010. Available at SSRN: https://ssrn.com/abstract=1565256 or http://dx.doi.org/aap028

Sandeep Mohapatra (Contact Author)

University of Alberta - Faculty of Agriculture, Forestry & Home Economics - Department of Rural Economy ( email )

Edmonton, Alberta
Canada

Rachael E. Goodhue

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States
916-754-7812 (Phone)
530-752-5614 (Fax)

Colin A. Carter

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States

James A. Chalfant

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-9028 (Phone)

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