Q. How common is the use of marketing and production contracts?
A. Contracting has been a significant
and growing part of U.S. agriculture since at least 1960.
In 1969, just over 156,000 farms (about 6 percent of all
U.S. farms) had contracts (U.S. Department of Commerce).
In 2001, more than 1 in 10 farm operators reported receiving
income from contracts and the value of production under
contract was about 36 percent of the total value of commodity
production based on information obtained in USDA's 2001
Agricultural Resource Management
Survey (ARMS).
The amount of contracting on farms varies by farm size, farm type, and
commodities produced. Rural residence
farms accounted for 60 percent of all farms in 2001, but accounted
for only 2 percent of the value of contract production. In comparsion,
commercial farms accounted for
10 percent of farms, but over 83 percent of the total value of contract
production.
See data table.
Commercial farms were the most frequent
users of contracts (42 percent), followed by intermediate farms (16 percent) and rural
residence farms (4 percent)
See data table.
Contracts can generally be categorized as
marketing or production based. Production contracts were
used most frequently on commercial farms while marketing
contracts were used more often on rural residence and
intermediate farms . While most rural residence and intermediate
farms used either marketing or production contracts exclusively,
nearly 3 percent of commercial farms used used both
types of contracts.
See data table.
Contracts are the norm in poultry and egg production (nearly 90 percent
produced under contract in 2001), and sugarbeets (96 percent--not shown),
and very common in hogs (61 percent), fruit (59 percent) dairy
(53 percent), cotton (52 percent), and vegetables (37 percent).
See data table.
Contracts are less common in other commodities, accounting for 21 percent
of the value of cattle production, 11 percent of the value
of corn and soybeans, and 6 percent of the value of wheat production.
Marketing contracts account for most the value of crop production under
contract. Most of the contract value of hog, poultry and egg, and cattle
production is accounted for by production contracts. In comparison, contracted
dairy products are produced almost completely under marketing agreements.
For more information, see Contracts
and Other Marketing and Production Arrangements.
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