We develop and estimate a model of supply response when transactions costs create a situation where some producers buy, others sell, and others do not participate in markets. We present two rationales for why producing households may have different relationships to the market: proportional and fixed transactions costs. Using data on Mexican corn producers, we estimate an empirical model that allows for separate tests of the significance of both types of transactions costs, revealing that both fixed and proportional transactions costs matter for the estimation. The results provide consistent estimates of supply elasticity and measures of the relative importance of factors determining both proportional and fixed transactions costs. Copyright 2000, Oxford University Press.

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Production and marketing contracts govern 36 percent of the value of U.S. agricultural production, up from 12 percent in 1969. Contracts are now the primary method of handling sales of many livestock commodities, including milk, hogs, and broilers, and of major crops such as sugar beets, fruit, and processing tomatoes. Use of contracts is closely related to farm size; farms with $1 million or more in sales have nearly half their production under contract. For producers, contracting can reduce income risks of price and production variability, ensure market access, and provide higher returns for differentiated farm products. For processors and other buyers, vertical coordination through contracting is a way to ensure the flow of products and to obtain differentiated products, ensure traceability for health concerns, and guarantee certain methods of production. The traditional spot marketthough it still governs nearly 60 percent of the value of agricultural production-has difficulty providing accurate price signals for products geared to new consumer demands (such as produce raised and certified as organic or identity-preserved crops modified for special attributes). We are likely to see a continuing shift to more explicit forms of vertical coordination, through contracts and processor ownership, as a means to ensure more consistent product quantity and quality.

In the United States, climate change is likely to increase average daily temperatures and the frequency of heat waves, which can reduce meat and milk production in animals. Methods that livestock producers use to mitigate thermal stress—including modifications to animal management or housing—tend to increase production costs. We use operation‐level economic data coupled with finely‐scaled climate data to estimate how the local thermal environment affects the technical efficiency of dairies across the United States. We then use this information to estimate the possible decline in milk production in 2030 resulting from climate change‐induced heat stress under the simplifying assumptions that the production technology, location of production, and other factors are held constant. For four climate model scenarios, the results indicate modest heat‐stress‐related production declines by 2030, with the largest declines occurring in the southern states.

This article measures the impact of contracting on partial and total factor productivity and the production technology of U.S. hog operations. A sample selection model accounts for the fact that unobservable variables may be correlated with both the operators' decision to contract and farm productivity. Results indicate that the use of production contracts is associated with a substantial increase in factor productivity, and represents a technological improvement over independent production. Results also identify determinants of farmers' decisions to contract and other factors influencing farm productivity. Copyright 2003, Oxford University Press.

Using farm-level panel data from recent U.S. Agricultural Censuses, this study examines how direct government payments influence the survival of farm businesses, paying particular attention to the differential effect of payments across farm-size categories. A Cox proportional hazards model is used to estimate the effect of government payments on the instantaneous probability of a farm business failure, controlling for farm and operator characteristics. Results indicate that an increase in government payments has a small but statistically significant negative effect on the rate of business failure, and the magnitude of this effect increases with farm size. Copyright 2006, Oxford University Press.

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