Forward Contracting of Inputs: A Farm-Level Analysis

Ashok K. Mishra, Janet E. Perry

Elsewhere No. (0010), November 1999

Forward contracting of factors of production is a growing activity between the suppliers of inputs and the farmers who use them. Forward contracting of inputs also guarantees farmers an assured supply of inputs at a specified price. Farmers choose to forward contract their factors of production for two basic reasons; first, getting price discounts and locking in a certain price for the inputs. This reduces the input price risk. Second, contracting of inputs ensures quality and timeliness of input deliveries.

Keywords: Contracting, forward contracting, inputs, factors of production, risk management, input prices, farm size, Economic Research Service, ERS, USDA, U.S. Department of Agriculture

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Updated date: November 1999