Marc F. Bellemare Posts

Community Supported Agriculture (CSA) contracts allow consumers to buy claims on a farm’s future production. In turn, the consumer provides working capital to the farm during the growing season. CSA contracts also provide risk management for farmers with limited access to Federal crop insurance by transferring part of the farm’s risk to the consumer. We derive a theory of CSA contract pricing for the two most prevalent types of CSA contracts: yield contracts, in which consumers receive a percentage of the farm’s production, and weight contracts, in which consumers receive fixed quantities. We develop a two-period model in which expected utility maximizing producers and consumers engage in CSA contracting in the first period based on anticipation of yields and spot prices in the second period. Using the model, we generate several testable hypotheses to be explored in future research. Additionally, we present an overview of the data necessary to test the propositions and potential challenges that might arise in related empirical work.

That is the abstract of a new article by my long-time friend and former grad-school colleague Jaclyn Kropp and her coauthor Tom Sproul in the American Journal of Agricultural Economics.

This is fascinating for a few different reasons. First off, from the point of view of novelty, this is exactly the kind of topic that I think agricultural and applied economists should be spending some time working on, given the rise in CSA popularity. Second, from a contract-theoretic perspective, I found it interesting that there were two types of contracts, as highlighted in the abstract: a contract wherein production risk is shared by the producer and the consumer (yield contract), and a contract where all risk is borne by the producer (weight contract). Finally, I like that the paper pays attention to both the theory and, in a more limited fashion, the empirics of CSA.

As I have mentioned a few times on this blog, I teach the second-year qualifying research paper seminar in our PhD program.

As is the case of most other agricultural and applied economics (or even economics) programs worth their salt, after they are done with the bulk of their coursework, our students must demonstrate that they have made suitable proficiency as researchers by writing an entire research paper from start to finish, with the guidance of a faculty advisor of their choosing.

Because our program is an applied economics program, and because the bulk of agricultural and applied economics nowadays consists of applied microeconomics of the empirical kind, one of the questions I often have to answer in student emails is of the form: “Should I do A or B?” Specifically, questions like

A few weeks ago, my posts on quinoa got a second life after a friend of mine linked to them in a Reddit thread titled “TIL Demand for quinoa in Western nations has pushed up prices to such an extent that poorer people in Peru and Bolivia, where quinoa is from, can no longer afford their staple crop.” (Note: TIL stands for “Today I learned that …” – MFB.)

A few thoughts: First, my friend’s comment linking to my posts on quinoa is thankfully the top-ranked comment, which indicates that there is a certain hunger out there for more accurate information than the unfounded emotional appeals peddled by some in the media. Second, Reddit generates a crazy amount of traffic. As in, my blog stats went nuts for a couple days after that thread became active—the folks at Reddit are not joking when they call themselves “the front page of the Internet.”

If you have any patience to read the entire thread of comments, you’ll notice that something that comes up a bit too frequently is comments of the sort “Yeah, sure, maybe farmers are better off, but traders are the ones making the most money off of this.” Those comments typically imply that traders getting rich is a bad thing.