“Agriculture by contract” () is the main Mexican government program aimed at mitigating price risks for agricultural producers in Mexico. [Math Processing Error] has unique features involving forward contracts and the provision of basis subsidies and subsidized exchange-traded futures options for both producers and intermediaries. A simulation model is developed to analyze the market and welfare effects of [Math Processing Error]. When applied to corn, results show that [Math Processing Error] exerts substantial impacts and causes large transfers across sectors. Even if [Math Processing Error] reduced intermediaries' market power to the largest extent feasible, results indicate that it would still cause important losses in aggregate welfare.
Available at: http://works.bepress.com/sergio_lence/27/
This is a pre-copyedited, author-produced PDF of an article accepted for publication in American Journal of Agricultural Economics following peer review. The version of record is available online at: http://dx.doi.org/10.1093/ajae/aav052.