DOI: 10.1093/erae/jbag022 ISSN: 0165-1587
Mitigating time-varying buyer power through farmer commodity storage
Zhiyao Ma, Richard J SextonAbstract
Buyer market power is a significant concern in many agricultural product procurement markets. Research almost exclusively treats such buyer power as a static element of agricultural market structure, despite evidence that buyer power varies across the marketing season for many commodities and locations. We study buyer power as a time-varying phenomenon and analyze the role of commodity storage in mitigating such power and increasing farmer incomes. Data-driven simulations show that strategic storage can generate significant farm income gains and risk reduction. Key factors determining welfare impacts are magnitudes and expected changes in buyer power and farmers’ storage efficiency and risk preferences.