Applied Economics Teaching Resources

an AAEA Journal

Agricultural and Applied Economics Association

Case Study

Mountain States Oilseeds: Can Contracts Enhance Safflower Seed Procurement?

Jameson Packer(a), Tanner McCarty(a), and Ryan Feuz(a)
(a)Utah State University

JEL Codes: JEL Codes: Q12, Q13
Keywords: Agricultural contracting, marketing, safflower seed, strategy

Publish Date: February 21, 2024
Volume 6, Issue 1

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Abstract

This case examines the contracting decisions facing a safflower seed processing company in southern Idaho. Mountain States Oilseeds (MSO) specializes in the procurement, storage, cleaning, drying, packaging, and transportation of safflower seeds. Recent supply chain disruptions coupled with regional drought have greatly decreased safflower seed availability. MSO must adjust their procurement strategy to secure sufficient safflower seed to meet their own commitments to their buyers. This case study illustrates the various hurdles to be overcome in drafting a successful producer-processor agricultural contract (farmer participation, moral hazard, etc.). It also highlights the trade-offs associated with various contractual payment mechanisms common within agricultural contracts (performance payments, acreage payments, and quality adjustments).

About the Authors: Jameson Packer is a MS Student at Utah State University. Tanner McCarty is an Assistant Professor at Utah State University (corresponding author: tanner.mccarty@usu.edu). Ryan Feuz is an Assistant Professor at Utah State University. Acknowledgements: Funding was provided by the Utah Agricultural Experiment Station Project #UATO1443

Copyright is governed under Creative Commons CC BY-NC-SA

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