Description: Managing Quantity, Quality, and Timing in Indian Cane Sugar Production : Ex Post Marketing Permits or Ex Ante Production Contracts?

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Managing Quantity, Quality, and Timing in Indian Cane Sugar Production : Ex Post Marketing Permits or Ex Ante Production Contracts?

Private sugar processors in Andhra Pradesh, India use an unusual form of vertical coordination. They issue 'permits' to selected cane growers a few weeks before harvest. These permits specify the amount of cane to be delivered during a na...

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Bibliographic Details
Main Authors:	Patlolla, Sandhyarani, Goodhue, Rachael E., Sexton, Richard J.
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	AGRIBUSINESS AGRICULTURAL ECONOMICS AGRICULTURAL LABOR AGRICULTURAL LABORERS AGRICULTURAL MARKETING AGRICULTURAL PROBLEMS AGRICULTURE CANE SUGAR COMMERCIAL CROPS CONTRACT FARMING COOPERATIVES CROP CROPPING CROPPING SEASONS CROPS CULTIVATION DISEASES DISTRIBUTION OF LAND FAMILY MEMBERS FAO FARM FARM LABOR FARM SECTOR FARM SIZE FARMER FARMER MEMBERS FARMERS FARMS FERTILIZER FLOOR PRICE FOOD MARKETS FOOD POLICY FOOD POLICY RESEARCH FOOD PROCESSING FOOD SUPPLY HARVESTING HAZARD INTEGRATION INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE LAND PREPARATION LIVESTOCK LONG-TERM CONTRACTS MAJORITY OF FARMERS MILLS PACKING PESTICIDES PESTS PLANTING PRICE PREMIUM PRODUCE PRODUCT QUALITY PRODUCTION COST PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION METHODS REGIONAL DUMMIES REGIONAL EFFECTS RICE CULTIVATION RICE PRODUCTION RURAL DEVELOPMENT RURAL POPULATION SEED SMALL FARMERS SOIL QUALITY SUCROSE SUGAR CANE SUGAR FACTORIES SUGAR INDUSTRY SUGARCANE SWEETENERS TRANSFER OF TECHNOLOGY UNREGULATED MARKETS VILLAGE LEADERS VILLAGE LEVEL YIELDS
Online Access:	http://documents.worldbank.org/curated/en/2014/07/19878480/managing-quantity-quality-timing-indian-cane-sugar-production-ex-post-marketing-permits-or-ex-ante-production-contracts http://hdl.handle.net/10986/19348

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Summary:	Private sugar processors in Andhra Pradesh, India use an unusual form of vertical coordination. They issue 'permits' to selected cane growers a few weeks before harvest. These permits specify the amount of cane to be delivered during a narrow time period. This article investigates why processors create uncertainty among farmers using ex post permits instead of ex ante production contracts. The theoretical model predicts that ex post permits are more profitable than ex ante contracts or the spot market under existing government regulations in the sugar sector, which include a binding price floor for cane and the designation of a reserve area for each processor wherein it has a legal monopsony for cane. The use of ex post permits creates competition among farmers to increase cane quality, which increases processor profits and farmer costs. Empirical analysis supports the hypothesis that farmers operating in private factory areas have higher unit production costs than do their counterparts who patronize cooperatives.