ABSTRACT
The purpose of this chapter is to examine the role of bargaining as a determinant of price in agricultural commodity markets. Bargaining is a key feature of vertically coordinated agri-food supply chains where production and marketing contracts between processors and commodity producers are common. Contract clauses that are negotiated can include simple variables such as price and the date of delivery, or complex variables such as quality-dependent pricing schedules, production processes to be followed and how various capital and operating costs are to be shared. Production contracts are common in a variety of industries including poultry in Brazil and the US, cotton and tobacco in Mozambique and Zambia and various horticultural crops in Canada. If a well functioning spot market exists for the commodity then the contract price may be linked to the spot price rather than being negotiated on a regular basis. In many industries spot markets have become too thin to serve as a reliable reference price, in which case price negotiations are a central feature of the contracting process.
