Principal-agent impact on the farm industry: Formalizing agency theory to the farm business, as a strategy for survival (can agency theory work down on the farm?)

Formalizing agency theory (principal-agent relations) to the farm industry as a strategy for survival is the essence of this dissertation. After generations, the family farmer continues to struggle. The large industrialized farmers appear to drive the market, own the agent and are in many cases the agent. The lines between principal and agent are blurred. After generations, the family farmer continues to struggle.; After a century of the family farmer walking away from generations of hard work in carving out a living on the land, their plight away from what they and their families before knew as a way of life continues on.; The application of agency theory-looking at the principal-agent relationships within the farm industry allows the farmer to better formalize the importance of principal-agent relationships to farming. The whole idea of analyzing these relationships gives the farmer an idea of the impact these relationships have on the fiscal and physical bottom line of their farm business. This analysis gives the farmer choices to make in terms of these relationships.; This dissertation addresses the question, does the "typical" farmer participate in writing contracts in general (or hand-shake/verbal contracts). Also addressed is the impact by other agent's initiatives on the principal farmer i.e., Government intervention. This research assesses the relationship the farmer (full time, part-time or tenant) has with writing production and market contracts. Also studied is the overarching economic structure of the farm industry, segmented by tenure and contract usage.; The use of contracts in the farm industry remains a testing ground for Agency Theory. In view of tenure and percentage of contract usage for production or market contracts covering farmer's total production/output, there are strong relationships for production contracts, share of production under production contracts and share of farms with market contracts with the tenant farmer. The relationship of full time owners and contract coverage was also analyzed.; This study uses secondary data from farms grouped by order of magnitude in terms of farm size, tenure, economic structure, production under total contracts and market and production contracts for all farms in the total United States. The impact agency participation has on the farm industry is analyzed by assessing the secondary data compiled by the United States Department of Agriculture's (USDA) Economic Research Service (ERS), and the National Agricultural Statistics Service (NASS).; Initial cursory analysis concludes the farmer has become over dependant on the Government as either a principal or an agent with subsidies to either give or loan in order for the farmer to survive. As the farming industry went into a near free-fall in the late 1990's the government pumped billions of dollars (at record levels, never before seen) into the farm industry. The one most significant relationship in this dissertation is the assessment to determine risk minimization in terms of production and market contracts.