Agriculture Reference
In-Depth Information
more specialized than any farmer and his short-term help. These specialized operators are
extremely knowledgeable in the use and maintenance of this expensive equipment. 31
The gains from specialized machines and labor would seem to imply that contracting for
harvesting would dominate wheat and grain farming. Timeliness costs for wheat harvest,
however, are severe and limiting. For any given wheat farmer, the window for optimal
harvest is barely three weeks and standing grain is vulnerable to hail, rain, and wind. The
puzzle is how do migratory custom cutters and the farmers who hire them reduce these
timeliness costs enough to sustain a viable industry? The answer is found in the geographical
(and climatological) contiguousness of the Great Plains. Custom cutters know they can
reliably follow the ripening wheat north in order to make intensive use of their expensive
equipment. And, similarly, farmers know that cutters will be venturing north each year. Still
there remains the problem of getting a cutter to a specific farm at a specific time. The problem
is solved, according to Isern and others, by diligent effort on the part of the cutters to contact
farmers during the off-season and commit to their harvest. Custom cutters send agents north,
ahead of the crew to keep farmers informed on the locations and to relay information back to
the cutter on the crop conditions. Furthermore, cutters consistently hop over adjacent farms
to avoid timeliness costs. By harvesting one farm every 100 or so miles (south to north),
the cutters allow time for adjustments in the optimal harvesting dates in their northward
progression. Reputation also appears to play an important part in this commitment, raising
the costs of reneging or overbooking by cutters. Isern (1981) summarizes:
The system of verbal agreements held together remarkably well. It was reliable enough that farmers
trusted it and custom cutters planned on it, and yet flexible enough to allow for adjustments due to
unforeseen circumstances. Sometimes individual farmers or custom cutters acted irresponsibly, and
such actions left a bitter taste. The unwritten code of custom combining was a flexible one, but the
person who stretched it beyond reason suffered the consequences. (P. 92)
Despite the remarkable stability of contracting in the presence of timeliness costs, there
have been occasions—weather driven—when even the strongest reputations could not
withstand the pressure. The 1948, 1957, and 1999 harvests are all cases in which unusual
weather disrupted the normal northern progression of ripening wheat, leaving northern
farmers anxiously awaiting custom cutters who were still not finished with their more
southern clients. In each of these years, unusually wet and cool weather in Texas and
Oklahoma delayed harvests while unusually warm and dry weather in Kansas and Nebraska
advanced harvests. In each case, the northern farmers suffered substantial losses because
they were faced with late harvests. 32 Even in these difficult times, cutters make effort to
find farmers another cutter when their own commitments are confounded by weather.
Even when the gains from specialization outweigh timeliness costs, moral hazard incen-
tives remain in any custom cutting contract. Moral hazard in the use of the assets (combines
and trucks) is significantly reduced by the use of a custom contract rather than a simple
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