Munich Personal RePEc Archive

Effects of streaming loans for commodity producers

Bell, Peter Newton (2014): Effects of streaming loans for commodity producers.

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Abstract

This paper analyzes a source of financing for commodity producers known as a streaming loan, where the producer makes periodic payments in proportion to their level of production. Streaming loans functions like a cropshare contract, whereas fixed rate debt is like a wage contract. Thus, producers can reduce the variance of profits by financing with streaming loans rather than debt. I establish this result when commodity prices are constant or random, but independent from the quantity of production.

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