The pricing of community supported agriculture shares: evidence from New England

Purpose - Community supported agriculture (CSA) programs allow consumers to buy a share of a farm's production while providing working capital and risk management benefits for farmers. Several different types of CSA arrangements have emerged in the market with terms varying in the degree to which consumers share in the farm's risk. No-arbitrage principles of futures and options pricing suggest that CSA shares should be priced to reflect the degree of risk transfer. The paper aims to discuss these issues. Design/methodology/approach - The authors evaluate the three most common share types using a cross-sectional data set of 226 CSA farms from New England to determine if there is empirical evidence in support of the theoretical price relationship between share types. Findings - The degree of risk transfer from farmers to consumers has a significant effect on the share price. There are statistically significant returns to scale and higher prices for organics. Farm characteristics and product offerings predict which type of shares is offered for sale. Research limitations/implications - The data set does not contain information pertaining to actual deliveries, expected deliveries, variance of expected deliveries, or covariance information; thus differences in share prices could be due to differences in these uncontrolled factors. Originality/value - This paper provides empirical evidence that CSA share prices reflect the degree of risk transferred from the producer to the consumer. It also highlights challenges in conducting empirical work pertaining to CSA contracting.