Captive supply:
Products that manufacturers or processors own or contract to purchase for future delivery so as to have a predictable source of raw materials for their plants. In agriculture, the term often is used, for example, to refer to the cattle that beef packers own or contract to purchase 2 weeks or more before slaughter. Examples of such contracts include an exclusive agreement with an individual feedlot in which the price is based on market prices at time of slaughter; or a contract in which the price is specified in advance or is based on some other formula. At issue is the effect that captive supplies have on prices paid to cattle producers.
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