ECONOMIC IMPACT OF SCAB WITH ALTERNATIVE RISK MANAGEMENT STRATEGY: THE CASE OF CROP QUALITY INSURANCE IN BARLEY

Managing quality risks, especially grain quality, has been a challenge facing farmers, grain merchandisers, and policymakers for many years. With the advent of genetically modified organisms (GMOs), food safety, and identity preservation, this is even more challenging today. In this paper, an equilibrium crop insurance model was developed and used to analyze the impact of quality risks on equilibrium coverage levels and risk premiums that suppliers of insurance and barley producers would be willing to provide when yield and revenue insurance instruments explicitly incorporate quality risks. The asking price concept and sensitivity analysis were used to evaluate farmers' behavior after they purchase crop quality insurance and to provide guidance and direction in the development of risk-efficient quality insurance instruments.crop insurance, equilibrium coverage levels, Fusarium Head Blight, premium rates, quality risks, risk aversion, Crop Production/Industries,

Stochastic Dominance in Wheat Variety Development and Release Strategies

Variety development and release decisions involve tradeoffs between yields and characteristics valued by end-users, as well as uncertainties about agronomic, quality, and economic variables. In this study, methods are developed to determine the value of varieties to growers and end-users including the effects of variability in economic, agronomic, and quality variables. The application is to hard red spring (HRS) wheat, a class of wheat for which these tradeoffs and risks are particularly apparent. Results indicate two experimental varieties provide improvements in grower and end-user value, relative to incumbents. Stochastic dominance techniques and statistical tests are applied to determine efficient sets and robustness of the results. A risk-adjusted portfolio model, which simultaneously incorporates correlations between grower and end-use characteristics, is also developed to compare the portfolio value of varieties.end-user value, grower value, portfolio value, stochastic dominance, tradeoffs, variety development, wheat, Crop Production/Industries,

CROP INSURANCE UNDER QUALITY UNCERTAINTY

Quality related yield and price losses have had significant impact on producer income and risks, and in some instances exceeded yield and price losses covered by conventional insurance instruments. However, there are no effective third party quality risk transfer mechanisms especially for barley growers. In this paper, we develop a framework to incorporate quality-related risk in crop insurance programs. Specifically, we derive the optimum equilibrium coverage levels and risk premium that suppliers of insurance and producers would be willing to provide when the yield and revenue insurance instruments explicitly incorporate quality losses. The results of our analysis provide several important contributions. First, the methodology illustrates how quality impacts could be incorporated into crop insurance types of contracts. Second, we explicitly incorporate the correlation effects of yield and price shortfalls due to quality. Though applied here in the case of malting barley and scab, this approach could be applied similarly in many regions, crops, and quality factors.Risk and Uncertainty,

Agro-terrorism and the Grain Handling Systems in Canada and the United States

The grain handling sector in Canada and the United States is vital to agriculture and trade. In a typical year on the Canadian prairies, about 140,000 producers deliver some 20 to 30 mmt of grain for export to primary elevators. In the United States, about 2.1 million producers deliver about 300 mmt of grain to primary elevators. Canadian grain is moved to export position using more than 400,000 hopper cars and marine containers, where about 1,200 ships per year are loaded. In the United States, about 1.08 million rail carloads of grain are originated per year, and about 23 mmt of grain are shipped on barges per year. These U.S. figures are in addition to trucks, which, more so than in Canada, are also used to deliver grain to primary processors and to terminal and export markets. The volume of grain trade gives rise to concern about risks of terrorism in the sector.(1) From a security perspective, the grain, pulse and oilseed supply chain is noteworthy because much of it is characterized by relatively long-term, insecure, bulky storage (particularly on farms) along with numerous modal and inter-modal product transfers. These factors suggest there are many places where chemical or biological contaminants could be introduced into this supply chain. From the perspective of the United States, security throughout the Canadian system as well as the U.S. system is a concern, since cross-border traffic in these products is significant, with an average of about six million tonnes of grain products alone imported into the U.S. each year (USDA-FAS, 2003). Numerous interventions to enhance food safety and mitigate the risk of terrorism have been adopted or are in the process of being developed. Some of these are private initiatives and voluntary, as a component of firm-level security processes. Others are being adopted in response to legislated initiatives. The stakes are large, and there are likely to be substantial differences in costs and effectiveness of different approaches.Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety,

OPERATIONAL EFFICIENCY OF A U.S./CANADIAN WHEAT POOL: A GAME THEORY ANALYSIS

The problem of declining wheat prices and excess supply has been the subject of recent economic studies partly because it coincides with the Federal Agriculture Improvement and Reform (FAIR) Act of 1996, and partly because efforts to decrease supply domestically have led to increased imports from Canada. This paper develops a game theory optimization model of market efficiency and derives conditions under which voluntary pooling is sustained for U.S./Canadian durum and hard red spring wheat producers. Analysis reveals that U.S. and Canadian farmers can increase farm returns with efficiency gains from pooling and by internalizing benefits from grain blending and logistics. The model is used to analyze diverse factors affecting the sustainability of such a pool.Voluntary pooling, game theory, efficiency gains, durum and HRS wheat marketing, Crop Production/Industries, Marketing,

ECONOMIC ANALYSIS OF THE PROPOSED NORTH DAKOTA WHEAT POOL; SUMMARY

The ND Durum Wheat Pool may provide additional revenue to durum wheat producers by raising the domestic prices in the North American market with full cooperation from the Canadian Wheat Board. The pool also could provide additional revenue to its members by improving marketing efficiency. On the other hand, the ND Spring Wheat Pool is less likely to provide additional revenue to spring wheat producers by raising domestic prices, mainly because hard red spring and winter wheat are highly substitutable. Efficiency gains also could be smaller than for durum wheat.marketing pool, market power, efficiency gains, durum wheat, hard red spring wheat, pool price, organizational structure, operating costs, Marketing,

OPERATIONAL EFFICIENCY OF US/CANADA WHEAT POOL: A GAME THEORY ANALYSIS

This paper develops a game theory optimization model of market efficiency and derives conditions under which voluntary pooling is sustained for US/Canada durum and hard red spring wheat producers. Analysis reveals that United States and Canadian farmers can increase farm returns with efficiency gains from pooling and by internalizing benefits from grain blending and logistics. The model is used to analyze diverse factors affecting the sustainability of such a pool.Crop Production/Industries, Marketing,

ECONOMIC IMPACTS OF FUSARIUM HEAD BLIGHT IN WHEAT AND BARLEY: 1993-2001

Fusarium Head Blight (FHB), commonly known as scab, has been a severe problem for wheat and barley producers since 1993. This study provides an update of economic losses suffered by wheat and barley producers in scab-affected regions in the United States. Emphasis is placed on estimating direct and secondary economic impacts of yield and price losses suffered by wheat and barley producers from 1993 to 2001. Nine states are included in the analysis for three wheat classes. Three of the nine states were also used for the analysis of malting and feed barley. The cumulative direct economic losses from FHB in hard red spring (HRS) wheat, soft red winter (SRW) wheat, durum wheat, and barley are estimated at $2.492 billion from 1993 through 2001. The combined direct and secondary economic losses for all the crops were estimated at$7.7 billion. Two states, North Dakota and Minnesota, account for about 68 percent of the total dollar losses.Fusarium Head Blight, scab, vomitoxin, crop losses, wheat, barley, Crop Production/Industries,

ECONOMIC ANALYSIS OF THE PROPOSED NORTH DAKOTA WHEAT POOL

The ND Durum Wheat Pool may provide additional revenue to durum wheat producers by raising the domestic prices in the North American market with full cooperation from the Canadian Wheat Board. The pool also could provide additional revenue to its members by improving marketing efficiency. On the other hand, the ND Spring Wheat Pool is less likely to provide additional revenue to spring wheat producers by raising domestic prices, mainly because hard red spring and winter wheat are highly substitutable. Efficiency gains also could be smaller than for durum wheat.marketing pool, market power, efficiency gains, durum wheat, hard red spring wheat, pool price, organizational structure, operating costs, Marketing,

ECONOMIC IMPACTS OF FUSARIUM HEAD BLIGHT IN WHEAT AND BARLEY: 1998-2000

Fusarium Head Blight (FHB), commonly known as scab, has been a severe problem for wheat and barley producers since 1993. This study provides an update of economic losses suffered by wheat and barley producers in scab-affected regions in the United States. Emphasis is placed on estimating direct and secondary economic impacts of yield and price losses suffered by wheat and barley producers from 1998 to 2000. Nine states are included in the analysis for three wheat classes. Three of the nine states were also used for the analysis of malting and feed barley. The cumulative direct economic losses from FHB in hard red spring (HRS) wheat, soft red winter (SRW) wheat, durum wheat, and barley is estimated at $870 million from 1998 through 2000. The combined direct and secondary economic losses for all the crops were estimated at$2.7 billion. Two states, North Dakota and Minnesota, account for about 55 percent of the total dollar losses.Fusarium Head Blight, scab, vomitoxin, crop losses, wheat, barley, Crop Production/Industries,