FORWARD SHIPPING OPTIONS FOR GRAIN BY RAIL: A STRATEGIC RISK ANALYSIS

Grain hauling railroads began offering shipping alternatives in the late 1980s that have made transportation decisions more strategic. Shippers now confront alternatives ranging from nearby and unguaranteed ordering to various durations of forward and guaranteed shipment. A dynamic stochastic simulation model was developed to analyze grain shipping and merchandising strategies that integrate these alternatives.railroads, grain merchandising, logistics, simulation, risk analysis, Crop Production/Industries, Marketing,

STRATEGIC ANALYSIS OF TRAIT COMMERCIALIZATION IN GENETICALLY MODIFIED (GM) GRAINS: THE CASE OF GM WHEAT

The prospective commercialization of GM traits leads to several strategic questions for agbiotechnology and seed firms. Important issues addressed in this study include the method of trait commercialization by agbiotechnology firms and variety production decisions by seed firms. Specifically, agbiotechnology firms must decide whether to license their traits to seed firms, to purchase a seed firm, or to not license or release their traits. These issues are highly strategic. The purpose of this study was to determine equilibrium strategies of agbiotechnology and seed firms regarding the prospective commercialization of two GM traits. Two game theory models were developed to examine equilibrium strategies in two different scenarios. In the first model, both agbiotechnology firms had commercialization strategies of licensing and not licensing. In the second model, the first moving agbiotechnology firm was allowed to have a strategic option to purchase a seed firm as a commercialization strategy. The second agbiotechnology firm remained with two strategies, licensing and not licensing. These models were applied to the case of Roundup Ready® (RR) and fusarium resistant (FR) HRS wheat, although the general structure of the models could be used to analyze other crops and traits. Studies on trait commercialization and stacking are lacking the public literature. This study uses game theory models to develop likely situations that may occur regarding the prospective commercialization of GM traits.genetically modified grains, wheat, Crop Production/Industries, Research and Development/Tech Change/Emerging Technologies,

IMPACTS OF GENETICALLY MODIFIED (GM) TRAITS ON CONVENTIONAL TECHNOLOGIES

In hard red spring (HRS) wheat, the two GM traits nearest to commercialization are fusarium resistant wheat (FRW) from Syngenta and Roundup Ready® wheat (RRW). Monsanto announced that it has deferred the commercialization of RRW until issues of market acceptance are alleviated. Monsanto acknowledged that it might reconsider its position if another agbiotechnology firm enters the GM wheat market. A Cournot quantity competition model was developed to determine the equilibrium quantities of conventional pesticide and agbiotechnology firms. The Cournot model was used because firms that must make production decisions ahead of the selling period, and firms with extensive research and development costs are not able to aggressively set prices. Rather, the conventional and agbiotechnology firms determine Nash equilibrium quantities and then determine a market clearing price for their respective products. The agbiotechnology firm determined a profit maximizing technology fee ($/acre) for its GM trait. The market with conventional wheat only was compared to the market with conventional and GM wheat varieties to determine the price decreases of the conventional pesticide as a result of the GM trait introduction. Changes in farmer surplus, tech firm payoffs, and sector welfare were also analyzed. Using the actual number of firms with conventional herbicides labeled for use on HRS wheat in North Dakota and marginal production costs ranging from one to three dollars, introduction of RRW would cause a 20-25% price decrease for conventional herbicides. Similarly, four firms produce conventional fungicides labeled for the suppression of FHB in HRS wheat. This value, combined with per acre marginal production costs ranging from one to three dollars, would likely cause a 19-22% price decrease for conventional fungicides, post introduction of GM FRW. Several implications arise from these results. First, adoption of a new GM wheat variety may not be as high as expected due to likely concurrent price decreases of conventional pesticides. The price decrease leads to a lower production cost of conventional varieties, and some farmers who would likely adopt the GM variety, if there were no price decrease, do not adopt because of the lower cost of conventional production. This price decrease must be included in the determination of potential adoption rates by agbiotechnology firms in their pricing decisions. Second, the release of a GM wheat variety results in an increase in surplus for all types of wheat farmers (GM adopters, conventional pesticide adopters, and no technology adopters). GM adopters benefit because of the release of the GM variety. Conventional pesticide adopters benefit due to the price decreases of the conventional pesticides. Farmers who did not adopt any technology prior to the release of GM wheat may adopt the conventional pesticide because of the lower cost. Third, the release of a GM wheat variety would result in slightly lower payoffs for conventional pesticide producing firms but higher payoffs for agbiotechnology firms. Overall, surplus to farmers and conventional and agbiotechnology firms increases due to the release of a GM wheat variety.genetic modification, fusarium resistance, Roundup Ready®, technology, Crop Production/Industries, Research and Development/Tech Change/Emerging Technologies,

Tests and Measurements in the Social Sciences

"The project was initiated by the Commission on the Social Studies in the Schools and carried out as a cooperative effort of social scientists and statisticians. Its tone is set throughout by clash of the divergent viewpoints of these unlike groups. The result is a book with a dual personality.

OPTION VALUES FOR PROVISIONS IN EXPORT CREDIT GUARANTEES

All major exporting countries of agricultural commodities have some form of credit guarantee program. As the importance of credit programs escalates, it is incumbent on policy makers to examine the value of their program relative to those of competitors. In this study, a model based on option pricing theory was developed to estimate the value of credit guarantees extended to importers and applied to U.S. and competing countries' programs. The Canadian guarantee has the lowest implicit value, followed by the U.S., Australian, and French guarantees. French guarantees had the highest implicit value due to higher coverage for interest and freight and insurance.International Relations/Trade,

Malt Barley Risk Management Strategies

Crop Production/Industries, Risk and Uncertainty,

EVALUATING INCENTIVE PAYMENT PROGRAMS THROUGH AGGREGATE PRODUCTION RESPONSE: THE CASE OF MOHAIR

Production Economics,

PRODUCTION RISK AND CROP INSURANCE IN MALTING BARLEY: A STOCHASTIC DOMINANCE ANALYSIS

Malt barley is an important specialty crop in the Northern Plains and growers mitigate risk with federally subsidized crop insurance and production contracts. However, growers face considerable risk due to "coverage gaps" in crop insurance that result in uncertain indemnity payments due to uncertainty of their crop meeting contract specifications. A stochastic dominance model is developed to evaluate alternative risk efficient strategies for growers with differing risk attitudes and production practices (irrigation vs. dryland). Results show that efficient choices are highly dependent on risk attitudes for dryland growers, but not irrigated growers. Sensitivities with respect to acceptance risk and level of crop insurance subsidization are presented. Increased specialization of agricultural crops with greater emphasis on quality characteristics will limit dryland producer interest in federal crop insurance.Crop insurance, malting barley, stochastic dominance, stochastic efficiency, Risk and Uncertainty,