Contracting for Canola in the Great Plains States

Canola has become an important crop in the last decade in the U.S. Production of canola is risky and competes with other crops which have a range of risk reduction mechanisms. Alternative contracting strategies were evaluated by comparing returns to labor and management for growers and gross margins for processors. Alternative contracting strategies included no contract, fixed price with and without act of god provisions, and an oil premium contract. Grower returns and processor gross margins were simulated and resulting distributions were evaluated using stochastic efficiency with respect to a function. We estimated certainty equivalents and ranked contract preferences for both growers and processors by region in North Dakota. Grower and processor risk preferences varied by region. Producers and processors preferences differed for contract alternatives in the Northwest, Northeast and Eastcentral regions and were in agreement in the Northcentral region. This suggests that development of a single contract that would be widely adopted across the state would likely have to be altered by region to be acceptable to growers and processors.Canola, Grower, Processor, Contracting, Risk, Stochastic Efficiency (SERF)., Agricultural Finance, Crop Production/Industries,

PROCUREMENT RISKS AND STRATEGIES TO IMPROVE QUALITY CONSISTENCY IN WHEAT SHIPMENTS

Consistency of functional characteristics in wheat is a concern confronting buyers and sellers. This research analyzes the cost and risk of different procurement strategies for importers. A stochastic simulation model is used to determine the probability of a functional characteristic being satisfied subject to quality targets and costs for alternative purchase strategies (purchase by protein only, variety, location, variety by location, or functional tests). Joint probabilities of meeting specifications and costs were determined for the alternative purchase strategies. Stochastic dominance was used to determine which purchase strategies dominate others, and stochastic efficiency was utilized to determine the degree of preference. Results indicate that, as more specific characteristics are incorporated into a contract, the probabilities of meeting end-use requirements increase. Requirements of specific characteristics come with a higher cost, due to increased testing costs related to identity preservation. Risk premiums for alternative strategies were derived.Buying Strategies, Location, Variety, Functional Characteristic Tests, Costs, Risks, Simulation, Stochastic Dominance, Crop Production/Industries, Risk and Uncertainty,

Dynamic Changes in Market Structure and Competition in the Corn and Soybean Seed Sector

The purpose of this paper is to analyze the dynamics of R&D investments, and the structure of the seed distribution sector using novel data sets that have not been used before to describe competition in these industries. The results describe four sets of issues of particular importance. One is that while all agbiotechology firms have increased their R&D expenditures, there have been sharp differences in the scope of this spending. Most important is that this has spawned the growth in what is now referred as “seeds and traits.” Second, a large number of future traits will be commercialized in the coming years. A third set of results indicates that one firm grew its market share by 14% and a portion of this growth has been through acquisition. The other three majors lost market share, but the ISC (independent seed companies) grew by 10%. At the crop reporting district level, the industry concentration ratios for the four largest firms (CR4) in most regions are .5‐.7. Finally, farmers purchased corn and soybean seed from 4‐7 different companies in most crop reporting districts (CRD) and up to 20 or more companies in the larger producing regions.Agbiotechnology, grain seeds, competition, Agribusiness, Crop Production/Industries, Demand and Price Analysis,

MARKETING OF WHEAT ON A CONSTANT AND NIL MOISTURE BASIS

This study examined moisture specification practices in the United States and for major exporters and assessed impacts of changes to a nil or constant moisture basis on prices and revenue. These were examined under scenarios where information on moisture in current prices is limited and under a scenario where current prices reflect Full Knowledge of moisture advantages. Results indicate that changing to a nil moisture basis (which requires a subsequent adjustment in volumes to reflect the subtraction of moisture) would increase reported prices from 42 to 70 c/bu for the wheat classes, while changing to a 12 percent constant moisture basis would have limited impacts on reported prices. Effects on relative prices/revenue depend on whether knowledge of moisture advantages are reflected in current prices. If current prices reflect moisture advantages (Full Knowledge), then relative effects on prices/revenues are minimal. If current prices do not reflect moisture advantages (Limited Knowledge), then prices/revenue in drier production regions would increase.moisture, specifications, pricing, wheat, constant moisture, nil moisture, Crop Production/Industries,

CONSISTENCY OF QUALITY CHARACTERISTICS IN HARD RED SPRING WHEATS

Greater sophistication of buyers in the wheat market has increased demands for higher quality wheats and focused attention on the consistency of the quality of wheat purchased. In this study, the variability of wheat quality characteristics was examined at different stages of the marketing chain. Variability was measured by variety and at farm and export levels. Comparisons were made with Canada where similar data were available. Different measures of variability were utilized where data were available. Inter-year variability, intra-year variability, and within-lot variability of wheat quality characteristics were measured at different points in the wheat marketing chain in the United States and Canada. Variability of many characteristics was similar between Canada and the United States for changes in annual average levels between years and for within year variability. In both Canada and the United States, higher grades exhibited lower variability than lower grades. In addition, the within-year variability of protein and dockage declined from farm level to export levels for the United States. The variability of average levels for grade and protein segregations between sampling periods in Canada was similar at both the farm production and export levels.Quality, Consistency, Quality Variability, Wheat Export Quality, Farm Production Quality, Wheat Variety Quality, Canada, United States, Production Economics,

EFFECT OF HARD RED SPRING WHEAT CONSISTENCY ON MILLING VALUE

Increased concerns over the quality of wheat in domestic and export markets has focused attention on the consistency of wheat quality. This study utilized three measures to examine the effect of variability in characteristics on the milling value of wheat. Distributions and correlations for wheat quality characteristics were estimated from U.S. wheat export data from 1985-1997. Effects of variability of wheat characteristics on the value of wheat to the miller for each of the three measures were estimated using a simulation model. U.S. No. 1 exports of Hard Red Spring (HRS) had higher value to millers on each of the three measures (net wheat, millable wheat index, and value added in milling) than did exports of No. 2 or better (OB). However, the value to millers of No. 1 HRS was more variable than for No. 2 OB HRS, likely due to a larger negative correlation between the levels of moisture and shrunken and broken kernels in exports of No. 2 OB HRS than No. 1 HRS. Further, the value of wheat to millers for each of the three measures varied substantially by importing country. Sensitivity analysis indicated that increases in the consistency of moisture would provide the greatest reduction in the variability of value to millers, while increases in the consistency of foreign material, shrunken and broken kernels, and dockage had lesser impacts. This suggests that millers looking to increase the value of wheat lots used in milling may want to consider adding restrictions/incentives on moisture to limit the variability from lot to lot. However for dockage, shrunken and broken kernels, and foreign material, the focus should be on actual levels within lots rather than variability between lots.quality consistency, wheat, net wheat, millable wheat value index, milling value, HRS, HRW, Marketing,

Grain Pricing and Transportation: Dynamics and Changes in Markets

Agricultural Finance, Crop Production/Industries, Marketing,

Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets

One of the impacts of higher prices along with greater volatility in futures and basis is that there is pressure for an escalation in cash contracting for grain. This volatility has resulted in an unprecedented level of contracting with growers in recent years. There is a wide array of cash contracts with varying terms. There is also a growing realization of growers not delivering on contracts, in part due to escalation in postcontract prices. These are evolving as major strategic issues for buyers and the marketing system, particularly as buyers seek to use such contracting strategies as an element of risk mitigation. There are three purposes of this article. First is to provide a broad survey of contract terms used in grain contracting with growers. Second, we illustrate some issues in contracting of some of the grains (durum, malting barley) in the upper Midwest. Third, we show some of the common contract clauses being adapted in these contracts. Finally, we summarize these issues with respect to industry implications.grain contracting, risk, volatility, Agribusiness, Crop Production/Industries, Farm Management, Production Economics, Risk and Uncertainty, C15, D81, Q12,

RECIPROCAL ACCESS IN U.S./CANADIAN GRAIN TRADE: BACKGROUND ISSUES FOR THE U.S. GRAIN TRADE

The purpose of this paper is to review past trade relations in the grains sector between the United States and Canada and to document trade barriers and the potential for the evolution of reciprocal trade. Historical trade flows between the United States and Canada in the grains sector are reviewed. Terms of recent trade agreements and other trade restrictions are described. Then, some of the important differences in the marketing system are described and compared as well as changes in the Canadian grain marketing system. Finally, the concept of reciprocal access is developed in the context of the evolving trading relations between these two countries.grain trade, U.S.-Canada trade, trade policy, International Relations/Trade,

GRADES/CLASSES OF HARD WHEATS EXPORTED FROM NORTH AMERICA: ANALYSIS OF DEMAND AND TRENDS

Export patterns for U.S. and Canadian hard wheats (HAD, HRS, HRW, CWRS, and CWAD) were examined. Analysis incorporated grade and non-grade factors from U.S. shipments and grades and classes of Canadian exports. Shift-share analysis was used to examine changes in market shares for classes and grades. Cluster analysis was used to group importers of U.S. wheat classes based on like grade and non- grade factors of wheat shipments. Canada exports most of its hard wheat as No. 1, while the U.S. exports predominately No. 2 or better. Classes experiencing increased market shares include HRS, CWRS, and CWAD. U.S. HRS, HRW, and HAD all showed patterns of increasing market shares for No. 1 over lesser grades from the early 1980s to 1990s. Importer comparisons indicated that in many cases, countries imported largely No. 1 from Canada and lesser grades from the U.S. (predominately No. 2 or better). Clustering analysis indicated an increase in the number of distinct segments of wheat importers from 1986-89 to 1991-94. Composition of market segments also changed with many countries moving from one segment to another from one year to the next.Demand and Price Analysis, International Relations/Trade,