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| Title: | PROCUREMENT RISKS AND STRATEGIES TO IMPROVE QUALITY CONSISTENCY IN WHEAT SHIPMENTS |
| Authors: | Wilson, William W.
Dahl, Bruce L. |
| Authors (Email): | Wilson, William W. (William.Wilson@ndsu.edu)
Dahl, Bruce L. (Bruce.Dahl@ndsu.edu) |
| Keywords: | Buying Strategies
Location
Variety
Functional Characteristic Tests
Costs
Risks
Simulation
Stochastic Dominance |
| Issue Date: | 2007 |
| Series/Report no.: | Agribusiness & Applied Economics Report No. 595 |
| Abstract: | 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. |
| URI: | http://purl.umn.edu/23498 |
| Institution/Association: | North Dakota State University>Department of Agribusiness and Applied Economics>Agribusiness & Applied Economics Report |
| Total Pages: | 40 |
| Language: | English |
| Collections: | Agribusiness & Applied Economics Report
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