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| Title: | Grain Contracting Strategies: The Case of Durum Wheat (Summary) |
| Authors: | Wilson, William W.
Dahl, Bruce L. |
| Authors (Email): | Wilson, William W. (william.wilson@ndsu.edu)
Dahl, Bruce (bruce.dahl@ndsu.edu) |
| Issue Date: | 2009-09 |
| Series/Report no.: | Agribusiness & Applied Economics Report No.
648-S |
| Abstract: | One of the impacts of higher prices
along with greater volatility in futures,
basis and spreads is that there is pressure
for greater use of cash contracts for grain.
Indeed there has been growth in
contracting for a number of competing
crops in recent years. There is a wide
array of cash contracts with varying terms
that pose major strategic alternatives for
buyers and the marketing system,
particularly as buyers seek to use
contracting as an element of risk
mitigation. Durum is a crop where many
of these issues and challenges are
apparent. Durum is more risky than
competing crops. There is greater price
and yield risk as well as quality risk, and in
contrast to competing crops, futures do
not exist, cross hedging is poor and
forward contracting has been used
minimally.
There are three purposes of this
paper: First, we provide a survey of
contract terms used in grain contracting
with growers. Second, we illustrate some
issues in contracting of some of the
specialty grains (durum) in the upper
Midwest. Finally, we develop a model to
analyze alternative contracting strategies
in the case of durum. We introduce
alternative pricing features, as well as
explore other alternatives and analyze
them in terms of risk and return to
growers. |
| URI: | http://purl.umn.edu/55120 |
| Institution/Association: | North Dakota State University>Department of Agribusiness and Applied Economics>Agribusiness & Applied Economics Report |
| Total Pages: | 16 |
| Collections: | Agribusiness & Applied Economics Report
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Size | Format |
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| AE648-S.pdf | | 61Kb | PDF | View/Open |
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