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Abstract
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.