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Seasonal Quality Premiums for Wheat

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  • Loy, Jens-Peter
  • Holm, Thore
  • Steinhagen, Carsten
  • Glauben, Thomas
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    Abstract

    Seasonal variations of the price premium between bread and feed wheat indicate opportunities to profitably adjusting the grain marketing strategy of farmers that harvest (and store) both qualities. In this paper, we estimate the seasonal pattern of wheat price premiums on the German market by a vector error correction (VECM) approach, which accounts for multivariate autoregressive conditional heteroscedasticity of the error terms. Results indicate a significant downward trend for the premium during the marketing season. The trend’s magnitude depends on the average quality of harvested wheat. If farmers have facilities so separately store bread and feed wheat, they should tend to postpone (move forward) their sales of feed (bread) wheat towards the end (beginning) of the season, particularly in years of low average wheat qualities. The volatility of the price premium significantly decreases over the season indicating higher risks at the beginning.

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    File URL: http://purl.umn.edu/149744
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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149744.

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    Date of creation: 2013
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    Handle: RePEc:ags:aaea13:149744

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    Related research

    Keywords: Quality Price Premium; Season; Wheat; Germany; Agribusiness; Farm Management; Marketing; Risk and Uncertainty; Q13; C32; L11;

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