Grain Contracting Strategies: The Case of Durum Wheat (Summary)
AbstractOne 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agribusiness & Applied Economics Report with number 55120.
Date of creation: Sep 2009
Date of revision:
Agricultural Finance; Crop Production/Industries; Marketing;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.