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The Implications on Price Relationships when Quality Adjusting Commodity Prices

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  • Baxley, Jonathon
  • Parcell, Joe

Abstract

Commodity markets work well in the U.S. because they standardize the products being sold. Using hedonic pricing models, this paper investigates the quality attributes that make soybeans differentiated across the U.S. and the possible implications that quality adjusted prices may have in today’s markets. A hedonic model was tested using soybean prices from 2004 to 2013 to adjust for quality. A test was then conducted to show the price change over time due to quality changes in soybeans. Results show that quality-adjusted pricing may affect forecasting and hedging with stronger correlations computed between futures prices and quality adjusted prices than futures prices and observed prices.

Suggested Citation

  • Baxley, Jonathon & Parcell, Joe, 2016. "The Implications on Price Relationships when Quality Adjusting Commodity Prices," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230132, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea16:230132
    DOI: 10.22004/ag.econ.230132
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    References listed on IDEAS

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    1. George W. Ladd & Marvin B. Martin, 1976. "Prices and Demands for Input Characteristics," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(1), pages 21-30.
    2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    3. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    4. Frederick V. Waugh, 1928. "Quality Factors Influencing Vegetable Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 185-196.
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