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Seasonal variability, land values and willingness-to-pay for a forward wheat contract with protein premiums and discounts

Author

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  • Fraser, Rob W.

Abstract

This article investigates the impact of a protein premiums and discounts system on the income stream from growing wheat. Based on a biological relationship between protein and yield in uncertain seasonal conditions, it shows that such a system reduces the expected level and variability of wheat income. It is subsequently argued, using a numerical analysis, that protein payments affect both the attraction to wheat growers of forward contracts and the value of land used for wheat. The nature of both of these impacts is related to the level of seasonal variability affecting the land. Consequently, wheat growers in the more unreliable regions of the wheatbelt may have been particularly disadvantaged by the system.

Suggested Citation

  • Fraser, Rob W., 1997. "Seasonal variability, land values and willingness-to-pay for a forward wheat contract with protein premiums and discounts," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(2), June.
  • Handle: RePEc:ags:aareaj:118011
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    File URL: http://purl.umn.edu/118011
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    References listed on IDEAS

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    1. Bardsley, Peter & Harris, Michael, 1987. "An Approach To The Econometric Estimation Of Attitudes To Risk In Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 31(02), August.
    2. A. Tegene & F. Kuchler, 1993. "A Regression Test Of The Present Value Model Of Us Farmland Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 135-143.
    3. Fraser, Rob W., 1988. "A Method For Evaluating Supply Response To Price Underwriting," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(01), April.
    4. P. B. R. Hazell & M. Jaramillo & A. Williamson, 1990. "The Relationship Between World Price Instability And The Prices Farmers Receive In Developing Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(2), pages 227-241.
    5. Anderson, Jock R. & Dillon, John L. & Hazell, Peter B.R. & Cowie, A.J. & Wan, G.H., 1988. "Changing Variability in Cereal Production in Australia," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(03), December.
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    Citations

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    Cited by:

    1. Petersen, Elizabeth H. & Fraser, Rob W., 2000. "The role of expected protein levels in determining the impact of protein premiums and discounts: a note," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(2), June.
    2. repec:oup:revage:v:26:y:2004:i:1:p:82-96. is not listed on IDEAS
    3. Jackson, Elizabeth & Quaddus, Mohammed & Islam, Nazrul & Stanton, John & Hoque, Zohurul, 2007. "A Multi-Disciplinary Approach For Determining Adoption Of Agricultural Price Risk Management Strategies," 81st Annual Conference, April 2-4, 2007, Reading University 7985, Agricultural Economics Society.
    4. Petersen, Elizabeth H. & Fraser, Rob W., 2000. "Grower perceptions of the impact of protein premiums and discounts for wheat," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123725, Australian Agricultural and Resource Economics Society.
    5. Fraser, Rob W., 1998. "Seasonal variability and a farmer's supply response to protein premiums and discounts," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(1), March.
    6. Jackson, Elizabeth & Quaddus, Mohammed & Islam, Nazrul & Hoque, Zohurul & Stanton, John, 2006. "Selling raw wool by forward contract: A qualitative analysis of the pros and cons," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139793, Australian Agricultural and Resource Economics Society.
    7. Petersen, Elizabeth H. & Fraser, Rob W., 1999. "The role of expected protein levels in determining the impact of protein premiums and discounts," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 124517, Australian Agricultural and Resource Economics Society.
    8. Jackson, Elizabeth & Quaddus, Mohammed & Islam, Nazrul & Stanton, John, 2008. "A mixed-method approach for determining the risk and complexity farmers associate with using forward contracts," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 42305, Agricultural Economics Society.

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    Keywords

    Land Economics/Use;

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