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Quality Uncertainty, Procurement Strategies, and Grain Merchandising Risk: Vomitoxin in Spring Wheat

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  • D. Demcey Johnson
  • William W. Wilson
  • Matthew A. Diersen

Abstract

This study analyzes implications of a random quality factor, vomitoxin, on spatial flows and merchandising risk. Vomitoxin poses major risks for grain traders because of contract specifications, regulatory limits, sampling difficulties, and imprecise measurement. The effect of these were analyzed using crop quality and market data for the U.S. spring wheat crop, which has been severely affected by vomitoxin infestations during the 1990s. The analysis was structured as a blending problem with the objective of maximizing the net value of wheat sales. Relationships among market price spreads and contract specifications are interesting and their effects are demonstrated through simulations.

Suggested Citation

  • D. Demcey Johnson & William W. Wilson & Matthew A. Diersen, 2001. "Quality Uncertainty, Procurement Strategies, and Grain Merchandising Risk: Vomitoxin in Spring Wheat," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 23(1), pages 102-119.
    • Handle: RePEc:oup:revage:v:23:y:2001:i:1:p:102-119.
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    File URL: http://hdl.handle.net/10.1111/1058-7195.00048
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    Cited by:

    1. William, Wilson & Dahl, Bruce & Hertsgaard, David, 2020. "Soybean quality differentials, blending, testing and spatial arbitrage," Journal of Commodity Markets, Elsevier, vol. 18(C).
    2. Wilson, William W. & McKee, Greg & Nganje, William & Dahl, Bruce & Bangsund, Dean, 2017. "Economic Impact of USWBSI’s Scab Initiative to Reduce FHB," Agribusiness & Applied Economics Report 264672, North Dakota State University, Department of Agribusiness and Applied Economics.
    3. Nganje, William E. & Johnson, D. Demcey, 2003. "Economic Impact of Fusarium Head Blight in Malting Barley: Blending Margins and Firm-Level Risk," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 4, pages 1-11, March.
    4. Prithviraj Lakkakula & David W. Bullock & William W. Wilson, 2022. "Asymmetric information and blockchains in soybean commodity markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(1), pages 273-298, March.
    5. Nganje, William E. & Tiapo, Napoleon M. & Wilson, William W., 2002. "Economic Impact Of Scab With Alternative Risk Management Strategy: The Case Of Crop Quality Insurance In Barley," Agribusiness & Applied Economics Report 23641, North Dakota State University, Department of Agribusiness and Applied Economics.

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