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Seasonal Quality Premiums for Wheat: A Case Study for Northern Germany

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  • Jens‐Peter Loy
  • Thore Holm
  • Carsten Steinhagen
  • Thomas Glauben

Abstract

ABSTRACT Seasonal variations of the price premium for bread and feed wheat indicate opportunities to profitably adjust the grain marketing strategy of farmers that harvest (and store) both wheat types. In this article, we estimate the seasonal pattern of wheat price premiums on the German market using a vector error correction approach, which accounts for multivariate autoregressive conditional heteroscedasticity of the error terms. Our results indicate a significant downward trend for the premium during the marketing season, with the trend's magnitude depending on the average quality of harvested wheat. If farmers separately store both bread and feed wheat, they should tend to sell bread wheat before they sell feed wheat, particularly in years of low average wheat qualities. Further, the volatility of the price premium significantly decreases over the season, indicating higher risks at the beginning and lower risks towards the end. The volatility of the premium may present opportunities that require a reevaluation of the recommended temporal sequence of selling bread and feed wheat.

Suggested Citation

  • Jens‐Peter Loy & Thore Holm & Carsten Steinhagen & Thomas Glauben, 2015. "Seasonal Quality Premiums for Wheat: A Case Study for Northern Germany," Agribusiness, John Wiley & Sons, Ltd., vol. 31(1), pages 63-75, January.
    • Handle: RePEc:wly:agribz:v:31:y:2015:i:1:p:63-75
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    File URL: http://hdl.handle.net/10.1002/agr.21387
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    Cited by:

    1. Holzer, Patrick & Loy, Jens-Peter, 2016. "Messung Des Vermarktungserfolges Bei Marktfruchtbaubetrieben: Wie Groß Sind Die Unterschiede?," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244893, German Association of Agricultural Economists (GEWISOLA).
    2. Anton Bekkerman, 2021. "Quality forecasts: Predicting when and how much markets value higher‐protein wheat," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(4), pages 465-490, December.
    3. Elisabeth Vollmer & Daniel Hermann & Oliver Musshoff, 2019. "The disposition effect in farmers’ selling behavior: an experimental investigation," Agricultural Economics, International Association of Agricultural Economists, vol. 50(2), pages 177-189, March.
    4. Peng Peng & Zhigang Xu, 2022. "Price expectations, risk aversion, and choice of sales methods for large‐scale farmers under incomplete market conditions," Agribusiness, John Wiley & Sons, Ltd., vol. 38(4), pages 1012-1031, October.
    5. Zwiafhela Naledzani & Petronella Chaminuka & Kenneth Nhundu & Charles L. Machethe & Frikkie Liebenberg, 2019. "Economic value of quality restrictions on the wheat industry in South Africa," Agrekon, Taylor & Francis Journals, vol. 58(1), pages 102-112, January.

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