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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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    1. Goodwin, Barry K. & Smith, Vincent H., 2009. "Harvest-Time Protein Shocks and Price Adjustment in U.S. Wheat Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(2), pages 1-19, August.
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    4. Blakeslee, Leroy & Lone, Todd A, 1995. "Modelling Optimal Grain-Marketing Decisions When Prices Are Generated Autoregressively," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(1), pages 87-102.
    5. Suleyman Karaman & Bahattin Cetin & Ayse Oguzlar & Koksal Yagdi, 2009. "Hedonic price estimation for the Turkish bread wheat characteristics," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(6), pages 895-902, November.
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    7. Loy, Jens-Peter & Pieniadz, Agata, 2009. "Optimal Grain Marketing Revisited: A German and Polish Perspective," 2009 Conference, August 16-22, 2009, Beijing, China 51058, International Association of Agricultural Economists.
    8. Parcell, Joseph L. & Stiegert, Kyle W., 1999. "Factors Affecting Wheat Protein Premiums," 1999 Annual meeting, August 8-11, Nashville, TN 21524, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    10. Leroy Blakeslee, 1997. "Optimal Sequential Grain Marketing Decisions under Risk Aversion and Price Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1140-1152.
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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. repec:bla:agecon:v:50:y:2019:i:2:p:177-189 is not listed on IDEAS
    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.

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