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Seasonal Quality Premiums for Wheat

Author

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  • Loy, Jens-Peter
  • Holm, Thore
  • Steinhagen, Carsten
  • Glauben, Thomas

Abstract

Seasonal variations of the price premium between bread and feed wheat indicate opportunities to profitably adjusting the grain marketing strategy of farmers that harvest (and store) both qualities. In this paper, we estimate the seasonal pattern of wheat price premiums on the German market by a vector error correction (VECM) approach, which accounts for multivariate autoregressive conditional heteroscedasticity of the error terms. Results indicate a significant downward trend for the premium during the marketing season. The trend’s magnitude depends on the average quality of harvested wheat. If farmers have facilities so separately store bread and feed wheat, they should tend to postpone (move forward) their sales of feed (bread) wheat towards the end (beginning) of the season, particularly in years of low average wheat qualities. The volatility of the price premium significantly decreases over the season indicating higher risks at the beginning.

Suggested Citation

  • Loy, Jens-Peter & Holm, Thore & Steinhagen, Carsten & Glauben, Thomas, 2013. "Seasonal Quality Premiums for Wheat," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149744, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:149744
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    File URL: http://purl.umn.edu/149744
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    Keywords

    Quality Price Premium; Season; Wheat; Germany; Agribusiness; Farm Management; Marketing; Risk and Uncertainty; Q13; C32; L11;

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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