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Contracting for Canola in the Great Plains States

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  • Wilson, William W.
  • Dahl, Bruce L.

Abstract

Canola has become an important crop in the last decade in the U.S. Production of canola is risky and competes with other crops which have a range of risk reduction mechanisms. Alternative contracting strategies were evaluated by comparing returns to labor and management for growers and gross margins for processors. Alternative contracting strategies included no contract, fixed price with and without act of god provisions, and an oil premium contract. Grower returns and processor gross margins were simulated and resulting distributions were evaluated using stochastic efficiency with respect to a function. We estimated certainty equivalents and ranked contract preferences for both growers and processors by region in North Dakota. Grower and processor risk preferences varied by region. Producers and processors preferences differed for contract alternatives in the Northwest, Northeast and Eastcentral regions and were in agreement in the Northcentral region. This suggests that development of a single contract that would be widely adopted across the state would likely have to be altered by region to be acceptable to growers and processors.

Suggested Citation

  • Wilson, William W. & Dahl, Bruce L., 2010. "Contracting for Canola in the Great Plains States," Agribusiness & Applied Economics Report 95751, North Dakota State University, Department of Agribusiness and Applied Economics.
  • Handle: RePEc:ags:nddaae:95751
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    References listed on IDEAS

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    1. Wilson, William W. & Dahl, Bruce L., 2009. "Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 41(02), August.
    2. J. Brian Hardaker & James W. Richardson & Gudbrand Lien & Keith D. Schumann, 2004. "Stochastic efficiency analysis with risk aversion bounds: a simplified approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 253-270, June.
    3. McCarl, Bruce A. & Bessler, David A., 1989. "Estimating An Upper Bound On The Pratt Risk A Version Coefficient When The Utility Function Is Unknown," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(01), April.
    4. William W. Wilson & Bruce Dahl, 2014. "Contracting for Canola in the Great Plains States," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(1), pages 89-106, March.
    5. MacDonald, James M. & Perry, Janet E. & Ahearn, Mary Clare & Banker, David E. & Chambers, William & Dimitri, Carolyn & Key, Nigel D. & Nelson, Kenneth E. & Southard, Leland W., 2004. "Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities," Agricultural Economics Reports 34013, United States Department of Agriculture, Economic Research Service.
    6. William Wilson & Cole Gustafson & Bruce Dahl, 2009. "Crop insurance in malting barley: a stochastic dominance analysis," Agricultural Finance Review, Emerald Group Publishing, vol. 69(1), pages 98-112, May.
    7. Wilson, William W. & Dahl, Bruce L., 2008. "Procurement Strategies to Improve Quality Consistency in Wheat Shipments," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(01), April.
    8. Wilson, William W. & Dahl, Bruce, 2009. "Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(02), pages 363-376, August.
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    1. repec:eee:agisys:v:162:y:2018:i:c:p:145-153 is not listed on IDEAS
    2. William W. Wilson & Bruce Dahl, 2014. "Contracting for Canola in the Great Plains States," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(1), pages 89-106, March.

    More about this item

    Keywords

    Canola; Grower; Processor; Contracting; Risk; Stochastic Efficiency (SERF).; Agricultural Finance; Crop Production/Industries;

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