Contracting for Canola in the Great Plains States

William Wilson and Bruce L. Dahl

No 95751, Agribusiness & Applied Economics Report from North Dakota State University, Department of Agribusiness and Applied Economics

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.

Keywords: Agricultural Finance; Crop Production/Industries (search for similar items in EconPapers)
Pages: 65
Date: 2010-07
New Economics Papers: this item is included in nep-agr and nep-eff
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Contracting for Canola in the Great Plains States (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nddaae:95751

DOI: 10.22004/ag.econ.95751

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