The Role of Spatial Density and Technological Investment on Optimal Pricing Strategies in the Grain Handling Industry

Anton Bekkerman and Mykel Taylor

Review of Industrial Organization, 2020, vol. 57, issue 1, No 2, 27-58

Abstract: Abstract Shuttle-loading elevators represent an investment that may lower marginal grain-handling costs. Some portion of those savings could be passed on to farmers in the form of higher cash prices. We model the pass-through decision and exploit a natural, historical difference in Kansas and Montana wheat markets to test several pass-through hypotheses empirically. Using cross-sectional, temporal, and spatial variation in weekly wheat prices in 2005–2013, we find that—relative to conventional grain elevators in Kansas—shuttle-loading facilities offer a $0.13 per bushel premium. In Montana—where there is less spatial competition among elevators—the pass-through is only $0.04 per bushel.

Keywords: Basis; Grain elevator; Prices; Pass-through; Spatial competition; Wheat (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11151-019-09725-2

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