Optimal Grain Carryovers in Open Economies: A Graphical Analysis

Keith Knapp

American Journal of Agricultural Economics, 1982, vol. 64, issue 2, 197-204

Abstract: Optimal storage, trade, and borrowing policies for grain are analyzed graphically using dynamic programming. World prices and domestic harvests are assumed to be stochastic. Optimal carryovers are generally increasing in supply and decreasing in world prices, while net imports are decreasing in both supply and world prices. Optimal levels of carryovers and net imports are influenced by the opportunity to borrow and save foreign exchange. It is shown that grain reserves and foreign exchange borrowing/saving are alternative inventory systems which both complement and substitute for one another.

Date: 1982
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