PROCUREMENT STRATEGIES TO MEET FUNCTIONAL REQUIREMENTS IN WHEAT SHIPMENTS

William Wilson, Del A. Peterson and Bruce L. Dahl

No 23509, Agribusiness & Applied Economics Report from North Dakota State University, Department of Agribusiness and Applied Economics

Abstract: Consistency of functional characteristics in wheat is a concern confronting buyers and sellers. This research analyzes the cost and risk of different procurement strategies for importers. A stochastic simulation model is used to determine the probability of a functional characteristic being satisfied subject to quality targets. Joint probabilities of meeting specifications and costs were determined for alternative functional characteristics. Results indicate that, as more specific characteristics are incorporated into a contract, the probabilities of meeting end-use requirements increase. Specific characteristics come with a higher cost, due to increased testing costs related to identity preservation. The results are summarized as cost/risk tradeoffs confronting buyers in wheat procurement.

Keywords: Crop Production/Industries; International Relations/Trade (search for similar items in EconPapers)
Pages: 40
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nddaae:23509

DOI: 10.22004/ag.econ.23509

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