ISSUES IN WHEAT MARKETING R. Karina Gallardo Tree Fruit Research and Extension Center School of...
Transcript of ISSUES IN WHEAT MARKETING R. Karina Gallardo Tree Fruit Research and Extension Center School of...
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ISSUES IN WHEAT MARKETING
R. Karina Gallardo Tree Fruit Research and Extension Center
School of Economic SciencesPresentation at the Wheat Production Growers Meeting
Wednesday March 2, 2011 NCW Fairgrounds - Waterville
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Wheat Production Over Time
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Prices Received by Class
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Market Fundamentals
• Supply
• Demand
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Supply
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Supply
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Wheat Accounting
• Ending stocks = production + imports - consumption - exports
• Gives a good idea of the overall supply that will be carried over into the next marketing year
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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US Ending Stocks
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Market Fundamentals
• Supply
• Demand
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Demand
• Food consumption Steady to increasing over past few decades
• Livestock feed High corn and soybean prices cause substitution among feed grains
• Biofuels Renewable fuels mandate: 30 billion gallons by 2022
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Wheat Marketing
• Some strategies for managing risk Cross-hedge in futures market (SRW) Forward contracting Hedge-to-arrive (open basis) Cash sales Crop insurance (yield and revenue)
Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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Mexican Millers’ Demand for Quality and
Consistency in Hard Red Winter Wheat
Study done in the Spring 2007
by R. Karina Gallardo
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Background
• Increased hard wheat imports • Importance for U.S. Southern plains wheat producers
• Concerns among Mexican buyers regarding quality issues consistency
Mexico
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Background (cont.)
• Wheat quality characteristics• Physical and end-use• Increasing interest for end-use quality characteristics• Not measure or not made publicly available
• U.S. wheat marketing system• Premiums and discounts in wheat prices are based mainly on physical characteristics
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Background (cont.)
• Evolution of international wheat markets• Less participation of State Trading Enterprises• Sophistication of milling and baking processes
• More attention is given to quality issues in the buying decision making• Uncertainty in wheat quality is negatively impacting U.S. wheat exports
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Objective
• To identify the value that Mexican millers place on the level and variability in selected hard red winter wheat attributes
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Methodology
• Personal interviews with wheat milling companies in Mexico • 70% of the total Mexican wheat milling capacity
• 80% of all the wheat imported into Mexico from U.S.
CANIMOLTMexican milling industry association
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Methodology (cont.)
• Wheat attributes included in the survey• Test weight• Protein content• Falling number• Kernel diameter• Farinograph stability• P/L ratio
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Example of Survey QuestionFeatures Option A Option B
Option C
1. Test weight minimum (kg/hl) 78 78
I wouldNOT chooseany of theAlternativespresented
Test weight values within the range: 77.5-78.5 76.5-79.5
2. Wheat protein 12% (%) 11 13
Wheat protein values within the range: 10.5-11.5 12.5-13.5
3. Falling number minimum 14% (sec) 400 400
Falling number values within the range: 385-415 355-445
4. Farinograph stability minimum (min) 9 9
Farinograph stability values within the range: 8-10 6-12
5. Alveograph P/L ratio 1.1 0.85
Alveograph P/L ratio values within the range: 1.05-1.15 0.8-0.9
6. Kernel diameter (mm) 2.3 2.3
Kernel diameter values within the range: 2.0-2.6 2.25-2.35
Price ($/MT) 170 180
I would choose*
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WTP Results Mean-Variance
Willingness-to-Pay for … WTP($/MT)
Willingness-to-Pay for … WTP($/MT)
Test weight: 78 kg/hl VS 80 kg/hl
30.30 Test weight standard deviation: 0.29 VS 0.87
8.382
Protein 12% moisture base: 11% VS 13% 46.428
Protein standard deviation 12% moisture base: 0.29 VS 0.87
-1.974
Falling number 12% moisture base: 300 sec VS 400 sec 21.297
Falling number st. dev. 12% moisture base: 8.66 VS 25.98
-7.033
Farinograph stability: 9 min VS 13 min
42.481 Farinograph stability standard deviation: 0.58 VS 1.73
-10.508
P/L ratio: 0.85 VS 1.1 18.140 P/L ratio standard deviation: 0.03 VS 0.12
-4.749
Kernel diameter: 2 mm VS 2.3 mm
14.261 Kernel diameter standard deviation: 0.03 VS 0.17
-3.249
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Market Share Estimation
Percentage Imported from the
U.S.
Percentage Imported from
Canada
Forecasted Mexican wheat imports predicted by the mean-variance specification
66.978% 33.022%
Actual Mexican wheat imports in 2006 63.670% 36.330%
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Conclusions
• Mexican millers’ concerns centered on quality attribute level rather than variability
• Greatest WTP: Test weight, protein, and farinograph stability
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Implications
• Wheat farmers• Listen to what your final customers have to say
• Policy • To reduce variability direct contracting between farmers and overseas buyers
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Thank You
R. Karina Gallardo
Washington State University Tree Fruit Research and Extension Center,
School of Economic Sciences
1100 N. Western Ave. Wenatchee, WA
E-mail: [email protected]: (509) 663–8181 x 261