Demand for quality characteristics of hard red winter wheat

Abstract

Scope, Method of Study, and Findings: The present three-paper dissertation analyses the demand for quality attributes for hard red winter wheat in both domestic and international markets. The first paper analyzes the effect of physical and functionality parameters on prices paid to Oklahoma farmers during 2005 for hard red winter wheat, using a hedonic pricing model to estimate the implicit values for quality characteristics. Results showed that test weight had an implicit value of 0.77 cents/bushel, and moisture a negative value of 0.67 cents/bushel. There is evidence that hard red winter wheat prices were not yet reflecting vertical differences in quality characteristics, especially those related with endues functionality.

The second paper investigates Mexican millers' preferences for wheat quality attributes. A major focus of the analysis is characterizing millers' preferences for consistency (or risk) in wheat input characteristics. In-person interviews were carried out with Mexican millers, who were administered a conjoint-type survey designed to incorporate uncertainty in attribute levels. Two methods are used to model millers' risk preferences: a modified mean-variance approach and an explicit expected utility approach. Controlling for variability, Mexican millers are willing to pay premiums for increases in quality factors such as test weight, protein content, falling number, and dough strength/extensibility. We find millers' are not particularly sensitive to changes in the variability of wheat quality characteristics. Out-of-sample forecasts suggest the mean-variance model provides an accurate depiction of actual Mexican imports.

The third paper attempts to the effect of the release of information on Mexican milling companies' welfare. A non-profit marketing company's expenditure is used as a proxy to model Mexican mill's accessibility to quality information, and applied to an indirect cost function. The value that wheat marketing companies expenditures represent to Mexican millers is measured by the difference of the flour mill's compensating surplus and compensating variation. Results indicate that for the period in study, information did not necessarily increase Mexican wheat imports; nonetheless it has a positive effect on mill's welfare.