ISSUES IN WHEAT MARKETING R. Karina Gallardo Tree Fruit Research and Extension Center School of Economic Sciences Presentation at the Wheat Production Growers Meeting Wednesday March 2, 2011 NCW Fairgrounds - Waterville
Wheat Production Over Time Slide provided by Mykel Taylor, School of Economic Sciences, WSU
Prices Received by Class Slide provided by Mykel Taylor, School of Economic Sciences, WSU
Market Fundamentals Supply Demand
Supply Slide provided by Mykel Taylor, School of Economic Sciences, WSU
Supply Slide provided by Mykel Taylor, School of Economic Sciences, WSU
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
US Ending Stocks Slide provided by Mykel Taylor, School of Economic Sciences, WSU
Market Fundamentals Supply 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
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
Mexican Millers’ Demand for Quality and Consistency in Hard Red Winter Wheat Study done in the Spring 2007 by R. Karina Gallardo
Background Increased hard wheat imports Importance for U.S. Southern plains wheat producers Concerns among Mexican buyers regarding quality issues consistency Mexico
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
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
Objective To identify the value that Mexican millers place on the level and variability in selected hard red winter wheat attributes
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. CANIMOLT Mexican milling industry association
Methodology (cont.) Wheat attributes included in the survey Test weight Protein content Falling number Kernel diameter Farinograph stability P/L ratio
Example of Survey Question
WTP Results Mean-Variance
Market Share Estimation
Conclusions Mexican millers’ concerns centered on quality attribute level rather than variability Greatest WTP: Test weight, protein, and farinograph stability
Implications Wheat farmers Listen to what your final customers have to say Policy To reduce variability direct contracting between farmers and overseas buyers
Thank You R. Karina Gallardo Washington State University Tree Fruit Research and Extension Center, School of Economic Sciences 1100 N. Western Ave. Wenatchee, WA Phone: (509) 663–8181 x 261