Stephanie Mercier

The market valuation of the FGIS grain quality characteristics

The issue addressed in this paper is whether the grain quality factors used by the Federal Grain Inspection Service in determining the quality grades of wheat exported by the United States including test weight, dockage, moisture content, percentage of foreign material, percentage of shrunken and broken kernels, and protein content are characteristics that influence the price of wheat for export. Using shiplot data on the transactions price for hard red winter wheat, hard red spring wheat and soft white wheat and the associated quality characteristics covering the period January 1990 to October 1991 and exported to 63 countires, the results suggest that only the test weight and the protein content are characteristics consistently valued by the market.

The Evolution of World Grain Trade

Over the course of history, world grain trade has developed from the stage where grain was only shipped as incidental cargo to its status today, an industry in which thousands of tons of grain move daily. As a share of total consumption, traded grain has risen from less than 0.03% in the eighteenth century to more than 10% today. This explosion in trade volume has relied on communication and measurement technology, which has made information about grain available to buyers and sellers. As we enter the twenty-first century, the information component of demand for grain will continue to expand, thereby threatening to overwhelm the current infrastructure.

The Effect of Quality on Corn Export Price Determination

This article examines export price formation for U.S. corn exports, adopting the hedonic approach of treating a commodity as a bundle of identifiable quality attributes for which separate implicit prices can be estimated. The study makes use of a rich data set which includes transaction-level price and quality data for U.S. corn exports for a period of two years. Significant implicit valuations for key quality factors between corn importers for feed use and corn importers for food and industrial uses are found, suggesting that the different end-uses substantially affect how users contract for corn imports.