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© 1995 Oxford University Press and the Foundation for the European Review of Agricultural Economics

research-article

Modelling optimal grain-marketing decisions when prices are generated autoregressively*

LEROY BLAKESLEE and TODD A. LONE

Washington State University Dept. of Agricultural Economics Pullman, WA 99164-6210 USA
Washington State University

Received May 1, 1994;

Summary

A model is developed to find decision rules that maximise expected utility of income from selling stored wheat when future price expectations are updated weekly using newly observed prices. Expected utility is approximated in terms of six moments of the income distribution, and efficient procedures are developed to calculate moments. Marketing losses that arise when the autoregressive structure of wheat prices is ignored are estimated. Losses were found to be equivalent to reductions of 1.9–14.5% in expected income, depending on initial prices and risk aversion

Keywords: wheat industry, dynamic programming, risk mamagement


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