Segregation of Grain Markets: Consequences for Price Behavior

By McNew, Kevin; Smith, Vincent H. | Journal of Agricultural and Resource Economics, April 2003 | Go to article overview

Segregation of Grain Markets: Consequences for Price Behavior


McNew, Kevin, Smith, Vincent H., Journal of Agricultural and Resource Economics


The introduction of genetically modified grain and oilseed products at the farm level and resistance for these products by consumer groups have led to segmentation in grain markets. This study explores the implications for market price behavior for a segregated soybean market for genetically modified (GM) and non-GM varieties. A stochastic dynamic simulation model of production and storage is solved, and Monte Carlo simulation procedures are used to examine price behavior between GM and non-GM soybeans. The results suggest important differences in price behavior between GM and non-GM soybeans. The results obtained in the model simulations are compared with evidence from the Tokyo Grain Exchange, where non-GM and GM soybean futures contracts have traded simultaneously since May 2000. The evidence from the Tokyo Grain Exchange contracts is largely consistent with the results of the simulation model. Price correlations between the Tokyo Grain Exchange non-GM and GM soybean contracts tended to be similar in magnitude to those found in the simulations.

Key words: genetically modified organisms, soybeans, storage

Introduction

Genetic engineering of crops represents a substantial breakthrough in agricultural technology. In the United States, the most widely used applications of this technology are BT Corn and Roundup Ready(R) Soybeans, first introduced in 1995. These first-generation transgenic crops are designed to lower farm production costs by reducing input costs and, as a result, have been rapidly adopted by U.S. farmers. In 1996, for example, less than 10% of the total areas planted to corn and soybeans in the United States consisted of genetically modified (GM) varieties. By 2002, over 35% of U.S. corn acreage and 75% of U.S. soybean acreage were planted to GM crops.

While many U.S. farmers have embraced this technology, many consumers have been more skeptical because of perceived health and environmental risks. Consumer and environmental groups in the European Union and Japan, both of which are major buyers of U.S. grain commodities, have been especially vocal about these concerns. As a result, some foreign food manufacturers have decided not to accept GM crops altogether, others have developed plans to institute labeling programs, and some foreign governments have introduced regulations requiring labeling and, in some cases, product segregation for GM products.1

The short-run reaction by participants in the U.S. grain market has been to segregate commodities by GM and non-GM varieties. A 1999 survey found that 11% of all Midwest grain elevators were segregating corn and 8% were segregating soybeans, with more elevators expected to segregate in the future [U.S. Department of Agriculture, Economic Research Service (USDA/ERS) 2000a]. As a result of segregation, price differences have begun to emerge with non-GM crops at a premium to GM crops. However, only limited anecdotal evidence is available on the size of these premiums, and there is even less information about how these premiums will behave in the future. In addition, the U.S. markets for GM and non-GM commodities are relatively unsophisticated, consisting of spot cash exchanges and contracts for delivery, but no futures or options contracts. For soybeans, however, GM and non-GM soybean futures contracts have been available on the Tokyo Grain Exchange since 2000.

Most previous research on GM issues has been related to welfare effects and the distribution of benefits (Moschini, Lapan, and Sobolvesky; Kalaitzandonakes) as well as consumer issues such as food safety and labeling (Caswell 1998, 2000; Caswell and Mojduszka; Hobbs and Plunkett; McCluskey; Feldman, Morris, and Harrington). This study explores issues concerning how segregated U.S. grain markets for GM and non-GM soybeans are likely to behave. Segregation does not just separate production and demand along GM and non-GM lines. It also requires that inventories, a key element in determining price behavior in grain markets, be segregated as well. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Segregation of Grain Markets: Consequences for Price Behavior
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.