Location, Planting Decisions, and the Marketing of Quality-Differentiated Agricultural Commodities

Alexander E. Saak
May 2003  [03-WP 331]

In a marketing environment, the demand conditions, the costs of shipping and storing grain varieties, the interest rate on farm loans, and the distribution of cropland in the area are important determinants of growers' planting decisions. In this article, I focus on a market for two quality-differentiated agricultural commodities: one produced with the use of biotechnology and the other, without. I develop a model for analyzing the equilibrium planting and marketing decisions made by geographically dispersed producers during the marketing year following harvest. I identify the types of marketing environments leading to a greater concentration of equilibrium acreage planted to a particular grain variety near the market and investigate the effects of the marketing environment on the spatial patterns of equilibrium land allocation among grain varieties.

Keywords: commodity prices, grain storage, location, marketing, product quality, supermodularity.

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