Producers' decision making process in grain marketing: a study in the Canadian market

Abstract

The purpose of this thesis is to investigate how Western Canadian wheat producers’ make their marketing decisions. In Canada, wheat, durum wheat, and barley produced for human consumption and export are marketed through the Canadian Wheat Board (CWB), which offers several marketing contracts providing distinct combinations of risk, return, and cash flow. Pool pricing is the default alternative in which the CWB markets grain for producers, while Producer Payment Options (PPOs) represent instruments producers can use to price their wheat outside the pool. Results suggest that generally producers are not able to identify profit opportunities with PPOs, but active marketing strategies tend to generate better performance compared to passive strategies. Further, producers do not seem to repeat the same strategy every year and are influenced by previous performance when choosing their current marketing strategy. Finally, producers seem to follow price signals in choosing marketing contracts, indicating they track market movements and respond to the incentive of locking in higher prices.