AGEC 321: Economics of Agricultural Marketing Course Notes

1 AGEC 321: Economics of Agricultural MarketingCourse NotesAnton BekkermanAny errors in this document are the responsibility of the author. Corrections andcomments regarding any material in this text are welcomed and appreciated. The materialin this document is intended to be supplementary (not as a substitute) to attendinglectures correspondence 2012 by Anton page intentionally left Syllabus11 Introduction to Agricultural Typical issues and where to find answers .. What is Marketing ? .. of Marketing .. functions of a market.

2 What s special about Agricultural markets? .. of prices .. Trends in Agricultural Markets ..152 Basics of Supply and Demand .. of a demand curve .. solving for quantity demanded and price .. Aggregate Demand .. aggregating demand .. of aggregate demand .. surplus .. Supply .. of supply .. changes supply? .. Aggregate Supply .. surplus and Producer cost .. Equilibrium .. do S and D models tell us? .. do prices indicate? .. problems .. Solving for Equilibrium .. problems: solving for equilibrium.

3 323 Elasticities and Definitions .. example .. Properties of Demand Elasticities .. Properties of Demand Flexibilities .. Analyzing more complex relationships .. do we find demand elasticities? .. Properties of Cross-Price Elasticities of Demand .. Price Elasticities of Demand in Agricultural Markets .. Elasticities of Supply .. of supply elasticities .. for elasticities of supply ..444 Equilibrium Displacement Single Commodity EDM Analysis .. practice .. General Equilibrium Displacement Models GEDM.

4 Example .. setup .. problems ..555 Food Marketing Understanding the food Marketing channel Derived Demand .. Scenario Analysis .. problems DD Graphical Analysis .. Derived Demand Numerical Analysis .. Numerical Example .. problems Deriving demand numerically ..716 Spatial Concepts in Agricultural of Scale .. One-dimensional spatial model .. Analysis One-dimensional transport models .. problems 2D transport models .. Overlapping production regions .. problems 2D overlapping transport models.

5 787 Inter-regional Deriving the excess demand curve .. Deriving the excess supply curve .. Trade .. Trade with transportation costs .. problems Illustrating changes in inter-regional trade . Welfare analysis of trade .. Gains in the Import Market .. Gains in the Export Market ..908 International Politics of Trade .. wants free trade? .. doesn t want free trade? .. blocks to Trade .. Trade Agreements .. Trade Restrictions ..979 Exchange Rates in International Exchange Rate Basics.

6 Exchange Rates .. Exchange Rates .. calculating and using exchange rates .. problems calculating and using exchange rates .. Trade with Exchange Rates .. Condition 1 .. Condition 2 .. purchasing power parity .. problems purchasing power parity .. Modeling Trade with Exchange Rates .. Trade with XR .. Analysis using Trade with XR Models .. 10810 Introduction to Agricultural Futures Brief history of Agricultural futures markets .. Commodity futures markets contract price information.

7 Introduction to Futures Contracts .. Purchasing a Futures Contract .. Offsetting Contracts .. Mechanics of a Futures Market .. Example of Futures Market Participation .. Deciding what position to take .. Entering the market .. Actions at Delivery Time .. Additional problems market participation .. Market Risks - price variability .. Market Risks Placed out of the Market .. Example Marking-to-Market .. Price Paths Matter .. 12111 Hedging Risk using Futures Local vs.

8 Futures Markets .. Positions in the local market .. Hedging Local Market Price Risk .. Offsetting Price Risk .. Additional problems Futures Market Hedging .. 12712 Introduction to Basis .. Properties of Basis .. Example of Hedging with Basis .. What happens in July? .. Basis risk .. 13313 Futures Market Speculator Approach .. Hedger Approach .. Basis .. Basis Risk vs. Price Risk .. 137 Class SyllabusClass SyllabusCourse InformationInstructor:Dr. Anton BekkermanClass days:Tue, ThurOffice:205 Linfield HallClass times:3:05 4:20 :406-994-3032 Classroom:Linfield Hall hours:Tue, Thur: 9 to 12 and by appointmentCourse website: #3 Required readings:Assigned in classOptional readings: Agricultural Marketing and Price Norwood and Lusk(Prentice Hall, 2008; ISBN: 9780132211215)Prerequisites:ECNS 204 or ECNS 251 Course DescriptionThis Course is intended to introduce important concepts in Agricultural Marketing .

9 Wewill examine links between producers and consumers and factors that may cause changesin those links. Because Agricultural markets are often fluid and changes can occur rapidly,we will seek to study current events and examine their effects on Agricultural , this Course will emphasize the effects of local, national, and internationalevents on Agricultural markets in Montana. Students who complete this Course shouldbe comfortable with using a theoretical economic framework to assess and interpret thefunctions of Agricultural this Course , we will develop theoretical frameworks to examine and evaluatequestions that relate to Agricultural markets.

10 Examples include: How does food become available to consumers? How are Agricultural commodity prices unique?1 Class Syllabus Commodity markets are risky. How can producers and consumers hedge risk? How can futures markets be used to predict local prices? What effects do transporting and storing a commodity have on the commodity sprice? Why do changes in the exchange rate between the dollar and the peso cause Montanaranchers to gain wealth?Is this class the same as a Marketing class in the business school?The business school at Montana State University describes its Marketing management as decision-making in the product, price, promotion, and distribution areas.