An Economic Analysis of Alternative Marketing Strategies for Northeast Louisiana Soybean Producers.

This study evaluates marketing strategies for Louisiana soybean producers and the influence of selected supply and demand factors on these strategies\u27 performance. Primary data from 100 producers were used to identify marketing strategies. Means and variances of returns were estimated for 41 marketing strategies for the 1975-1979 period. Forward contracting yielded the largest mean returns although its variances exceeded harvest sales\u27 variances. Unhedged storage yielded significantly higher mean returns and lower variances than hedged storage strategies. Strategies involving the hedging of growing crops generated mean returns not significantly different from forward contracting strategies and variances which were relatively less than those of forward contracting. An econometric soybean market model was constructed to predict farm level soybean prices for 1980-1985. This model was a 16-equation simultaneous system reflecting: (1) crushing soybeans produces joint-products, (2) soybeans, meal, and oil have multiple uses and markets, (3) soybeans, meal and oil are components in larger economic sectors, and (4) prices and product flows are determined simultaneously due to the joint product nature. Evaluation of the model\u27s prediction accuracy was based on Theil\u27s U(,2) inequality coefficient. The model was relatively more accurate for the soybean sector than for meal and oil sectors. This model (Model 1) was compared with two other models (Models 2 and 3) which differed in variables included and statistical estimation methods used. In Model 2, some variables used in Model 1 were combined into ratios or weighted averages of original variables. Model 3\u27s variables were included based upon improving the farm level price equation\u27s accuracy with other equation\u27s accuracy being considered subordinate. Models 1 and 2 were estimated using OLS while Model 3 was estimated using 2SLS. Model 3 outperformed (minimum U(,2) statistics) Models 1 and 2 in the farm level price equation in the 1975-1979 and 1980-1985 periods. Conditional farm level soybean price estimates were made for 1980-1982 and 1983 using Model 3. These estimates were used to determine potential marketing strategy returns