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Australian Wheat Storage: A Dynamic Programming Approach

Author

Listed:
  • Alaouze, Chris M.
  • Sturgess, Neil H.
  • Watson, Alistair S.

Abstract

Dynamic programming is used to examine whether Australia should store wheat for subsequent sale at higher prices. The dynamic programming model is developed assuming that the demand for Australian wheat is perfectly elastic at the world price. An important consequence of this assumption is that the algorithm used in computing the optimal policy takes a very simple form. It is concluded that interest rate and wheat price in the following season are the major determinants of storage policy. When prices are stable, rule-of-thumb policies, such as storing when prices are below average, are sub-optimal.

Suggested Citation

  • Alaouze, Chris M. & Sturgess, Neil H. & Watson, Alistair S., 1978. "Australian Wheat Storage: A Dynamic Programming Approach," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 22(2-3), pages 1-17, August.
    • Handle: RePEc:ags:ajaeau:22715
    DOI: 10.22004/ag.econ.22715
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    File URL: https://ageconsearch.umn.edu/record/22715/files/22030158.pdf
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    References listed on IDEAS

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    1. Gustafson, Robert L., 1958. "Carryover levels for grains: A method for determining amounts that are optimal under specified conditions," Technical Bulletins 157231, United States Department of Agriculture, Economic Research Service.
    2. Alex F. McCalla, 1966. "A Duopoly Model of World Wheat Pricing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(3_Part_I), pages 711-727.
    3. Chris M. Alaouze & A. S. Watson & N. H. Sturgess, 1978. "Oligopoly Pricing in the World Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(2), pages 173-185.
    4. Freebairn, John W., 1967. "Wheat Storage Costs in New South Wales," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 35(01), pages 1-34, March.
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    Cited by:

    1. Watson, Alistair S., 1996. "Principles of Grain Marketing: Some Lessons from Australian Experience," Technical Reports 113821, Australian Centre for International Agricultural Research.
    2. Kennedy, John O.S., 1979. "Optimal Buffer Stock Policies For Wheat At The World Level," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 23(3), pages 1-13, December.

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