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State Trading Enterprises in a Differentiated Product Environment: The Case of Global Malting Barley Markets

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  • Dong, Fengxia
  • Marsh, Thomas L.
  • Stiegert, Kyle W.

Abstract

The lack of transparency in the pricing and operational activities of state trading enterprises (STEs) has caused WTO members to express concern that certain countries’ STEs might circumvent Uruguay Round commitments on export subsidies, domestic support, or market access. The purpose of this study is to examine the market structure of the differentiated world malting barley market in which two STEs (the Canadian Wheat Board and Australian Barley Board) maintain jointly a very large share of the export market. In particular, this study focuses on the exclusive procuring and pricing policies used by both STEs to test if these intra-country mechanisms can generate leadership and shift rent from other exporting countries. A conceptual and empirical framework is also provided to test if STEs set their initial payments at optimal levels. Four key results are forthcoming from this research. First, we found strong support that the global malting barley market operates in a quantity setting oligopolistic structure. Second, both STEs and other exporting countries were in Cournot competition, and thus held the potential to exercise rentshifting behavior using their initial payment structures. Third, while some distortionary impacts from the STE prepayment systems were possible, we did not find evidence that it was a tool either STE employed. Empirical results from the precommitment stage show that both STEs did not set their initial payments low enough to maximize their profits. Fourth, It appears that the strong anecdotal and statistical evidence of product differentiation dampened significantly the desire/ability of malting barley STEs to pursue a rentshifting objective.

Suggested Citation

  • Dong, Fengxia & Marsh, Thomas L. & Stiegert, Kyle W., 2005. "State Trading Enterprises in a Differentiated Product Environment: The Case of Global Malting Barley Markets," Working Papers 201543, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    • Handle: RePEc:ags:uwfswp:201543
    DOI: 10.22004/ag.econ.201543
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    2. Scoppola, Margherita, 2006. "Economies of Scale and Endogenous Market Structures in International Grain Trade," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25322, International Association of Agricultural Economists.
    3. Margherita Scoppola, 2010. "The Liberalisation of Tariff Rate Quotas under Oligopolistic Competition," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(3), pages 584-604, September.
    4. Paulus, Moritz & Trueby, Johannes & Growitsch, Christian, 2011. "Nations as Strategic Players in Global Commodity Markets: Evidence from World Coal Trade," EWI Working Papers 2011-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    5. Soregaroli, Claudio & Sckokai, Paolo, 2011. "Modelling Agricultural Commodity Markets under Imperfect Competition," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116012, European Association of Agricultural Economists.
    6. Roberts, Shane & Brooks, Kathleen & Nogueira, Lia & Walters, Cory G., 2022. "The role of quality characteristics in pricing hard red winter wheat," Food Policy, Elsevier, vol. 108(C).
    7. Flaming, Stephen & Marsh, Thomas L. & Wahl, Thomas I., 2007. "Farm-Level Price Formation for Fresh Sweet Cherries," Journal of Food Distribution Research, Food Distribution Research Society, vol. 38(2), pages 1-11, July.
    8. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    9. Bourgeon, Jean-Marc & Jean, Sebastien & Maillet, Anais, 2015. "State Trading Enterprises and Price Stabilization," 2015 Conference, August 9-14, 2015, Milan, Italy 211367, International Association of Agricultural Economists.
    10. Biswajit Dhar, 2007. "Agricultural trade and government intervention - A persepctive from a developing country," STUDIES IN TRADE AND INVESTMENT, in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 211-223, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
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