An economic analysis of surveillance and quality assurance as strategies to maintain grain market access

Hoda Abougamos

    Research output: ThesisDoctoral Thesis

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    Abstract

    [Truncated abstract] Australian grain exports depend on compliance with stringent biosecurity requirements. This thesis analyses the management of biosecurity by the Western Australian (WA) export wheat industry. The delivery of pest-free grain to export markets depends upon phosphine fumigation. The effectiveness of this treatment is under constant threat from the spread of resistant grain pests that have the potential to increase biosecurity costs, disrupt trade and reduce the asset value of low grade storage. This thesis analyses this problem by measuring the cost of grain transport, storage and biosecurity from farm to port in a grain supply network. It also analyses the incentives offered by grain contracts for farmers to manage biosecurity and simulates the costs of the spread of phosphine resistant stored grain pests. The grain supply network is represented by two models: Model 1 represents the grain network between farms and receival sites; Model 2 represents the network between receival sites and Kwinana port in Perth, WA. The objective of Model 1 is to maximise farmers' net profits; given total costs of transporting, storing, handling and fumigating grain. The objective of Model 2 is to minimise the total costs of Co-operative Bulk Handling (CBH). Results of Model 1 show that farmers prefer to store wheat temporarily at farms rather than transport it during harvest period to receival sites. The low storage and biosecurity costs relative to transport costs explain the farmers' optimal decision. However, restricted storage capacity at some farms may result in the delivery of some grain during the harvest period. The quantity of wheat stored on farms during harvest and storage periods represents around 19 per cent of the wheat harvested. Model 2 distinguishes between receival sites located on road and those on rail lines. The initial stock of wheat at receival sites on rail is around three times that of receival sites on road, which highlights the importance of rail transport to the grain supply network. During the clearance period, all wheat is cleared from receival sites to port. During the harvest period, most wheat is stored at receival sites on rail. The model also distinguishes between different types of storage bins namely; horizontal (HOR), silo (SIL) and bunkers (OBH). Bin types are significant in determining storage costs and biosecurity risks. A theoretical grain biosecurity contract is modelled to analyse the contract between farmers and CBH using a principal-agent framework. The objective of this model is to analyse the design of grain supply contracts under moral hazard. CBH is unable to observe directly the management of grain on-farm, but does engage in grain testing on delivery to a receival site and can set a price premium relative to the world price. Three sets of assumptions are assessed: first, perfect information, where CBH, the principal, observes the farmer’s biosecurity efforts. Second, where the farmer's effort level is non-verifiable by CBH but CBH can monitor the farmer's grain at zero cost, results in a decline in the farmer's biosecurity effort. The third is when CBH has monitoring costs and imperfect monitoring. This assumption leads to a reduced biosecurity effort relative to the perfect information case...
    Original languageEnglish
    QualificationDoctor of Philosophy
    Publication statusUnpublished - 2012

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