Quality and Grading Risk
Many (perhaps most) sorts of agricultural commodities are not homogeneous, but instead vary according to a set of quality characteristics. Some of these characteristics may be easy to inexpensively measure — many sorts of fresh fruit, for example, are sorted into different sizes by using a sizing belt. However, others may be difficult to measure non-destructively — think of trying to measure the color of flesh of a whole melon. In between these extremes (characteristics that are easily measured and those that are difficult or impossible to non-destructively measure) lie the sorts of characteristics that consumers may place a high value on, yet which can be easily measured only by the prospective consumer, such as the smell of a tomato.
KeywordsQuality Characteristic Agricultural Commodity Price Function Post Ranking Price Risk
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