Applying SERF Analysis to Rank Procurement Strategies for a North Dakota Green Field Pea Processor
Abstract
There are many crops grown in North Dakota, but only a few have a futures market for prices and are grown readily throughout the country. The specialty crops in North Dakota display many of the same characteristics such as a lack of a futures market, high standards for grain quality, and concentrated production areas. These characteristics create unique procurement risks for specialty crop processors. This project ranks procurement strategies for a green field pea processor located in North Dakota using stochastic efficiency with respect to a function (SERF) analysis. Through SERF analysis, it was found that geographic diversification and forward contracting are useful tactics to include in a green field pea processors procurement strategies. The methodology and model can be applied to other specialty crops in North Dakota that display similar risk characteristics seen in green field peas such as lentils, dry edible beans, and malt barley.