An analysis of alternative wheat pricing schemes

Abstract

The aim of this study was to measure, from an economic efficiency viewpoint, the impact of making the domestic wheat pricing scheme more responsive to changes in the world wheat price. This was done by distilling information on the effects that alternative pricing schemes could have on those criteria thought to be of interest to policymakers. The results were based on historical data and therefore show what could have happened in the past if alternative schemes had been in operation. However it is unlikely that future data on variables, such as prices, will coincide with the past pattern. A problem encountered in this study was data availability. This resulted in the fixed costs and imported inputs involved in wheat and sheep production being disregarded. These are important omissions as machinery fixed costs and the import components of machinery in wheatgrowing are significant. The problem of data availability also caused an intractable validation problem, involving assumptions made concerning farmers' wheat area response to different schemes. A weakness was that the study considered only the average, not marginal, value of potential wheatgrowing land.