The New Zealand wheat and flour industry: market structure and policy implications

Abstract

The subject of physical distribution of wheat and flour within New Zealand addressed by the authors of this report should be of considerable interest to wheatgrowers, participants in the marketing chain, and New Zealand flour consumers. In that cost reductions seem likely by a relaxation of controls on the distribution system, it is hoped that this report will attract feedback to enable further constructive and more meaningful use of the model that has been evolved. The basic aim of this study has been to seek a more rationalised market structure for the New Zealand wheat and flour industry. Current policy constraints are seen to insulate the market from its underlying economic forces. These forces include the economies of scale present in the milling and transport sectors of the market and inter-regional competition. The policy constraints relate to the policy instruments of Government, namely milling quotas, standardised wheat and flour pricing, import controls, and fixed inter-regional trade flows.