Implications of Recent Australian Wheat Industry Developments for Domestic and Overseas Prices

This study is motivated by the proposition that the objectives of the AWB Ltd havechanged since semi-privatisation of the Australian Wheat Board under the WheatMarketing Act, 1989. Conceptualising this change of objectives as a shift from revenuemaximization to profit maximization, this study examines the impact of such a change onthe pricing policies of a multi-market price-setting firm. More specifically, this paperinvestigates, using two hypothetical objective functions, a risk averse AWB’s price-settingbehaviour in an “overseas” and a “domestic” market in response to recent wheatindustry developments. In the analysis these developments manifest themselves asdiffering price elasticities, differing transport costs and uncertain demand functions, andtheir implications particularly for the prices paid by domestic consumers are explored.