Wheat in 1984

In many respects, the Australian wheat industry is unusual. It is extensively regulated in all its activities beyond the farm-gate, yet the overall effect of Government regulation since 1948 has been to reduce the incomes of wheatgrowers (Longworth and Knopke 1982). The partial equilibrium analysis on which this conclusion rests is based on comparisons of observed wheat prices with an "otherwise" free market with wheatgrowers receiving world prices for their output. Essentially, the losses have occurred because the domestic price has often been below the world price, especially at times of high world prices. Although all producers have shared in the attendant income transfers according to their proportionate contribution to output, the incidence of losses brought about by distorted price relationships is more complex as it depends upon regional and farm-specific comparative advantages in wheat production. Wheatgrowers who can adjust production more easily between wheat, other grains and livestock products suffer less than those with production plans that are less responsive to changes in relative prices. Moreover, because of variations in yields, there have been random effects on farm incomes occasioned by intervention in prices. A detailed study of the systematic influences of regulation on the distribution of income within the wheat industry might go part of the way towards explaining some of the interstate, size-related and other conflicts that exist within wheatgrowing organizations but that is beyond the scope of this paper.