Analysis of Wheat Production, Market, and Consumption in Australia

This report provides a comprehensive analysis of agricultural economics, focusing on wheat production in Australia. It begins by examining the production function performance, exploring the relationship between inputs like land area and output, and discussing the law of marginal returns. The report then delves into the spatial, temporal, and form dimensions of the Australian wheat market, covering the stages of wheat production from paddock selection to harvesting, and the stages of consumption, including export markets. The determination of wheat prices based on supply and demand is also discussed. Furthermore, the report provides an overview of different grades of Australian wheat, developed by AWB, and their suitability for various products. The analysis incorporates charts illustrating wheat production by state and the export of wheat, offering a detailed understanding of the industry's economics.

Agricultural Economics

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Production function performance................................................................................................1
Spatial, temporal and form dimensions of wheat market in Australia........................................4
CONCLUSION................................................................................................................................9

INTRODUCTION
Agricultural economics deals with applied science where, technical knowledge and
productive resources like capital, land and labour are used by the humans for the purpose of
production of food and fibre along with the distribution of the production to the society.
Economics is the study of the factors that affect the choices of the public under various situations
like scarcity. In this report, study of economics is applied to the agricultural product. The product
selected for the purpose of study is “wheat” because Australia is the main produces of wheat and
canola. The production of Australia grain can be divided on the basis of winter and summer.
Wheat is a main product of winter. The study explains the production function performance that
defines the relationship between inputs and outputs of agriculture. A clear interpretation is
provided with the example change in input and output in wheat. The present report includes the
stages of production and consumption of wheat with the determinants of price. Various grades of
wheat has also been discussed.
Production function performance
Production function establishes relationship between inputs and outputs of agriculture.
Production function assumption is one of the main component of neoclassical theories. This
theory is used to define the marginal product (Harris and Harris, 2016). The main purpose of this
function is to address the efficiency of input to the resulting outcomes. The actual production
curve will increase with the change in inputs, but eventually after reaching a point the slope of
curve will start declining. this describe the law of marginal returns. In this experiments are made
by making variations in inputs and the results are observed. Examples of inputs could be:
 Application of level of fertilizers to the paddocks and then observing the level of
production.
 Increasing the intake of feed and observing the weight of grains.
 Increasing the area of paddock.
 Changing in sowing techniques may affect the production level of wheat.
 Implication of policies.
 Climate change and weather conditions will also have significant impact to the level of
output.
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 Quality of seeds can affect the quality of grains.
Production function approach helps in identifying the optimum combination of inputs and
outputs from the perspective of technical science.
Likewise, area of sowing the wheat can also affect the volume of production which will
ultimately affect the revenue generation.
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Illustration 1: Wheat production by state
(Production of wheat by state, 2017)
From the above chart, the interpretation of the changes in the output due to variation in the
output can be done:
In the area like Tas, production of wheat is very low because the land area is low. As the
area decreases, production also decreases and as the land area increases production also
increases.
But in the area like Vic, the land area increases, but there is a decline in the production.
This means here, increase in land area, has affected the negative return.
From both the examples it is visible that input has a direct relation with output. But how the
input factor will affect the output, cannot be determined.
Level of change in input, relatively affects the level of change in output. In the region of WA,
percentage change in the level of input has a similar affect to the percentage change in the level
of output. And in the region like SA, mere change in the level of input has shown higher change
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in the level of output. Therefore, these examples from the above chart denies the fact that level of
change in input relatively affects the level of change in the output.
Change in the production due to change in the land area, will also affect the change in
total revenue. From the general point of view, increase in production will positively affect the
revenue and decrease in production will negatively affect the revenue.
Therefore, from the overall analysis of above chart, it can be concluded that the data used
for production function analysis is exhibiting both increasing and decreasing return but that are
not related to increasing and decreasing level of output. That means there is no positive
relationship between change in input and change in revenue.
The highest produces of Wheat from the above chart is the region of WA following with region
of NSW. And the lowest producer of wheat is the region of Tas. However, the production of the
region NSW has declined dramatically from 2003 to 2007 with the increase in the area of land.
From the above chart it can also be concluded that, in 2003, production of wheat was
highest in all the regions and with each consecutive year the overall production of wheat in
Australia has been declined.
Spatial, temporal and form dimensions of wheat market in Australia
Occurrence of rainfall is the major factor of spatial and temporal variability in the
production of wheat in Australia (Nelson and Shively, 2014).
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Illu
stration 2: Wheat producing Areas
(The Australian Grains Industry, 2011)
Stages of production of wheat:
Wheat in Australia is growing since 200 years. Australia's wheat output is growing
continuously from 1980's. Wheat is a winter crop. Production of wheat involves various stages:
Paddock selection and crop sequence: In history, wheat was grown in a rotation process. But
then it countered with diseases and fertility issues. Now rotation is rarely used and crops are
sown in the same paddock every year. The variety of wheat, increases the need of sowing the
wheat in consecutive years. The technique of wide row sowing is used in wheat that means the
wheat is sown between the rows. This increases the frequency of sowing the wheat. For the
purpose of sowing wheat, choice of paddock is based on the series of issues.
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Seedbed preparation: For the successful wheat establishment, ensuring the preparation of
seedbed with good contact between seed and soil is an essential element. Advanced sowing
equipments are used for furrowing and harvesting that ensures good contact between seed and
soil.
Sowing: sowing of wheat totally depends on seasonal variations. Best season for sowing wheat is
April. Wheat varieties that require long seasons are sown first in the mid April. And the varieties
that are of medium season are sown in may and June.
Harvesting: the final stage of production of crop is harvesting, wheat will be harvested once the
crop is ready.
Stages of consumption:
Wheat is a main production of Australia, but is not consumed largely in Australia.
Instead, the major portion of wheat is exported in more than 40 countries to around 100
customers. The major countries where Australian wheat is exported is middle east and asian
regions (Roy and Singh, 2017).
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Illustration 3: Export of American wheat by region
Determination of prices within the market:
Prices of products are determined based on the Demand and supply of the product (Valin
and et.al., 2014.). Likewise, prices of wheat are determined keeping in view the level of demand
and level of supply of variety of wheat.
 The market demand curve and the market supply curve shows the variation in demand
and supply at different prices.
 For determining the price of the wheat, equilibrium price should be defined. It is that
point where quantity demanded is equal to the quantity supplied. There could be the
situation of excess demand and excess supply. These situations occur when at the current
price, quantity demanded and quantity supplies is more than the actual supply and
demand.
 These situations determine the price. If there is the excess demand of wheat than the
actual supply, prices will tend to increase. And if there is the excess supply of wheat than
the actual demand, prices will tend to fall.
 When the excess demand comes to zero, the price is said to be the equilibrium price, at
this situation market is said to be in equilibrium.
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 In the wheat industry, prices are also determined on the basis of variety of wheat.
Raw product and final product:
Raw wheat and the final wheat are not same, after the production of wheat, grading is
done in order to reach to the final product. For the purpose of grading wheat is measured with its
physical characteristics. Weight, kernel weight and the size or grains are tested. Then grading is
done based on quality of the wheat. Protein and moisture content is also tested.
There are different varieties of wheat:
Six main grades of Australian wheat that are developed by AWB for the purpose of
different wheat based product (Australian wheat, 2017).
 Prime hard: This grade of wheat is suitable for European breads and alkaline noodles.
This type of grade can be mixed with high protein wheat for producing a high quality of
flour.
 Hard: this grade of wheat is suitable for hearth breads, European pans, yellow alkaline
noodles and eastern style bread. This grade of wheat is grown in all states of wheat
producers.
 Premium white: Premium white wheat is used for producing flat and pocket breads used
in middle east. Such as tanoor, taftoon, baladi and Indian speciality breads. This grade of
wheat is produced in the entire Australia.
 Standard White: this grade is suitable for Iranian, Indian style and middle eastern breads
such as naan. This grade of wheat is cropped in Western Australia and south Australia.
 Soft: soft quality of wheat is ideal for baked and confectionery products that includes
cakes, pastries, sweet biscuits, cookies and steamed buns. This grade of wheat is cropped
where environmental factors are suitable like areas of western Australia.
 Durum: durum grade is suitable for producing pasta's dry or wet. This grade is also
suitable for many types of products in middle east and north Africa. But production of
this grade is limited in few areas.
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CONCLUSION
From the above study it has been concluded that, agricultural economics have its own
importance in the agricultural industry. The above report is based on the production of wheat in
Australia. Concepts of agricultural economics have been applied there on. The first part of the
above report includes production function performance of wheat taking input as the area of land
which is compared with the output that is production. It is concluded that change in input has no
direct relationship with the change in output. Like area of land there could be various other
factors that can be taken as inputs, such other factors are discussed in the report. In the second
part of the report, dimensions of wheat market in Australia has been discussed. Main emphasis in
the second part of report is on the stages of production and consumption of wheat in Australia
and different grades of wheat available in different parts of Australia.
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REFERENCES
Books and journals
Harris, D. and Harris, F. H. D. B., 2016. Determinants of Price Discovery: Dark Trading and
Price Improvement. The Journal of Trading. 12(1). pp.55-72.
Nelson, G. C. and Shively, G. E., 2014. Modeling climate change and agriculture: an
introduction to the special issue. Agricultural Economics. 45(1). pp.1-2.
Roy, V. and Singh, S., 2017. Mapping the business focus in sustainable production and
consumption literature: Review and research framework. Journal of Cleaner Production.
150. pp.224-236.
Valin, H. and et.al., 2014. The future of food demand: understanding differences in global
economic models. Agricultural Economics. 45(1). pp.51-67.
Online
Production of wheat by state, 2017. [Online] Available
through :<http://www.ausgrain.com.au/Back%20Issues/177ybgrn08/30_Wheat.pdf>.
[Accessed on 25th October 2017]
PDF
Australian wheat, 2017. [PDF] Available through :<http://muehlenchemie.de/downloads-future-
of-flour/FoF_Kap_07.pdf>. [Accessed on 25th October 2017]
The Australian Grains Industry, 2011. [PDF] Available through
:<https://www.pwc.com.au/industry/agribusiness/assets/australian-grains-industry-
nov11.pdf>. [Accessed on 25th October 2017]
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