Wheat Production & Economic Impact: An Australian Market Analysis

This report provides an economic analysis of wheat production in Australia, focusing on its contribution to the country's GDP and its position in the global market. The report reviews an article highlighting the significant increase in wheat production and its expected impact on economic growth. It applies economic concepts such as supply and demand to explain the dynamics of wheat pricing, noting the inverse relationship between surplus production and market prices. Recommendations are made to improve Australia's competitiveness, including product differentiation, year-round production, and strategic market positioning. The report concludes that wheat production is a vital component of Australia's agricultural income and a key contributor to its GDP, emphasizing the importance of understanding market dynamics to maintain a strong export position.

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Economics for Business
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Table of Contents
Introduction......................................................................................................................................2
Review of the Article.......................................................................................................................2
Application of Economic Concepts.................................................................................................3
Recommendations............................................................................................................................4
Conclusion.......................................................................................................................................5
Reference.........................................................................................................................................6

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Introduction
The main purpose of this assignment is to analyze an newspaper article from an economic
point of view while at the same time using economic concepts and application of theory. The
assignment will be focusing on agriculture produce in Australia which is exported (Lawrence,
Richards & Lyons, 2013). Australia is known as developing nation in which the economy is
mainly engaged in mining activities, services industry and a part on the manufacturing industry.
However, it is to be noted that Australia also has a strong agriculture base such contributes to the
GDP of the country quite significantly (Kubiszewski et al., 2013). Australia has a good amount
of wheat production which is mainly a winter crop of the country. The sowing for the same starts
in autumn and the harvesting takes place depending upon the circumstances. The report will be
providing an analysis of the situation utilizing economic concepts and identifying any problems.
Lastly the report will be ending with recommendations and conclusion.
Review of the Article
The article which is selected was published in Sydney Morning Herald with the headlines
as ‘Soaring Wheat Production to Fuel GDP growth in 2017”. The article states the fact that the
production of wheat was immense during the last year. As per the article, it is not gas products
and commodity exports which are keeping the exports of the company up but also the agriculture
is also catching up. The article states that during the year a record wheat production was
expected which would contribute around half a per cent worth of growth to economic growth of
the country. The article further states that even though the excess wheat surplus in wheat
production will result in fall in the prices of wheat in world economy (Fleurbaey & Blanchet,
2013). The price has fallen from $US9.00 in 2012 for a bushel to about $US4.41 a Bushel in
2017. However, the sheer amount of wheat production will be enough to make a significant

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Q3
D
S1
S2 S3
E3
E2
E1
P3
P2
P1
P
Q
Q1 Q2
contribution to the GDP growth of the country. The wheat production has increased up by 45%
in 2017 to a quantity amount of 35.1 million tons which is expected to contribute around 0.5% to
the GDP of the country.
Application of Economic Concepts
In case of a market where there is competition for sale of products and surplus amount of
goods exits, the price equilibrium will be determined by the forces of demand and supply of that
particular good (Cashin et al., 2014). In other words, the demand for the product in the market
and the supply of the product into the market determines the ultimate price of the product.
Figure 1: (Figure showing Demand and Supply of the Wheat)
Source: (Created by Author)
As per the diagram which is shown above, the horizontal axis measures quantity of the
wheat and the vertical axis shows prices which is to be charged for the wheat. As per the figure,
the initial demand line is represented by D and the initial supply line is denoted by S2. As the

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supply of the wheat increase, the price of the wheat will fall and keeping the demand constant,
the supply curve will shift rightwards. The new supply curve or line will be S3 and the new
equilibrium position will be E3. An equilibrium is a position where the demand is equal to the
supply of the good (Brim, 2017). The initial equilibrium position for the production of wheat was
E2 which was changed due to increase in the supply of the wheat in the world market which
resulted in the fall of the prices of wheat. This equilibrium is necessary to decide the price which
the companies will charge for the products on offer. It is also to be noted that whenever there is a
shift in either demand and supply curve, changes will occur and the demand and supply curve
will always move back into an equilibrium position as per the diagram shown above (Garnett et
al., 2013). At the new equilibrium price which is shown in the above figure, for a price of P3 a
quantity of Q3 is on offer which shows increase in quantity due to high supply and fall in the
prices of the product.
Recommendations
The recommendation which can be suggested for further improving the situation in the
world market are given below:
1. The company needs to differentiate the wheat it produces from the other supplying
countries. This can be done with the use of HYV seeds, better quality of wheat, proper
branding of the product. This will improve the sales and the prices for the product which
is offered by the company.
2. Australia is known for wheat production during the winter season which can be made
available throughout the year with effective use of modern use of farming techniques.
3. Australia needs to prepare a proper strategy for competing against nations which are also
in the business of exporting wheat. The policy of the country should be to secure a

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particular market where the country can establish more of a monopoly or Duopoly
market. This will ensure that the demand of the product is maintained and also the prices
are charged appropriately as per the requirement of the government of Australia.
4. Australia should also try out different varieties of wheat in order to differentiate its
products from the competitors selling wheat in international markets.
Conclusion
Thus, from the above analysis, it is clear that the wheat production in Australia is an
important part of the agriculture income of the country. The discussion also proves that wheat
significantly contributes to the GDP of the country. The discussions also make it clear the role of
demand and supply in determining the price of wheat in international markets. The article which
is discussed, showed that the production of wheat in 2017 was significantly high and therefore it
proves that wheat can be a regular export product for the country.

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Reference
Brim, O. (2017). The economic theory of representative government. Routledge.
Cashin, P., Mohaddes, K., Raissi, M., & Raissi, M. (2014). The differential effects of oil demand
and supply shocks on the global economy. Energy Economics, 44, 113-134.
Fleurbaey, M., & Blanchet, D. (2013). Beyond GDP: Measuring welfare and assessing
sustainability. Oxford University Press.
Garnett, T., Appleby, M. C., Balmford, A., Bateman, I. J., Benton, T. G., Bloomer, P., ... &
Herrero, M. (2013). Sustainable intensification in agriculture: premises and
policies. Science, 341(6141), 33-34.
Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T., & Aylmer, C.
(2013). Beyond GDP: Measuring and achieving global genuine progress. Ecological
Economics, 93, 57-68.
Lawrence, G., Richards, C., & Lyons, K. (2013). Food security in Australia in an era of
neoliberalism, productivism and climate change. Journal of Rural Studies, 29, 30-39.