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Economic issues surrounding wheat quality assurance: the case of late maturing alpha-amylase policy in Australia

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  • Kingwell, Ross
  • Carter, Chris

Abstract

Late maturing α-amylase (LMA) is a genetic defect in some wheat lines that when triggered by particular environmental conditions damages the grains’ starch and reduces its suitability in processing. To lessen the risk of LMA expression in Australia’s wheat crops, a testing regime is now part of the nation’s varietal classification system. This paper analyses the impact of relaxing the testing regime and thereby providing farmers with the option to grow higher yielding varieties with higher risks of expressing an LMA defect that causes a price downgrade. We model the potential for quality downgrade by incorporating an expected price into the wheat supply and demand functions. The expected price is generated using the price differential between milling and feed grades and the probability of LMA exhibition. The net benefit from shifting between the current and more relaxed testing regimes is evaluated as the change in producer surplus. The analysis is based on the Western Australian wheat industry that supplies around half of Australia’s wheat exports. Initial findings indicate that the expected net benefit to the wheat industry in Western Australia from a relaxation of the current LMA policy is around $18m per annum.

Suggested Citation

  • Kingwell, Ross & Carter, Chris, 2014. "Economic issues surrounding wheat quality assurance: the case of late maturing alpha-amylase policy in Australia," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 22, pages 1-13.
    • Handle: RePEc:ags:auagre:206170
    DOI: 10.22004/ag.econ.206170
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    References listed on IDEAS

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    1. Thomas J. Voon & Geoff W. Edwards, 1992. "Research Payoff from Quality Improvement: The Case of Protein in Australian Wheat," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 564-572.
    2. Brennan, John P. & Godyn, Dirk L. & Johnston, Brian G., 1989. "An Economic Framework for Evaluating New Wheat Varieties," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 57(01-02-03), pages 1-18, December.
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