None
Tuesday, 24 May 2016

The 2008 deregulation of the Australian wheat export market did not induce a permanent change in wheat prices, according to a study published by agricultural economists at The University of Western Australia.

Mr Reece Curwen conducted the study as part of his Honours degree at UWA and was supervised by Dr Amin Mugera and Associate Professor Ben White from UWA’s School of Agricultural and Resource Economics and Institute of Agriculture.

Prior to the Wheat Marketing Act 2008 wheat exports were regulated under the single desk marketing arrangements. Under the new act, any merchant wanting to export wheat could apply for an export license. Consequently, competition between grain traders has increased.

Daily spot prices for the period of 20 May 2003 to 14 September 2010 were analysed, and no strong evidence to suggest that deregulation induced a permanent or structural change in Australia’s wheat price series was found.

The findings contradict expectations by some growers that deregulation may have led to permanent wheat price changes, such as high prices and increased price volatility.

Dr Mugera said the transition into a newly deregulated market coincided with unusual volatility in world wheat prices that were mainly affected by a pronounced commodity price cycle and the global financial crises.

“Analysis of prices during the sample period revealed two permanent price changes which we call structural breaks, but neither break coincided with the time when the Wheat Export Marketing Act 2008 came into effect,” Dr Mugera said.

“The implication of the results is that deregulation was not the main cause of high volatility in wheat prices during the period analysed, as this was mainly due to volatility in the global market.” The price of Australia’s wheat has remained very volatile and has been trending downwards after the study period, mainly because of global supply and demand.

The goal of deregulation should be to benefit Australian farmers and consumers, and enabling key stakeholders in the industry to respond to changing business environment by investing where there are opportunities for future growth and development.

The findings were published in the paper Deregulation on the Australian Wheat Export Market: What happened to wheat prices? in the Journal of International Food and Agribusiness Marketing.

Media references

Dr Amin Mugera (+61 8) 6488 3427

Diana Boykett (Communications Officer, The UWA Institute of Agriculture)

(+61 8) 6488 3756 / (+61 4) 04 152 262

Tags

Channels
Research — Science
Groups
UWA Institute of Agriculture