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Derived Demand for Wheat by Class

Опубликовано на портале: 05-02-2004
Организация: Department of Agricultural Economics
Подтип: Магистерские
Тематические разделы: Экономика, Экономика отраслевых рынков, Экономика отраслевых рынков: Аграрная экономика

The United States has witnessed a dramatic increase in per capita consumption of wheat flour since 1970. The increase is seen in all six major classes produced, including hard red winter, hard red spring, soft red winter, soft white, hard white, and durum wheat. This has heightened the need for research on the price responsiveness within and between wheat classes. To quantify price responsiveness, derived demand functions were estimated for wheat by class. Three derived demand functions were specified and estimated. First, a double-log model was estimated using both ordinary least squares and generalized least squares. Second, assuming cost-minimizing behavior, a system of derived demand equations was defined from a translog cost function. Third, assuming profit maximizing behavior, derived demand equations were defined from a normalized quadratic profit function. The latter two models were estimated using generalized least squares. Own-price and crossprice elasticities were calculated from the parameter estimated of each model. Based on price elasticity estimates, soft wheat varieties are generally less responsive to their own price than are the hard wheat varieties. The cross-price elasticities indicate that hard red winter wheat, hard red spring wheat, and soft wheat varieties are economic substitutes. The cross-price elasticities are different from those previously reported, which can have important policy implications when introducing new wheat varieties.