LAND USE AND PROFITABILITY IN WHEAT PRODUCTION: THE AUSTRALIAN WHEAT-SHEEP ZONE

Abstract

The Australian wheat industry is an important contributor to the Australian economy and farm sector. This paper investigates the determinants of land use and profitability in wheat production for the Australian wheat-sheep zone. Wheat area supply response and its profitability were estimated across the wheat-sheep zone for the period 1990-2015. The results indicated that the growers in Western Australia are more (relative expected) price responsive than the growers in the South Eastern states. The current wheat area is highly depended on the previous year’s wheat area, and the area adjustment is also not significantly different between the regions. Estimates for own-price (wheat-wheat) and cross-price (wheat-wool) elasticities are with the expected signs, and the cross-price elasticities are more inelastic compared to the own price elasticities. Wheat productivity influenced negatively by the area sown but showed the positive influence of locations and periods, which implies technological progress has been playing a significant role to improve wheat production. Ricardian approach for wheat profitability indicates the regional effect of minimum temperature on determining wheat net revenue in the Australian wheat-sheep zone.

Keywords

• Wheat production
• Land use
• Supply response
• Relative prices
• Ricardian approach
• Profitability