The impact of supply, demand and grain quality on the UK bread and feed wheat price differential in the UK

Abstract

The difference between the bread wheat and feed wheat prices in the UK (the premium) is an important influence on behaviour throughout the entire grain chain. The aim of the present study was to quantify the influence of grain quality and other factors on interannual variation in the premium calculated as a proportion of the feed price. A hypothetical model of the UK wheat economy was devised, appropriate annual national data from 1982 to 2000 were collected for each component and multiple regression was used to develop a statistical model for the premium.

The statistical model included livestock numbers (calculated as pig equivalents), Hagberg falling number and wheat stocks, which together explained 0·80 of the interannual variation in the premium. A high premium was associated with high livestock numbers, low Hagberg falling number and low wheat stocks. These variables were included in the hypothetical model because: livestock numbers represent demand for feed wheat; Hagberg falling number is a quality criterion for purchase of bread wheat with a low value indicating poor quality and thus a smaller supply of bread wheat; wheat stocks are one of the sources of supply of wheat. It was concluded that of the 16 supply, demand or price variables in the hypothetical model the main variables associated with the premium from 1982 to 2000 were demand for feed wheat, quality of the wheat harvest and carry-over of wheat from the previous harvest.