PRICE EFFECTS OF WOOL MARKETING INNOVATIONS: SOME EMPIRICAL EVIDENCE

Conflicting claims are often made about the price effects of specific wool marketing innovations. In this paper, a regression model is used to estimate the price effects of two innovations, namely, computerised selling by separation and pre-sale, dense packaging of wool. The results are indicative of aggregate price differentials between wool sold via the 'normal' system and via an innovative system for the particular wool types and sale dates analysed. The extent to which price effects may be offset by differences in selling charges is also considered. In addition, some underlying reasons for price differences, where they exist, are proposed.     

ON THE HIDDEN REVENUE EFFECTS OF WOOL PRICE STABILISATION IN AUSTRALIA: INITIAL RESULTS

A preliminary analysis of demand in eight major OECD wool-consuming countries is used to provide up-to-date estimates of price elasticities of demand for wool. Those elasticities are employed to calculate ex ante market prices, assuming no wool price stabilisation in Australia. The computed ex ante prices are used in a dynamic simulation to estimate demand and, hence, revenue from wool sales to the eight countries in the absence of reserve price operations in Australia. Based on the preferred semi-log demand curve, the variability of wool prices is estimated to have been reduced by 44 per cent, due to Australian intervention in the market up to 1977/78. However, price stabilisation is estimated to have lowered the revenue from Australian wool sales to the eight countries by S139m, or by 2 per cent, in the period up to 1977/78.     

RISK,UTILITY AND STOCKING RATE*

A simple utility-based model of risky wool production is presented. Evaluation of the model indicates the effect on optimal stocking rate of changes in the degree of risk aversion, farm area, variable cost, fixed cost, wool cut, wool price, variance of wool price, climatic variability and tax rate. It is shown that the utility hypothesis implies a lower optimal stocking rate than does expected profit maximization and hence implies a discrepancy between private and public optimal resource use which it is suggested, might be mitigated by a progressive bounty on wool production.     

SHORT RUN PRICE CYCLES IN THE SYDNEY WOOL FUTURES MARKET

Evidence of systematic short run price movements in Sydney wool futures prices is presented. Traders' reaction to market uncertainty is suggested as a rationale of wool futures price periodicity. There is also a discussion of the significance of the cycle with regard to the efficiency of the market.     

Valuing quality attributes of Australian merino wool

We measure the relationship between clean prices of individual lots of wool sold at auction and a range of characteristics of the raw wool. Based on the data for 111,440 fleece lots sold in the 2008–2009 auction season, five hedonic models are estimated to determine the premiums and discounts associated with each wool characteristic in five micron categories. Several wool characteristics exhibited significant nonlinear relationships, and therefore, joint density functions were assessed where appropriate. The results indicate that fibre diameter has the greatest influence on price in all markets. Brand contamination, higher levels of unscourable colour and vegetable matter contamination were found to negatively influence price.     

PRODUCT CHARACTERISTICS AND ARBITRAGE IN THE AUSTRALIAN AND NEW ZEALAND WOOL MARKETS*

The physical characteristics of wool are important determinants of its spinning properties, yarn quality and end use. The degree to which wools from different countries of origin may be substituted has important implications for the domestic marketing policies of Australia and New Zealand. The hypothesis examined in this paper is that the differences in wool prices can be explained by differences in the physical characteristics of the wool and that objective measures of these characteristics allow for effective arbitrage between these markets. The alternative hypothesis is that premiums or discounts exist owing to country of origin. A hedonic price analysis was conducted on wool prices in Australia and New Zealand using a balanced sample of sale lot data from the 1986-87 selling season. In the year examined, there was no evidence of any price premiums associated with country of origin.     

WOOL IN 1980*

Since the introduction of a reserve price scheme in 1970, the interest in wool marketing previously shown by agricultural economists has not been maintained outside the public service and the wool industry itself. Nor is the subject as divisive amongst wool growers with, in general, 'orderly marketing' now acceptable to all factions of wool growers. The history of wool marketing discussion in Australia is reviewed and some reasons for this changing climate of opinion are discussed. An attempt is made to assess the actual performance of the buffer stock scheme in the light of the academic literature of the 1960s.     

WOOL POLICY IN THE UNITED STATES: ITS DIRECT IMPACT ON AUSTRALIAN EXPORTS

Australian apparel wool exports to the United States are less than they might be because of two protective policies of the U.S. government: a fixed tariff and a system of direct price.support payments to U.S. wool producers. Dismantling these policies, though difficult, could mean $10 million to $21 million worth of additional Australian wool sales to the United States, over 1966 levels. Most of the increase would come from tariff cuts. Such amounts are worth negotiating for but would not solve the industry's problems.     

The politics and economics of wool marketing, 1950–2000

The history of marketing, research, development policies and intervention in marketing of the wool clip is reviewed from the perspective of an insider. The overall theme is that politics took over comprehensively from clear economic policy advice on wool marketing in the past 50 years and woolgrowers paid a high price for this. The idea of 'integrated marketing' including an export monopoly, a buffer stock scheme and coordinated promotion and R&D, collectively a strong interventionist philosophy, has waxed and waned. Having borne most of the costs of these failed policies, remaining woolgrowers can now look forward to a market less distorted by political interference.     

SOME ASPECTS OF INCOME STABILIZATION FOR PRIMARY PRODUCERS

The objectives of this paper are two-fold. The first is to discuss the basic economics of an aggregate industry income stabilization policy for primary producers. The second is to examine post-World War II income instability in Australian wool, wheat, and beef and to apportion it into its price and output components. This analysis provides a basis for discussing income stabilization in the Australian context.     

THE NATURE OF PRICE MOVEMENTS DURING SINGLE SALES FOR THREE INDIVIDUAL WOOL TYPES SOLD IN SYDNEY

Price series for three wool types sold in Sydney are tested for the presence of serial correlation using the von Neuman ratio. The results indicate that it is unusual to find significant serial correlation between prices during a single sale. These results have implications for the use of various statistical techniques in wool marketing research and for buying tactics in the market generally.     

A SIMULATED STUDY OF AN AUCTION MARKET

A simulated model of an auction market is developed showing the relationship between the variation in valuations, the price variation and the number of independent bidders in the market. Average prices paid in a market with two or three bidders are less than average valuations. Average prices are progressively greater than average valuations as the number of bidders increases beyond four. Some applications of this model in the Australian wool market are discussed.     

RATIONAL EXPECTATIONS IN THE AUSTRALIAN WOOL INDUSTRY

The process by which producers form expectations has implications for model building and policy analysis. An econometric model of the Australian wool market is estimated. It is shown that the rational expectations hypothesis is not inconsistent with the data for both the period before the floor price scheme was implemented and since that date. This finding has important implications, since it has been shown that the welfare gains from stabilisation are small if producers form rational expectations.     

WOOL-GROWER ADOPTION OF SALE BY SAMPLE

Adoption levels of the innovation, sale of wool by sample, were less than complete but still increasing even after the innovation had been available for a number of years. A model that offers an explanation of the innovation process by individual growers is discussed and tested using econometric methods. The model is converted to testable form, given the data available, with the help of techniques used in studies of demand for travel. Variables found to have a significant influence on adoption levels include grower characteristics, which influence the profitability of innovation, and search variables such as contact with other growers and policies of wool brokers.     

Generic Advertising of U.S. Lamb

ABSTRACT

Generic advertising of U.S. lamb by the U.S. sheep and lamb industry is an effort to reverse an almost continual decline in the industry since World War II. This analysis explores the answers to three related questions: (1) What have been the effects of the generic lamb advertising on U.S. and foreign sheep, lamb, and wool markets? (2) Has the generic lamb advertising program effectively increased the consumption of domestically produced lamb as intended rather than imported lamb? (3) What have been the returns to U.S. sheep producers, feeders, and packers who pay for the advertising? Using a 70-equation, non-spatial, price equilibrium, simultaneous econometric simulation model of the world sheep, lamb, and wool markets, the analysis concludes that the U.S. lamb industry’s generic lamb advertising program has positively impacted their markets, enhanced profitability of the industry, and increased the industry’s share of domestic lamb consumption.     

WOOL PRICE STABILISATION AND PROFIT RISK FOR WOOL USERS

It has often been suggested that more stable wool prices would lead to an outward shift in the long-run demand for wool. To assess this claim it is necessary to examine different sources of risk and instability in wool prices and their impact on the risk borne by wool users. A model is presented in which the input and output decisions of a wool processor are related to interactions between the wool and yarn markets. It is concluded that, if fluctuations in final demand or exchange rates are the major sources of instability, the long-run effect of stabilising prices is to increase the risk faced by wool users and reduce that faced by wool growers.     

DISTRIBUTED LAGS AND BARLEY ACREAGE RESPONSE ANALYSIS

The need to incorporate production response lags in agricultural supply models is established, and two such lags are considered: the familiar adaptive expectations geometric lag, and a more general polynomial lag. These distributed lag supply response models are applied to Australian barley data for the period 1946-47 to 1968-69. A number of statistical problems associated with the adaptive expectations model are discussed, and in particular it is concluded that lags both in the formation of price expectations and in acreage adjustment should be considered when using geometric lag models. While the polynomial lag model does not provide useful results in the present study, its simplicity and flexibility suggest it may be useful in other studies requiring distributed lag models. The short run and long run price elasticity of barley supply estimates are compared with Gruen et al. [14] supply elasticities for the other major rural commodities, from which it appears that barley has a higher short run elasticity but a lower long run elasticity than wheat, wool and meat.     

Estimating Price Distortions Caused by Canadian Wheat Board Initial Payment Policy

Limited Dependent variable regression techniques are used to measure price distortitons caused by initial payments as price floors. The result indicate that the degree of uncertainty producers have regarding the price floor is the critical issue in the level of price distortions.     

The costs of global tariff barriers on wool products: 1997–2005

The Doha round of multilateral trade negotiations commits World Trade Organization (WTO) members to improving market access for both agricultural and nonagricultural goods. Tariff barriers on wool products represent a small but important subset of these negotiations. To inform the debate on the round, we analyze the distortionary effects of recent (1997–2005) tariff barriers on wool products using a model that applies a comprehensive analytical approach with regard to the production, trade, and consumption of wool products. We also account for any indirect effects of wool tariff barriers on the nonwool economy by incorporating the production, trade, and consumption of nonwool products, that is, the framework is a comparative‐static global general equilibrium model with a detailed representation of the world wool market. Changes in wool tariffs over 1997–2005 lead to positive welfare effects for most regions; Italy, China, and the UK are estimated to have gained the most from the changes. The results indicate that the nature of recent wool tariffs severely distort the size of wool industries in different regions. The changes in the output of wool commodities are extreme reflecting the discriminatory nature of the tariffs.     

OPTIMAL WOOL FLOWS FOR MINIMIZATION OF TRANSPORT COSTS*

Movements of wool from grower to wool store in Queensland, N.S.W., Victoria, and South Australia are affected by differing State legislation and Section 92 of the Australian Constitution. Taking various arrangements within each State into account, average wool transport costs from wool production areas to selling centres are found. A linear programming technique is then applied to produce an optimal pattern of wool flows minimizing transport costs for all growers.