Factors affecting the demand for high protein hard red spring wheat
by Allen B Richards
A THESIS Submitted to the Graduate Faculty in partial fulfillment of the requirements for the degree
of Master of Science in Agricultural Economics HhaTrvriflrT. 'Rrrflrrir irincr Hnmmr +,+.PPx^
Chairman, Examining Committee Approved? Bozeman, Montana January, 19#
Montana State University
© Copyright by Allen B Richards (1955)
Abstract:
The following thesis is an attempt to gain a better perspective of the marketing problems facing the
producer of high protein hard spring wheat by examining various factors which influence the demand
for his product.
Part I introduces the problem and outlines the general methodological procedure used. It outlines the
formulated hypotheses which were used as guideposts for the analysis..
A preliminary background for the analysis of the problem is contained in Part II. A brief history of
flour milling is given. The various segments of the distribution system are outlined. The last two
sections of this part describe the wheat used by the spring wheat millers and the types and properties of
the various flours.
Part III contains the analysis of the problem and is broken into seven sections. Section A presents the
theory of demand which becomes a framework from which to analyze the data. Section B discusses the
role of the flour orders received by the miller in determining and affecting the demand for high protein
spring wheat. Section C describes the effect of other wheat and flour markets on demand. Section D
analyzes the variations in wheat shipments on the Great Lakes and their relationship to demand and
price. Section E considers the fluctuating supplies of various proteins and their effect on the demand
for high protein spring wheat. Section F covers the substitution of high protein spring wheat for durum
wheat in the manufacture of macaroni products. Section G discusses changing technology in the baking
and milling industries and its effect on the demand for high protein spring wheat.
The conclusions and implications of the study are contained in Part IV.
FACTORS AFFECTING THE
DEMAND FOR HIGH PROTEIN
HARD RED SPRING WHEAT
by
A lle n Be R ic h ard s
A THESIS
S ub m itted to th e G raduate F a c u lty
in
p a r t i a l f u l f i l l m e n t o f th e re q u ire m e n ts
f o r th e degree o f
M aster o f S c ie n ce i n A g r ic u ltu r a l Economics
at
Montana S ta te C ollege
Approved: .
) <=a^_JD
Chairm an, Exam ining C om m ittee^
Bozeman, Montana
Ja n u a ry , 1 9 #
N37?
-2 -
V? 3 H
C »y >, «2
T i t l e,
Page
L i s t o f T a b le s .
.....................................................................................................
^
L i s t o f F i g u r e s ......................................................... ........................................................
6
Acknowledgements
..............................................................................................................
g
A b s tr a c t....................................................................................................................................
g
P a rt I .
INTRODUCTION..................................................................................................... ......
A.
The Problem ................................................................................................................
I.
I n tr o d u c tio n and Problem S i t u a t i o n ................................................ 10
H.
S tatem en t o f th e Problem ....................................................................... 12
III.
The O b je c tiv e o f t h i s S t u d y .............................................................. 12
B.
S ta te m e n t o f H ypotheses............................................................................... ......
C.
M eth o d o lo g ical P r o c e d u r e ................................................................................Ilj
P a rt I I .
A.
I.
D ata Used and Method o f A n a ly s is ..................................................... I ^
II.
P rocedure U sed i n t h i s S tu d y ..............................................................l £
BACKGROUND TO THE ANALYSIS........................................................................... 18
The M arket S t r u c t u r e ........................................................................................ 18
I.
II.
I n tr o d u c tio n and H is to r y ...................................................................... 18
M arketing C hannels........................................................
20
a.
The
M arketing P ro c e s s ......................................................
20
b.
The
Term inal E le v a to r . ..................................................
21
c.
The
Commodity B r o k e r .................................................................21
d.
The
S p e c u l a t o r .............................................................................. 21
III.
P ro d u c tio n A re as........................................................................................ 22
IV .
S iz e o f S p rin g Wheat M illin g C e n te rs ................................................23
H 1779
V0
Be
P u rch ases and P r a c tic e s o f th e M i l l e r s .................. ....
a.
L o c a tio n and Method o f P u rc h a sin g . . . . . . . . .
23
b.
P r o te in C ontent o f P u r c h a s e s ...............................
26
F lo u r .
29
I 0' F lo u r Types and U ses. . . .
....................... . . . . . . . .
29
II.
P ro d u c tio n and Consumption o f F lo u r . . . . . . . . . . .
3^
H I.
G eneral P r o p e r tie s o f B read F lo u r . . . . . . . . . . .
3$
G lu ten
P a rt I I I .
A.
B.
.
e
e
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
b.
P r o te in and Ash. . . . . . . . . . . . . . . .
c.
O ther P r o p e r tie s ............................................
o
I.
D eriv ed Demand. . . . . . . . . .
Ho
Changes in Demand . . . . . . . .
.
36
o
e
e
0
o
o
•
0
O
O
o
e
III.
IV .
e
o
»
»
o
tt
0
39
o o o o o o o o o o o
bh
Q
G
o
o
o
e
o
e
e
H .
III.
e
o
G ra p h ic a l and S t a t i s t i c a l Comparison
lo
O ther Wheat and F lo u r M ark ets. ..................
I0
o
'
e
F lo u r and F lo u r S a le s Made b y th e M ille r s
B akers and T h e ir P r a c tic e s . .
The Movement Between M arkets^
e
o
o
O
O
O
o
0
o
e
e
0
e
O
e
o
0
o
O
o
o
0
e
0
h9
0
0
0
«
37
o
o
e
e
e
o
o
o
o
o
e
31
o
e
ii8
e
o
e
0
o
o
o
o
h8
e
o
e
e
.
c
o
o
The E l a s t i c i t y o f S u b s titu ti o n . e.
39
O
O
o
39
o
F lo u r O rders R eceived by th e M ille r
The E f f e c t on DemandA
33
.
/ ' 36
o
Theory o f Demand . . . . . . . . . . . . . .
II.
D.
e
ANALYSIS OF THE DATA........................................ ....
I.
C.
23
. *
e
o
e e
o
o
e
60
o
60
o
62
The E f f e c t on Demand. . ............................... .... . . .
0 63
The V a ria tio n s i n Wheat Shipm ents on th e G re at L akes
66
I.
S hipping on th e G re at Lakes .
e
e
e
e
o
o
o
o
o
e
o
66
II0
E0
B lending o f P r o te in , 6 . . . . . .
I0
II.
III.
IV .
F.
II.
O
o
o
o
o
6?
.
78
.
78
.
79
.
80
.
82
o
O b je c tiv e s o f M ille r s and B ak e rs. . . .
B lending P r a c tic e s . .
O
O
O
The E f f e c t on Demand. .
O
O
O
O
O
O
O
O
O
O
O
O
O
O
o
o
o
o
o
o
o
O
O
o
O
O
O
O
O
O
O
O
. Bh
O
The Use o f Durum W heat. . . . . . . . . . .
The S u b s titu ti o n o f S p rin g Wheat f o r Durum.
.
8H
.
BH
H I.
S u b s titu ti o n E l a s t i c i t i e s . . . . . . . . .
.
88
IV .
The E f f e c t on Demand. . . . . . . . . . . .
.
91
Changing Technology i n th e Baking and M illin g I n d u s tr ie s
I.
II.
Changes i n Baking I n d u s tr y
. 92
O
O
O
O
O
O
O
O
O
0
O
O
O
O
. 92
Changes i n M illin g I n d u s tr y
o
o
o
o
o
o
o
o
o
o
o
o
o
.
9k
.
9k
.
97
III.
P a r t TV.
.
.
V a r ia tio n s i n th e Supply o f P r o te in , . . .
B lending W ith Durum W heat.
I.
G.
S t a t i s t i c a l R e la tio n s h ip s 0 0 0 4 6 0 0 0
E f f e c ts on Demand
O
CONCLUSION,
NO
O
O
.
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
. . . . . . . .
O
O
A0
Summary 0 0 . . o .
B.
C o n clu sio n s. . . . . . . . . . . .
C.
Im p lic a tio n s o f th e S tudy. . . . .
O
De
A reas f o r F u r th e r S tudy. . . . . .
O
APPENDIX. . . . . . . . . . . . . . . . . .
BIBLIOGRAPHY. 0 . . . . . . . . . . . . .
O
O
0
O
O
O
O
O
O
O
O
O
O
O
o
O
O
O
O
O
O
O
O
O
O
O
O
. 97
O
O
O
O
O
O
O
O
O
O
O
. 99
O
O
O
O
O
O
O
O
O
O
o
o
o
0
0
0
o
0
o
0
e
o
0
0
o
*
o
0
O
. 100
o
o
. 101
0
0
. 102
. O O O Oz O 0.0 O OO OO . 106
LIST OF TABLES
Number
I
U
III
IV
V
VI
V II
V III
T itle
Source o f Wheat M ille d b y N o rth e rn G re a t P la in s
M ille r s - 19^2 Crop Y ear. ^
Page
.
2k
The P r o te in C ontent o f S p rin g Wheat Purchased in
19^2 by 11 N o rth ern G reat P la in s F lo u r M ille r s . . . . . . .
27
The P r o te in C ontent o f W in ter Wheat P urchased i n
19^2 by 9 N o rth e rn G re at P la in s F lo u r M ille rs . . . . . . .
28
Type o f F lo u r Produced by 12 F lo u r M ille r s i n th e
N o rth e rn G reat P la in s - .1953. . . . . . . . . . . . . . . .
30
D i s t r i b u t i o n o f P r o te in i n P ro d u cts From Hard Red
W inter W heat. . ............................... ....
33
V a ria tio n s i n P r o te in C ontent o f M ill Stream F lo u rs 9 . . . . .
33
The P r o te in C ontent o f th e M a jo rity o f F lo u r Produced
by II4 FLour M ille r s i n th e N o rth ern G reat P la in s . . . . . .
Bi
D if f e r e n t P r o te in C o n ten t Wheat Used f o r th e P ro d u c tio n
o f S e v e ra l Types o f F lo u r by l it F lo u r .M illin g Companies
i n th e N o rth ern G re at P la in s . . . . . . . . . . . . . . . .
52
I
LIST OF FIGURES
Number
.. T i t l e
Page
1
The R e la tio n s h ip betw een FLbur G rades . . . . . . . . . .
.
2
D e riv a tio n o f th e Demand Curve f o r W heat, . . . . . . . .
. 5i
3
D e riv a tio n o f th e Demand Curve f o r W heat. . . . . . . . .
.
k
T h e o r e tic a l Demand Curves f o r a Commodity . . . . . . . .
. 55
3
T h e o r e tic a l Demand Curves f o r a Commodity
• 55
6
T h e o re tic a l Demand Curves f o r a Commodity 9 9 . . . . .
.
6 56
7
T h e o r e tic a l Demand and Supply Curves f o r a Commodity, , .
. 57
8
The P ric e o f F lo u r a t M in n eap o lis as Compared to th e
R e c e ip t o f FLour O rders a t M in n eap o lis by Weeks f o r
th e Y ear I 9^6 . . . . . . . . . . . . . . . . . . . . . .
. 55
The P ric e o f FLour a t M in n eap o lis as Compared to th e
R e c e ip t o f F lo u r a t M inn eap o lis by Weeks f o r fhe
Y ear 1 9 k l . . . . . . . . . . . . . . . . . . . . . . . .
. 55
Comparison o f M in n eap o lis F lo u r and Wheat P ric e In d e x e s
by Weeks f o r th e Y ears 1956 and 19^7.
. 58
A Comparison o f M inneapo lis F lo u r P ric e In d e x and F lo u r
O rders R eceived i n M inneap o lis by Weeks f o r th e Y ears
19U6 and 19h7 . . . . . . . . . . . . . . . . . . . . .
, 59
The E l a s t i c i t y o f S u b s titu ti o n betw een Hard Red S p rin g
Wheat and Hard Red W inter Wheat - 1929-1938 . . . . . . .
.
The E l a s t i c i t y o f S u b s titu ti o n betw een Hard Red S pring
Wheat and Hard Red W inter W heat5 1935-1937 and 19^1-1950.
. 65
9
10
11
12
13
lit
15
32
52
63
The P ric e o f S p rin g Wheat on th e D uluth M arket as
Compared to th e Shipm ents o f Wheat from D uluth f o r th e
Y ears 1952-1953.. . . . . . . . . . . . . . . . . . . . .
,
68
The P r ic e o f S p rin g Wheat on th e M in n eap o lis M arket as
Compared to th e R e c e ip ts o f Wheat a t M in n eap o lis f o r
th e Y ears 1951 - 1951 . . . . . . . . . . . . . . . . . .
.
70
.
-
“ 7"
16
17
18
19
The P r ic e o f Wheat P aid to U. S. Farm ers as Compared to
th e R e c e ip ts o f Wheat a t 12 P r in c ip a l M arkets f o r th e
Y ears I p li l- 1 9£U .
......................
The M onthly P ric e o f S prin g Wheat on th e D oluth M arket
as Compared to th e M onthly Shipm ents o f S p rin g Wheat
from D uluth f o r an Average Y ear. ^
Tl
.
72
Comparison o f U0 S. Farm P ric e In d ex and D uluth P ric e
In d e x f o r Wheat by M onths. . . . . . . . . . . . . . . . .
7£
Comparison o f th e D i f f e r e n t i a l betw een D uluth and
M in n eap o lis P ric e In d e x e s f o r Wheat and th e Q u a n tity
o f Shipm ents over th e G re a t L ak es, M onthly F ig u re s
f o r 11 Y e ars, l p l i l - 1 91>1. . . . . . . . . . . . . . . . . .
76
20
T h e o re tic a l Demand Curves f o r High P r o te in S p rin g W heat.
21
T h e o re tic a l Demand and Supply Curves f o r High P r o te in
S p rin g Wheat . . . . . . . . . . . . . . . . . . . . . . .
82
T h e o re tic a l Demand and Supply Curves f o r High P r o te in
S p rin g Wheat . . . . . . . . . . . . . . . . . . . . . . .
81|
The E l a s t i c i t y o f S u b s titu ti o n betw een Durum Wheat and
Hard Red S p rin g W heat. . . . . . . . . . . . . . . . . . .
90
22
23
.
2k
T h e o re tic a l Demand Curves f o r High P r o te in S p rin g W heat.
23
T h e o r e tic a l Demand and Supply Curves f o r High P r o te in
S p rin g Wheat and F lo u r . . . . . . . . . . . . . . . . . .
p£
T h e o re tic a l Demand and Supply Curves f o r High P r o te in
S p rin g Wheat . . . . . . . . . . . . . . .
96
26
„
78
91
—
8-
, ACKNOWLEDGEMENTS
The w r i t e r w ish es to e x p re ss h is s in c e r e a p p r e c ia tio n f o r th e h e lp
and -guidance giv en by s e v e ra l p e rso n s and o rg a n iz a tio n s i n th e p re p a ra tio n
o f th is th e s is „
The M in n eap o lis and D uluth Boards o f Trade responded g e n e ro u sly to
s e v e r a l r e q u e s ts f o r in fo rm a tio n .
Members o f th e g r a in tr a d e were k in d
and h e lp f u l i n p r e s e n tin g th e w r i t e r w ith d a ta u se d i n t h i s s tu d y .
Members o f th e s t a f f i n th e D epartm ent o f A g r ic u ltu r a l Economics and R u ral
S o c io lo g y have been h e lp f u l i n t h e i r s u g g e s tio n s and c r itic is m s o f t h i s
w ork.
P r o fe s s o r L ayton S. Thompson d ev o ted c o n s id e ra b le tim e to th e rev iew
o f th e m a n u sc rip t as i t was p re p a re d .
The w r i t e r i s e s p e c i a l l y in d e b te d to P r o fe s s o rs Edward H. Ward and
C liv e R. H a rsto n f o r t h e i r encouragem ent, g u id a n ce , and c r i t i c a l rev iew
o f th e w r i t e r 's w ork.
However, th e w r i t e r assumes f u l l r e s p o n s i b i l i t y f o r
th e id e a s and c o n c lu s io n s c o n ta in e d i n t h i s t h e s i s .
-9ABSTRACT
The fo llo w in g t h e s i s i s an a tte m p t to g a in a b e t t e r p e rs p e c tiv e o f th e
m a rk e tin g problem s fa c in g th e p ro d u cer o f h ig h p r o te in h a rd s p rin g w heat by
exaiitining v a rio u s f a c t o r s w hich in flu e n c e th e demand f o r h i s p ro d u c t.
P a r t I in tr o d u c e s th e problem and o u tlin e s th e g e n e ra l m e th o d o lo g ic al
p ro ced u re u se d . X t o u tlin e s th e fo rm u la te d h y p o th eses w hich were u se d as
g u id e p o sts f o r th e a n a ly s is ..
A p re lim in a ry background f o r th e a n a ly s is o f th e problem i s c o n ta in e d
i n P a r t XX. A b r i e f h i s t o r y o f f l o u r m illin g i s g iv e n . The v a rio u s seg­
m ents o f th e d i s t r i b u t i o n system a re o u tlin e d . The l a s t two s e c tio n s o f
t h i s p a r t d e s c rib e th e w heat u sed by th e s p rin g w heat m ille r s and th e ty p e s
and p r o p e r tie s o f th e v a rio u s f l o u r s .
_
I I I c o n ta in s th e a n a ly s is o f th e problem and i s broken in to seven
s e c t i o n s . S e c tio n A p re s e n ts th e th e o ry o f demand which becomes a framework
from w hich to an aly z e th e d a ta . S e c tio n B d is c u s s e s th e r o le o f th e f lo u r
o rd e rs re c e iv e d by th e m i l l e r i n d e te rm in in g and a f f e c t in g th e demand f o r
h ig h p r o t e i n s p rin g w h eat. S e c tio n C d e s c rib e s th e e f f e c t o f o th e r wheat
and f l o u r m ark ets on demand. S e c tio n D a n a ly z e s th e v a r ia tio n s i n wheat
sh ipm ents on th e G re at Lakes and t h e i r r e l a t i o n s h i p to demand and p r i c e .
S e c tio n E c o n s id e rs th e f l u c t u a t i n g s u p p lie s o f v a rio u s p r o te in s and t h e i r
e f f e c t on th e demand f o r h ig h p r o te in s p rin g w heat. S e c tio n F co v ers th e
s u b s t i t u t i o n o f h ig h p r o te in s p rin g w heat f o r durum w heat i n th e m anufacture
o f m acaroni p ro d u c ts . S e c tio n G d is c u s s e s changing te ch n o lo g y i n th e baking
and m illin g i n d u s t r i e s and i t s e f f e c t on th e demand f o r h ig h p r o te in s p rin g
w h eat.
The c o n c lu s io n s and im p lic a tio n s o f th e stu d y a re c o n ta in e d i n P a rt IV .
-1 0 -
P a rt I
INTRODUCTION
Ae The Problem
Ie
I n tr o d u c tio n and P roblem ■S itu a tio n
For th o u san d s o f y e a rs b re a d h a s been th e s ta p le d i e t o f W estern man
and one o f th e w o rld r s m ost in d is p e n s a b le p ro d u c ts .
Even in r e c e n t y e a rs
when o u r h ig h e r s ta n d a rd s o f l i v i n g and in c r e a s in g v a r i e t y i n fo o d s have
r e s u l t e d i n l e s s r e lia n c e upon b re a d , i t h a s ,' n e v e r th e le s s , rem ained one
■o f our b a s ic fo o d s .
Good b re a d , u n f o r tu n a te ly , cannot be made o u t o f e v e ry ty p e o f wheat
p roduced.
I t m ust be w heat t h a t c o n ta in s th e p ro p e r q u a l i t y and q u a n tity
of p ro te in .
I t h as been o n ly i n th e l a s t th r e e d e ca d e s, how ever, t h a t
p r o t e i n has been given r e c o g n itio n in th e g r a in m a rk e ts.
In 1925, th e f i r s t
premiums f o r p r o te in were e s ta b lis h e d on th e M in n eap o lis m a rk e t.
Since
th e n , p r o te in premiums have grown to occupy an im p o rta n t p o s itio n i n our
a g r i c u l t u r a l economy.
I t h as been e s tim a te d t h a t in th e s t a t e o f Montana
a lo n e , i f p r o te in premiums were c o n sid e re d a ' s e p a ra te commodity, th e y would
r e p r e s e n t th e f i f t h l a r g e s t c ro p , exceeded o n ly by w h eat, c a t t l e , sheep,
and d a ir y . I /
P r o te in premiums a re p a id on "h ig h p ro te in " w heat w hich i s
g e n e r a lly c o n sid e re d t o be w heat c o n ta in in g more th a n 12 p e r c e n t p r o te in .
l / H. R, S tucky and M. C. T a y lo r, Looking Ahead W ith Montana Farm ers and
R an ch ers, F o ld e r 22, Montana E x te n sio n S e rv ic e , Montana- S ta te C o lle g e,
Bozeman, M ontana, Septem ber I , 1952.
The premiums a re e x p re sse d as in c r e a s in g premiums f o r e v e ry o n e -te n th or
o n e -h a lf p e r c e n t p r o te in over 12 p e r c e n t.
The payment o f p r o te in premiums, even though i t has h e lp e d th e p ro ­
d u cer t o in c r e a s e h is incom e, h as caused a d d itio n a l U n c e rta in ty to th e
d e a le r and p ro d u cer engaged i n an a lre a d y u n c e r ta in f i e l d .
Wheat p r ic e s
f l u c t u a t e d a i l y b u t th e e f f e c t s o f t h i s f l u c t u a t i o n can be g r e a t l y m in i^
raized th ro u g h hedging i n th e f u tu r e s m ark et.
P r o te in premiums, however,
can n o t be hedged and th u s cause a d d itio n a l a n x ie ty on th e p a r t o f th o se
h o ld in g h ig h p r o te in w heat f o r which premiums have been p a id .
The p ro d u c e r has q u e stio n e d a t tim es w h eth er o r n o t a l l o f th e p re ­
miums p a id by th e m i l l e r a re b ein g r e f l e c t e d back to h im s e lf.
The payment
o f premiums have te n d ed to e s t a b l i s h p r o te in as a s e p a ra te commodity.
The
p ro d u c e r knows i n a g e n e ra l way how h i s g rain .m o v es to m a rk e t, y e t th e r e '
may be some q u e s tio n as to w hether o r n o t h ig h p r o te in w heat fo llo w s th e same
m arketing:-' p a t t e r n as t h a t o f o rd in a ry w h eat.
Premiums, i n th e m selv e s,
r e p r e s e n t an im p o rta n t p a r t o f th e p ro d u c e r's income and f o r t h i s re a so n
i t i s to h is advantage to know ab o u t them and how th e y a re e s ta b lis h e d .
dn th e p ro d u c tio n s id e , th e p ro d u c e r has re c e iv e d h e lp from in d u s tr y ,
governm ent, and e d u c a tio n a l i n s t i t u t i o n s .
C o u n tless hours have been sp e n t
d e v e lo p in g new v a r i e t i e s o f w heat f o r th e p ro d u c e r.
O ther m easures have
been ta k e n to give th e p ro d u c e r th e b e s t p o s s ib le advantage i n r a i s i n g h is
c ro p .
However, w hat happens to h is g ra in a f t e r i t i s h a rv e s te d i s j u s t as
im p o rta n t to th e p ro d u c e r.
U n le ss he can s e l l h is g ra in a t a f a i r p r ic e ,
he i s n o t b e n e f itin g f u l l y from h is p ro d u c tio n e f f o r t s .
The p ro d u c e r,
t h e r e f o r e , i s i n t e r e s t e d in w hat happens to h i s h ig h p r o te in w heat when
-1 2 -
i t le a v e s h i s farm i n th e N o rth e rn G re at P la in s .
He i s i n t e r e s t e d i n
th o s e who h andle th e w heat and a id i t s movement to m a rk e t.
He i s i n t e r ­
e s te d i n th o se who buy and s e l l th e w heat a f t e r i t h a s 'a r r i v e d on th e mar­
k e ts
I n a d d itio n , he may w ant to know how th e w heat i s u se d , th e p ro d u c ts
made from i t , and th e u s e s f o r th e s e p ro d u c ts .
In g e n e r a l, th e p ro d u c e r i s
i n t e r e s t e d i n th e movement o f w heat from h is farm to th e u ltim a te consumer
who u s e s w heat i n i t s f i n a l form o f b re a d and o th e r b ak in g p ro d u cts..
II.
S ta te m e n t o f th e Problem
T h is stu d y i s concerned w ith th e f a c to r s b ehind th e demand f o r high
p r o te in h ard re d s p rin g w heat, th e re a so n s f o r th e f lu c t u a t i o n s in demand,
and th e e f f e c t th e demand f a c t o r s have on p r i c e .
P r ic e s a re d eterm in ed by v a rio u s su p p ly and demand f a c t o r s .
An
e x am in atio n o f b o th m ust be made in o rd e r to an aly ze p r ic e s c o m p letely .
However, t h i s s tu d y i s concerned o n ly w ith th e demand f a c t o r s and t h e i r
e f f e c t on th e p r ic e th e p ro d u c e r r e c e iv e s f o r h is h ig h p r o te in s p rin g
w h eat.
III.
The O b je c tiv e o f t h i s Study
The o b je c tiv e o f t h i s stu d y i s to i s o l a t e , exam ine, a n a ly z e , and
d e s c rib e th e f a c t o r s which a f f e c t th e demand f o r h ig h p r o te in h ard re d
s p rin g w heat and t h e i r r e l a t i o n s h i p to p r i c e .
A knowledge o f th e f a c t o r s b eh in d th e m arket p r ic e f o r h ig h p r o te in
s p rin g w heat would be h e lp f u l to th e p ro d u c e r and give him a b e t t e r u n d er­
s ta n d in g o f th e co m p lex ity o f m arket o p e ra tio n s And e x p la in why he r e ­
c e iv e s a p a r t i c u l a r p r ic e f o r h is w h eat.
Not o n ly w i l l th e p ro d u cer
-1 3 -
b e n e f it,, b u t th e r e s t o f th e g ra in tr a d e and o th e rs a f f e c te d by th e p r ic e
o f h ig h p r o t e i n s p rin g w heat w i l l come to a g r e a te r a p p r e c ia tio n f o r each
o t h e r ’ s p roblem s.
The demand f o r high p r o te in s p rin g w heat i s a d e riv e d demand from
th e consum ers' demand f o r b re a d and o th e r b ak in g p ro d u c ts .
S in ce th e
o b je c tiv e i s to a n aly z e th e demand f a c t o r s , t h i s stu d y concerns m ain ly
th e m illi n g and b ak in g in d u s t r i e s because th e y a re th e consumers and
p ro c e s s o rs o f w heat and w heat p ro d u c ts .
T h e re fo re , f u r t h e r d is c u s s io n
w i l l be lo c a te d p r im a r ily i n th e s e a r e a s .
B.
S ta te m e n t o f H ypotheses
The demand f o r h ig h p r o te in h ard re d s p rin g w heat i s a f f e c t e d by th e
fo llo w in g m ajor f a c t o r s :
( I ) F lo u r o rd e rs re c e iv e d by th e m i l l e r s ; (2)
O ther w heat and- f l o u r m a rk e ts; ( 3 ) The s e a s o n a lit y o f s h ip p in g on th e
G reat L a k e s; (U) The b le n d in g o f p r o te in ; (5 ) The durum w heat cro p , and;
(6 ) Changing te ch n o lo g y i n th e m illin g and b ak in g i n d u s t r i e s .
(1) F lo u r o rd e rs r e c e iv e d by th e m i l l e r s r e p r e s e n t th e m ajo r f a c to r
b e h in d th e demand f o r h ig h p r o te in s p rin g w heat.
w heat i s dependent on t h e i r . s a l e s o f f l o u r .
The m i l l e r s ’ demand f o r
.The m ille r s buy w heat to
m eet th e f l o u r commitments.
(2) Buyers from o th e r m arket a re a s e n te r th e s p rin g w heat m arket f o r
w heat and cause a s h i f t i n th e demand curve as w e ll as more e l a s t i c i t y .
■The r e v e r s e s i t u a t i o n b rin g s about s u b s t i t u t e s f o r s p rin g w heat and causes
th e demand f o r s p rin g w heat to be more e l a s t i c .
-I il-
(3 )
The s e a s o n a lit y o f sh ip p in g on th e G reat Lakes cau ses a se a so n a l
change in th e demand f o r s p rin g w heat.
D uring th e l a t t e r p a r t o f th e open
seaso n th e r e i s a d e c re a se i n th e e l a s t i c i t y o f demand.
,The s e a s o n a lity
a ls o s h i f t s th e demand c u rv e --th e amount and d i r e c t i o n depending on th e
s e a so n .
(Il) The n e c e s s ity o f b le n d in g p r o te in s c au ses f lu c t u a t i o n s in th e
demand f o r th e in d iv id u a l p r o te in s depending l a r g e l y on th e r e l a t i v e
s u p p lie s .
(3 ) The s h o rta g e o f durum w heat c au se s an a l t e r n a t i v e u se f o r high
p r o te in s p rin g w heat. ..This makes th e demand f o r s p rin g w heat more e l a s t i c .
( 6 ) Changing te ch n o lo g y in th e m illin g and b aking in d u s t r i e s cause'
th e demand to be more e l a s t i c by p ro v id in g , s u b s t i t u t e s f o r h ig h p r o te in
w h eat.
C0 M eth o d o lo g ical P rocedure
T»
D ata U sed and Method, o f A n a ly sis
The p rim a ry d a ta u sed in t h i s s tu d y were e m p iric a l ev id en ce g a th e re d
by d i r e c t in te rv ie w w ith members o f th e f l o u r m illin g in d u s tr y and by m ail
from members o f th e b ak in g in d u s tr y .
The d a ta re c e iv e d from th e m illin g
in d u s tr y were by f a r th e m ost e x h a u s tiv e and r e p r e s e n t a t i v e .
F if te e n f l o u r m ille r s i n Montana3 N orth D akota3 and M innesota were .
in te rv ie w e d .
These m ille r s produce a p p ro x im a te ly o n e - th ir d o f a l l th e
f l o u r produced i n th e U nited S t a t e s 3 and a p p ro x im a te ly 63 p e r c e n t o f th e
f l o u r produced in th e s t a t e s o f Montana3 N orth D akota3 and M in n eso ta,
They
were s e le c te d because th e y a re th e l a r g e s t m i l l e r s in th e N o rth e rn G reat
-If) =
P la in s and t h e i r p r a c tic e s p ro b a b ly have more in flu e n c e on th e m arket th a n
a l l th e s m a lle r m i l l s .
.Most o f th e m ille r s a re n a tio n a l i n s i z e , and t h e i r
p o l i c i e s and p r a c tic e s a re in d ic a tiv e o f th e f l o u r m illin g in d u s tr y as a
w hole.
Members o f th e b aking in d u s tr y were c o n ta c te d by m a il.
A m a il ques­
tio n n a ir e was s e n t to each o f 28 b a k e rs th ro u g h o u t th e c o u n try .
p le te d q u e s tio n n a ir e s were r e tu r n e d .
Nine com­
These n in e a re s u f f i c i e n t l y s c a tte r e d
around th e c o u n try so t h a t a g e n e ra l p ic tu r e o f b a k e r s ' p r a c tic e s in
s e v e r a l a re a s h as been o b ta in e d .
The seco n d ary d a ta u sed came m o stly from th e g r a in tr a d e and tr a d e
p e rio d ic a ls .
In fo rm a tio n g a th e re d from th e N o rth w estern M ille r was ex­
tre m e ly h e lp f u l.
The D uluth and M in n eap o lis Boards o f Trade p ro v id e d
'
e x c e lle n t so u rc e s o f in fo rm a tio n , p a r t i c u l a r l y th ro u g h th e use o f t h e i r
Annual R e p o rts.
The m i l l e r s r sc h e d u le s were f i r s t assem bled and com posite r e s u l t s
o b ta in e d to a l l q u e s tio n s .
th e b a k e r s ' q u e s tio n n a ir e s .
S im ila r p ro c e d u re was u sed in d e a lin g w ith
These com posite r e s u l t s were th e n an aly zed
and used to t e s t th e h y p o th e se s, to g e th e r w ith r e s u l t s o f a s t a t i s t i c a l
a n a ly s is o f b o th p rim a ry and seco n d ary d a ta .
A fte r t e s t i n g th e h y p o th e se s,
in f e r e n c e s were drawn and some g e n e ra l c o n c lu sio n s were re a c h e d .
Ho
P rocedure Used in t h i s Study
The i n i t i a l p h a se s o f t h i s stu d y were s p e n t in rev ie w in g l i t e r a t u r e
i n th e f i e l d o f w heat m a rk e tin g i n o rd e r to g a in a b e t t e r p e rs p e c tiv e o f
th e problem .
The amount o f l i t e r a t u r e a v a il a b le , however, was found to be
-1 6 -
r a th e r S m all0
T h erefo res t h i s stu d y r e l i e s v ery g r e a t ly on em p ir ic a l
in fo r m a tio n .
Prom th e o v e r - a ll problem o f h ig h p r o te in w heat m a rk e tin g , th e s p e c i­
f i c problem was s e le c te d .
By li m i t i n g th e s tu d y to th e s p e c if ic problem a
d e t a i l e d a n a ly s is can be made.
At th e same tim e , however, th e s p e c if ic
problem i s s t i l l b ro ad enough so t h a t i t f i t s in to th e l a r g e r problem o f
h ig h p r o te in w heat m a rk e tin g .
The im portance o f th e s iz e o f th e s p e c if ic
problem to be a tta c k e d l i e s i n th e f a c t t h a t a n o th e r s m a lle r problem co u ld
have been s e le c te d and examined from e v e ry c o n c e iv a b le a s p e c t and i n a
much more th o ro u g h m anner.
Y et, a s o lu tio n to such a sma^Ll problem would
be so sm all a p a r t o f th e l a r g e r problem o f h ig h p r o te in w heat m ark etin g
t h a t i t would c o n tr ib u te l i t t l e t o s o lv in g th e l a r g e r problem .
I t is f e lt,
th e r e f o r e , t h a t any s o lu tio n o f th e problem w ith which t h i s s tu d y i s con­
cern ed w i l l be m eaningful and c o n trib u te som ething to th e so lv in g o f th e
l a r g e r problem o f h ig h p r o t e i n w heat m a rk e tin g .
The n e x t s te p was th e fo rm u la tio n o f h y p o th e se s.
A s e t o f h y p o th eses
was a r r iv e d a t th ro u g h d e d u c tio n from th e s p e c i f i c problem and th ro u g h i n ­
d u c tio n from th e l i t e r a t u r e re v ie w ed .
These hypotheses were th e n u sed as
g u id e p o sts in p ro c e e d in g from th e known i n t o th e unknownj i , e . , p ro c e ed in g
i n t o th e a c tu a l a n a ly s is o f th e problem .
L a rra b e e say s h y p o th e se s "go be­
yond th e given to a p o s s ib le p a tte r n in g o r arrangem ent o r i n t e r p r e t a t i o n o f
i t j and th e y do so p r o v is io n a lly , w ith a d e f i n i t e view to u ltim a te c o n f ir ­
m ation o r r e j e c t i o n a f t e r t e s t i n g " . 2/
2 / H aro ld A. L a rra b e e , R e lia b le Knowledge, Houghton M if f li n Comnanv.
Cambridge, 1 9 ^ , p . 1 6 8 7 ™ ------------------------
-1 7 -
I n o rd e r to examine th e problem and t e s t t h e Iiypdtheses3 e m p iric a l d a ta
were c o lle c te d and seco n d ary in fo rm a tio n g ath ered ^
This in fo rm a tio n was
u sed to t e s t th e hypotheses, and t o make some n e c e s s a ry a d ju stm e n ts i n both
th e problem S tatem ep t and th e h y p o th e se s.
P a r t I I I o f t h i s r e p o r t covers th e a n a ly s is o f t h i s d a ta and th e
t e s t i n g o f th e h y p o th e se s,
drawn from th e a n a ly s is ,
Pgtrt IV p r e s e n ts th e c o n c lu sio n s and inferences"
.However, b e fo re p ro c e e d in g in to th e a n a ly s is i t
w i l l be h e lp f u l to have a p ic tu r e o f s e v e ra l p h ases o f w heat m ark etin g and
t h e i r r e l a t i o n to t h i s s tu d y , and a p ic tu r e o f th e commodity, f l o u r , w ith
which t h i s stu d y i s concerned, ■T h e re fo re , P a r t I I covers th e n e c e s sa ry
m a te r ia l to p ro v id e an adequate background f o r i n t e r p r e t i n g th e s p e c if ic
p o in ts to be covered i n P a r t I I I , th e a n a ly s is o f th e d a ta .
r
—1 8 —
P a rt I I
BACKGROUND TO THE ANALYSIS
Ae
I o
The M arket S tr u c tu r e
I n tr o d u c tio n and H is to ry
There p ro b a b ly i s no o th e r in d u s tr y w hich has a lo n g e r h i s t o r y i n th e
U n ite d S ta te s th a n th e f l o u r m illi n g in d u s try * • The f i r s t American manu­
f a c tu r in g e s ta b lis h m e n ts were d e v o ted to g r a in g r in d in g .
The h i s t o r y and
grow th o f f l o u r m illi n g p a r a l l e l s th e h i s t o r y and grow th o f our country*
The f i r s t known f l o u r m ill was founded on th e E a s te rn sea b o a rd i n 1632*
I n su b seq u en t y e a r s , f l o u r m illin g grew up alo n g th e e a s te r n c o a s t and New
York C ity e s ta b lis h e d i t s e l f as th e f l o u r c e n te r o f t h i s p e r io d .
As th e
n a tio n expanded, w heat growing and f l o u r m illin g sp re ad th ro u g h o u t a l l th e
c o lo n ie s*
Poor m illi n g f a c i l i t i e s , and th e h ig h c o s t o f tr a n s p o r ta tio n
te n d ed to make each a re a s e l f - s u f f i c i e n t , and th e r e f o r e , m ost o f th e m ills
were sm all custom m i l ls ,s e r v in g o nly l o c a l tr a d e .
W estward e x p an sio n o f th e .n a t io n b ro u g h t ab o u t a s im ila r ex p an sio n i n
th e m illin g in d u s tr y .
The w heat growing a re a s s h i f t e d to w e ste rn New York
and th e Midwest w ith P h ila d e lp h ia , B a ltim o re , a n d .R o c h e ste r becoming th e
le a d in g f l o u r m ark ets and m illin g c e n te r s .
F u r th e r w estw ard movement
b ro u g h t th e w heat fa rm e r o u t onto th e g r e a t p l a i n s . ■Again th e c e n te r s o f
m illin g and th e f l o u r m ark ets moved w ith th e crop*
C in c in n a ti, S t, L o u is
and New O rlean s to o k t h e i r p la c e i n m illin g h i s t o r y as th e c e n te r s f o r t h i s
p e r io d . ■F in a lly , th e home m arket demand, th e la c k o f t r a n s p o r ta tio n to th e
e a s t , and th e undeveloped s t a t e o f tr a n s p o r t a t i o n i n th e w est te n d ed to
b rin g about m i l l developm ent i n th e w e ste rn p l a i n s , I /
M illin g began a t w hat i s now M in n eap o lis as e a r l y as 1 8 2 2 -2 ] w ith th e
e s ta b lis h m e n t o f a sm all g r i s t m i l l to s e rv e th e s o ld ie r s a t F o r t S n e llin g 6
S e t t l e r s moved v e ry slo w ly in to th e a re a and f o r a number o f y e a rs were o u t­
numbered by tr a p p e r s , lumbermen, and m in e rs.
A f te r 1851, th e r e was a r a p id in c r e a s e o f p o p u la tio n in M innesota,
-Flour and fe e d m i l l s sprung up a l l o v er th e s t a t e .
m i l l s tu rn in g o u t p ro d u c ts w orth over $ 1 ,2 0 0 ,0 0 0 ,
By i8 6 0 th e r e were 81
The developm ent o f
M in n eap o lis a s a m illin g c e n te r w as, up to 1870, th e r e s u l t o f th e movement
o f fa rm e rs and m ills in to th e great p l a i n s .
A f te r 1870, th e r a p id r i s e o f
M in n eap o lis was due to a r e v o lu tio n i n m illi n g p ro c e ss e s which r e s u lte d
from th e in tr o d u c tio n o f th e p u r i f i e r and r o l l e r sy stem .
These new p ro ­
c e s s e s b ro u g h t suprem acy i n w o rld tra d e to American f l o u r s and th e Minneapo­
l i s m ille r s i n th e p e rio d fo llo w in g 1870.
Commercial m illi n g developed in N orth D akota and South D akota i n th e
1 890r s and in Montana a f t e r 1900.
At th e same tim e th e re was a c o n c e n tra ­
t i o n o f m i l l ow nership i n th o se a r e a s . .,The R u s s e ll- M ille r Company was
o rg a n iz e d i n 1897»
I n 1911 th e Montana F lo u r M ills Company began o p e ra tio n s
i n H arlow ton, s u b se q u e n tly b u ild in g a la r g e m ill a t Lew istow n.
■ O ther la r g e combines came about i n t h i s same p e rio d .
The I n t e r n a t i o n a l
M illin g Company appeared a t New Prague, M innesota and ro s e to a p re s e n t
d a i l y c a p a c ity o f 53?IiOO s a c k s . (1 00# s a c k s ) ,
Commander-Larabee C o rp o ratio n
was founded by b rin g in g to g e th e r m ills s c a t t e r e d ab o u t M innesota and Katisa s .
l / C h a rle s B. Kuhlmann, The Development o f th e F lo u r M illin g I n d u s tr y in
th e U n ite d S t a t e s , Houghton M if f lin Company, New York, 1929,
'
-
20 -
Comraander-Larabee now h as a d a ily c a p a c ity o f 38,61:0 s a c k s .
The tr e n d
tow ards c o n c e n tra tio n , has c o n tin u e d up to th e p r e s e n t day w ith th e la r g e
g e t t i n g l a r g e r and th e sm all droppin g by th e w ay sid e, 2/
I!,
M arketing Channels
a 0 •The M arketing P ro ce ss
The f i r s t s te p i n th e m a rk e tin g p ro c e ss i s th e d e liv e r y o f w heat by
th e p ro d u c e r to th e c o u n try e le v a to r .
The c o u n try e le v a to r p la c e s th e
wheat- i n s to ra g e o r lo a d s i t in to a bo x car f o r immediate shipm ent*
c o u n try e le v a to r g e n e r a lly buys th e g r a in from th e p ro d u c e r.
some c ase s i t i s s to r e d in th e p r o d u c e r 's name.
The
However, in
S to rag e f o r p ro d u c e rs i s
n o t v e ry p r e v a le n t to d a y p a r t l y because th e e le v a to r s a re s t o r i n g Commodity
C re d it C o rp o ra tio n w heat i n s te a d .
The c o u n try e le v a to r i s a c o lle c tio n
p o in t f o r w heat produced i n th e su rro u n d in g a r e a .
Very l i t t l e o f th e w heat
moves d i r e c t l y from p ro d u c e r to te rm in a l m a rk e t.
The e le v a to r c o n ta c ts a commission firm a t th e te rm in a l m ark et, in
t h i s case M in n eap o lis o r D u lu th , and n o t i f i e s i t o f th e q u a n tity and
q u a l i t y o f w heat e n ro u te to m arket o r on hand.
th e w heat f o r th e c o u n try e le v a t o r .
The commission firm hedges
When th e w heat i s re c e iv e d on th e
m ark et i t i s t e s t e d f o r p r o te in and q u a l i t y .
The commission firm th e n
p la c e s a sample o f th e g ra in on th e tr a d in g ta b l e s on th e c ash f lo o r and
p ro c e ed s to b a rg a in w ith p ro s p e c tiv e custom ers*
The l a r g e s t sh a re o f th e cash w heat i s p u rc h a se d by p ro c e s s o rs l i k e
' •■
bn
" ■.
..............
_
■■■
2 / C h arles B. Kublmann, I b i d .
■■ - -
................- -
■■
-
---
- ..■
I
-
_______
___ -L-
I
-2 1 -
th e f l o u r m i l l e r .
The m i l l e r g rin d s th e w heat he buys on th e cash f l o o r
in to f l o u r and fe e d , and s e l l s th e s e p ro d u c ts to b a k e rs , fe e d m i l l s , and
o th e r s d e s ir in g th e p ro d u c ts .
The b a k e r, in t u r n , makes b re a d from th e
f l o u r and s e l l s i t to th e ' consumer.
b.
The Term inal E le v a to r.
The te rm in a l e le v a to r firm to d a y i s p r im a r ily a g r a in m erch an d iser
r a t h e r th a n j u s t th e s u p p lie r o f a la r g e s to r a g e ■w arehouse f o r g r a in .
The
te rm in a l e le v a to r firm p u rc h a se s w heat i n i t s own name and p ro ceed s to
c le a n i t and b in i t by narrow ra n g e s o f p r o t e i n .
The la r g e f a c i l i t i e s
p e rm it i t to s to r e huge q u a n t i t i e s o f w heat, and o th e r g r a in s , and to be i n
a p o s itio n to b le n d d i f f e r e n t w heats to s a t i s f y p a r t i c u l a r cu sto m ers.
c.
The .'Commodity B roker
The commodity b ro k e r d i f f e r s from th e commission firm i n t h a t he
o p e ra te s o n ly on th e f u tu r e s m a rk e t.
H is job i s to buy and s e l l c o n tr a c ts
f o r f u tu r e d e liv e r y o f w heat and o th e r com m odities.
The b ro k e r may be
b o th a s e c u r i t i e s and a commodity b ro k e r, o r he may s p e c ia liz e i n commodi­
t i e s a lo n e .
tu re .
H is custom ers r e p r e s e n t e v e ry segment o f th e m a rk e tin g s t r u c ­
M ille r s , te rm in a l and c o u n try e le v a to r s , and s p e c u la to rs a re among
th e b r o k e r 's cu sto m ers.
d.
The S p e c u la to r
The s p e c u la to r , a s found in th e commodity m a rk e ts, i s a p e rs o n who
buys and s e l l s on th e f u tu r e s m arket in o rd e r to make a p r o f i t from th e
tra n s a c tio n s .
any.
The s p e c u la to r h o ld s no com m odities n or ta k e s p o s s e s s io n o f
Many f e e l t h a t th e s p e c u la to r does more harm th a n good.
w ith o u t him th e r e would be no f u tu r e s m a rk e t.
However,
I t i s th e s p e c u la to r who i s
-2 2 -
alw ays p r e s e n t re a d y to buy when th e c o u n try e le v a to r w ishes to hedge, or
to s e l l when th e e le v a to r w ishes to r e v e rs e th e hedge.
N a tu r a lly , i t i s
n o t alw ays th e s p e c u la to r who p u rc h a se s th e hedge, b u t w ith o u t h is p re se n c e ,
hedging as i t i s now p r a c tic e d would be im p o s sib le .
!IT .
P ro d u c tio n A reas
There are f o u r m ajor w heat pro d u cin g a re a s i n th e U n ite d S t a t e s , each
d is tin g u is h e d by th e ty p e o f w heat t h a t i s predom inant i n th e a re a s
(l)
The h a rd s p rin g w heat a re a com prisin g N o rth D akota, South D akota, Montana,
and M innesota! (2) The h a rd r e d w in te r w heat a re a o f T exas, Oklahoma,
K ansas, and N ebraska! (3 ) The s o f t re d w in te r w heat a re a o f E a s te r n K ansas,
C e n tra l T exas, M is s o u ri, Lower I l l i n o i s , I n d ia n a , Ohio, and th e C e n tra l
A t la n tic C oast s t a t e s ! and (Il) The s o f t w h ite w heat a re a o f C a lif o r n ia ,
Oregon, Id a h o , and W ashington.
These p ro d u c tio n a re a s each su p p ly a p a r t i ­
c u la r m illin g c e n te r o r m arket w ith a la r g e p a r t o f i t s w h eat. 3 /
S t i g l e r d e fin e s a m arket a re a to be " th e a re a w ith in which th e p r ic e
te n d s to u n ifo r m ity , allow ance b e in g made f o r t r a n s p o r ta tio n c o s ts " , it/
The M in n eap o lis p r ic e f o r w heat te n d s to be th e p r ic e th ro u g h o u t th e s p rin g
w heat p ro d u c tio n a re a w ith allow ances f o r f r e i g h t .
i s th e s p rin g w heat m arket c e n te r .
T h e re fo re , M inneapolis
T h is s tu d y concerns i t s e l f w ith th e
h a rd s p rin g w heat a re a and i t s p a r t i c u l a r m illin g c e n te rs w hich are
M in n eap o lis and B u ffa lo .
D uluth i s th e t r a n s i t p o in t f o r w heat moving to
3 / Commodity R esearch B ureau, Commodity Y earbook, New York, 1952, p . 3^0«
k / George J 0 S t i g l e r , The Theory o f B ric e , The M acm illan Company, New York,
191*6, p . 92.
-2 3 -
B uffalo,, th e l a r g e s t s p rin g w heat m i l l in g c e n te r ,
M inneapolis^ however^
i s th e w o r ld 's l a r g e s t cash w heat m a rk e t,
IV 6
S ize o f S p rin g Wheat M illin g C en ters
As h as been s t a t e d p r e v io u s ly , M in n eap o lis and B u ffa lo a re th e two
p rim a ry s p rin g w heat m illin g c e n te r s ,
M in n eap o lis and D u lu th a re th e s p rin g
w heat m arkets where p r ic e s a re quoted d a i l y on cash r e c e i p t s o f s p rin g
w h eat.
B u ffa lo f l o u r p ro d u c tio n amounted to 26,2 1 6 ,1 3 0 sack s i n 19!?3.
M in n eap o lis produced 13*^78,063 sack s in th e same y e a r .
By com pgfison,
ICansas C ity produced 13,017*915 sack s i n 1953 o u t o f a t o t a l U. S0 produc­
t i o n o f 221,852,000 s a c k s .
T his means t h a t B u ffa lo produced ap p ro x im a te ly
12 p e r c e n t o f th e t o t a l
S. f l o u r i n 1953, w h ile M inneapolis and Kansas
C ity each produced ab o u t 6 p e r c e n t.
B u ffa lo ra n k s No. I in t o t a l d a i l y c a p a c ity w ith 9h}700 s a c k s .
M in n eap o lis i s second w ith 68,800 s a c k s j Kansas C ity t h i r d w ith 5^,1 2 0
s a c k s I D a lla s - F t. W orth f o u r th w ith 26,700 s a c k s ; and S a lin a f i f t h w ith
1 5 ,0 0 0 s a c k s . 5/
V.
P u rc h a se s and P r a c tic e s o f th e M ille r s
a.
L o c a tio n and Method o f P u rch asin g
M in n eap o lis m i l l e r s o b ta in more th a n 75 p e r c e n t o f t h e i r w heat from
Montana and N orth D akota,
p lie r.
I n 1952 and 1953* Montana was th e l a r g e s t sup­
O ther N o rth e rn G reat P la in s m i l l e r s p u rch ase m ost o f t h e i r w heat
5 / T h e 'M ille r P u b lis h in g Company, N o rth w estern M ille r Almanack, M in n ea p o lis.
195h* p . 2lu
~
:
-21;-
from th e s e two s t a t e s a ls o .
T able I shows th e so u rce o f w heat p u rch ased
by 15 f l o u r m i l l e r s i n th e N o rth e rn G reat P l a i n s .
Seven o f th e s e m ille r s
p u rc h a se d 100 p e r c e n t o f t h e i r w heat from Montana and N orth D akota.
o th e r s p u rch ased a t l e a s t
The
p e r c e n t o f t h e i r w heat in th e s e s t a t e s .
Table I .
Source o f Wheat M ille d by N o rth ern G reat P la in s M ille r s
1952 Crop Year
Company
"I
Mont.
2 3 U 5
35 5o Uo 25
75
N. Dak.
5o h o
60
,
6 7 8 9
10
r
C
;
0:
en
?
Total
.
Pe
25 50
60
Uo
nnU *.
*. t-LU
11 12. 13 iU
Purchase Ss
100. 100 100 100
5o 30 25 U5
55
15
25
75
P ac i N.W.
10 5
K an ., Okla.
.M inn.,
S . Dak.
15 10
20 25 25 20 5
The m ille r s g e n e r a lly p u rc h a se t h e i r w heat th ro u g h commission firm s ori
th e c ash m arket r a t h e r th a n buy d i r e c t from c o u n try e le v a to r s o r p ro d u c e rs.
T h is way th e m i l l e r can a c t u a l l y see th e w heat he i s buying and i s d e a lin g
w ith a s p e c ia liz e d agency.
The commission firm s g e n e r a lly r e p r e s e n t th e
c o u n try e le v a to r s on th e cash f l o o r , a lth o u g h th e y may s e l l w heat f o r p ro ­
d u c e rs o r te rm in a l e l e v a t o r s .
Twelve o f th e l £ m ille r s in te rv ie w e d p u r­
ch ased 90 p e r c e n t o r more o f t h e i r w heat th ro u g h commission f ir m s .
Only
two m ills p u rc h a se d more th a n o n e -fo u rth o f t h e i r w heat d i r e c t from C ountry
e le v a to r s o r p ro d u c e rs.
-25>The m ille r s a p p a r e n tly t r y to p u rc h a se t h e i r w heat from th e same
a re a s and l o c a l i t i e s e v e ry y e a r .
Of c o u rs e , t h i s f l u c t u a t e s because o f
changes in p r o te in and w heat q u a l i t y which i s due p r im a r ily to th e unpre^
d i c t a b l e w e ath e r found i n th e s e a r e a s .
Over th e y e a rs th e m i l l e r s have
e s ta b lis h e d c e r t a i n l o c a l i t i e s t h a t produce th e d e s ir e d q u a l i t y o f w h eat.
The m i l l e r s te n d to fa v o r th e s e a re a s i n t h e i r p u rc h a sin g and t r y to buy
from them b e fo re going elsew h ere f o r t h e i r w h eat.
C ountry e l e v a t o r s , to o ,
have e s ta b lis h e d r e p u ta tio n s w ith th e m i l l e r s , some good and some bad.
These r e p u ta tio n s a re v e ry im p o rta n t to th e m i l l e r s .
The m i l l e r s keep a
c lo s e check on th e w heat coming from th e e le v a to r s and know which ones a re
d e liv e r in g s u p e r io r w h eat.
The m ille r s r e g r e tta b ly f in d t h a t some e le v a to r s
a tte m p t to s h ip plugged c a rs and w heat w ith e x c e s siv e dockage.
These
e le v a to r s a re soon known th ro u g h o u t th e tr a d e , and th e tra d e p r e f e r s n o t to
h an d le t h e i r w heat.
The m i l l e r s have s t a t e d t h a t f o r aw hile an e le v a to r
may g e t away w ith c a r p lu g g in g , b u t e v e n tu a lly th e p r a c tic e i s d is c o v e re d
and f u r t h e r shipm ents from such an e le v a to r a re n o t a c c e p te d v e ry r e a d i l y ,
sometimes o n ly a t a d is c o u n t.
I n th e lo n g ru n th e se p r a c tic e s may harm
n o t o n ly th e e le v a to r s b u t a ls o th e fa rm e rs th e s e e le v a to r s s e r v e .
Most o f th e m i l l e r s p u rch ase a l l th e w heat th e y can s to r e d u rin g th e
h a r v e s t seaso n .
B u ffa lo m ille r s t r y to g e t as much w heat as p o s s ib le over
th e G re a t L akes b e fo re th e y c lo s e .
Thus t h e i r p u rc h a sin g i s done d u rin g
th e h a r v e s t seaso n and in th e p o s t- h a r v e s t seaso n as w e ll.
The m i l l e r s a l l do some c o n tr a c tin g f o r f u tu r e d e l i v e r i e s b u t th e s e
a re u s u a ll y s h o r t term c o n tr a c ts .
Most o f th e c o n tr a c tin g i s done in th e
—2 6 —
l a t e summer or e a r l y f a l l .
The tim e and amount o f c o n tr a c tin g w i l l depend
upon th e s u p p lie s a v a ila b le and th e e x p ec te d p r ic e movement,
b.
P r o te in C ontent o f P urchases
" M ille rs and b ak ers a re n o t i n t e r e s t e d i n th e p r o te in c o n te n t o f
w heat and f l o u r from a d i e t a r y v ie w p o in t.
Premiums a re p a id f o r h ig h p ro ­
t e i n w heat because p r o te in c o n te n t i s a crude measure o f g lu te n q u a l i t y ." 6/
P r o te in c o n te n t may be u se d as a m easure o f q u a l i t y because i t i s sim ple
and i s a g e n e ra l in d i c a t i o n o f th e g lu te n c o n ta in e d in th e w h eat.
About
85> p e r c e n t o f th e d ry g lu te n i s p r o te in , • so th e g r e a te r th e p r o te in con­
t e n t , th e g r e a t e r th e g lu te n c o n te n t.
/
The w heat p u rc h a se d by th e N o rth ern G re a t P la in s m i l l e r s i s g e n e r a lly
t h a t c l a s s i f i e d as h ig h p r o te in w h eat.
T h is i s in d ic a te d by a 15? week
p e rio d from 195)1 t o 19!?b i n w hich ?6 p e r c e n t o f th e t o t a l c a r l o t s s o ld
a t M in n eap o lis t e s t e d more th a n 1 2 .5 p e r c e n t p r o te in . 7 /
The m ills g e n e r a lly buy to m eet t h e i r own p a r t i c u l a r m illi n g r e q u ir e ­
m en ts.
Most o f th e m i l l e r s in d ic a te d t h a t th e y l i k e to buy th e m iddle
ra n g e o f p r o t e i n ( I 3-15 p e r c e n t) b e fo re a c q u ir in g any o th e r p r o t e i n s .
They te n d to s e t t h e i r p u rc h a sin g p o lic y on h ig h p r o te in w heat acco rd in g to
th e h a r v e s t e v e ry y e a r .
I f th e re a p p ea rs to be a la r g e su p p ly o f h ig h .pro-
t'e in w heat th e y w i l l h o ld o f f t h e i r p u rc h a se s u n t i l th e y need th e w heat for.
6/ E0 Ri Hehn, P r o te in o f Wheat a s a Measure o f th e M illin g C h a r a c te r is tic s
o f th e P l p u r. Memo to members o f Committee on O b je c tiv e s o f R esearch and
E x te n sio n E d u c a tio n w ith re fe re n c e to p r o te in in M ontana/s h a rd w h eats,
O ctober 1 2 , 1951.
7 / R ecorded from D a ily M arket R ecord, M in n ea p o lis, A p ril 23, 1951 to May 1 0 ,
195%
.
-27=
m il l i n g .
On th e o th e r hand,, i f th e su p p ly o f h ig h p r o te in w heat ap p ears to
be s h o r t, th e y w i l l t r y to s to c k up on i t f o r f u tu r e n eed s.
Some m ills t r y
to g e t t h e i r h ig h p r o te in e a r l y w h ile o th e rs buy as th e y need i t acc o rd in g
to a v a ila b le s u p p lie s .
A su rv e y o f th e p r o te in c o n te n t o f s p rin g w heat p u rch ased by 11
W prthern G reat P la in s m i l l e r s shows t h a t o n ly one company o u t o f e le v e n
p u rch ased more th a n 8 p e r c e n t o f i t s s p rin g w heat below 12 p e r c e n t p ro ­
te in .
The p r o te in c o n te n t o f th e w heat p u rc h a se d by th e v a rio u s m ills i s
in d ic a te d by T able IL
Most o f th e companies p u rch ased betw een 70 and 8£
p e r c e n t o f t h e i r s p rin g w heat i n th e 13-15 p e r c e n t b r a c k e t.
T a b le H .
The P r o te in C ontent o f S p rin g Wheat P u rch ased in 1952 by
11 N o rth e rn G re at P la in s F lo u r M ille r s
Company
I
12%
5o
h .
.Per
8
o
5. •
O
5
3
I "
ft
ll% and
Below
. 2
d
>
6
8
7
T o tal Pure? iases
5
5
11
«*
30 —
.■
- Qq
j 6o
0
80 - - 70 -
10
Ji5 ~~j ■93
13%
—*
75
IP
30 —
■ OU
:
—
85 -
5
lb%
30 -
• 15 -
15#
I 6# "and
•over
10
9
20 — - I i -
60 -
10
15
12
25
10
30
20
30
I
10
10
5
The w in te r w heat p u rch ased by N o rth ern G re a t P la in s m ille r s i s low er
i n p r o te in th a n th e s p rin g w heat p u rc h a se d .
Of th e 8 m ills t h a t r e p o r te d
=28—
p u rc h a sin g w in te r Wheat5 m ost o f them b ought w in te r w heat Under lit p e r c e n t
p ro te in .
A la r g e p a r t o f t h e i r p u rc h a se s was in th e 11 p e r c e n t and below
c a te g o ry , a lth o u g h th e m a jo r ity o f th e p u rc h a se s f e l l in th e 12-13 p e r c e n t
ra n g e .
Ta b l e IiQrg iv e s a p ic tu r e o f th e w in te r w heat p u rc h a se s.
Table I I I .
The P r o te in C ontent o f W inter Wheat P urchased i n 195.2 by ^
N o rth e rn G reat P la in s F lo u r M ille rs
Company
I
2
3
h .
5
11% and
Below
5o
I
7
8
5o
10
5u r chase;3
100
k
5
12%
1#
B
U
I
A
- rP
fU
-
■100
k
■ 50
lh%
_
- 5o
O
m ~~
e
9
I-------- 1-----"LA
O
Ox
__________________ I____
Pe] * Cent o f T o tal
B
U
I
6
1%
16K
and over
CD
- 100
----------- 1_______
I* .
5 -
5
A ll t h i s would in d ic a te t h a t ’'w heat on th e M in n eap o lis m ark et” can be
c o n sid e re d to be h ig h p r o te in w heat.
Thus, t h i s stu d y concerns i t s e l f w ith
”w heat on th e M in n eap o lis m ark et” , and a ls o w heat on th e D uluth m a rk e t.'
■The d a ta u sed in t h i s s tu d y have been an aly zed and d is c u s s e d on th e b a s is
t h a t M in n eap o lis and D uluth w heats a re h ig h p r o te in w h eats, and t h a t th e
-2 9 -
b ase p r ic e s q uoted on th e s e m ark ets a re b ase p r ic e s f o r h ig h p r o te in w heat.
N a tu r a lly , a d d itio n a l premiums a re g iv en f o r a d d itio n a l p r o te in , b u t t h i s
s tu d y concerns i t s e l f m ain ly w ith demand f a c t o r s and t h e i r r e l a t i o n to th e
bqse p r ic e o f h ig h p r o t e i n h a rd re d s p rin g w h eat,
B, F lo u r
I,
KLour Types and U ses
The f l o u r produced in th e N o rth e rn G re a t P la in s may be d iv id e d in to
th r e e m ajor groupq:
B akery, fa m ily , and s p e c i a l t y f l o u r .
f l o u r s o ld to b a k e rs f o r p ro c e s s in g in to b re a d .
Bakery f l o u r i s
Fam ily f l o u r i s f l o u r
s o ld a t th e r e t a i l l e v e l t o th e consumer f o r u se i n h is home, . S p e c ia lty
f l o u r i s s o ld to b a k e rs to make s p e c ia l p ro d u c ts l i k e fre n c h b re a d , whole
w heat b re a d , k a i s e r r o l l s , and h ard r o l l s .
B akery f l o u r r e p r e s e n ts th e
l a r g e s t p r o p o r tio n o f th e m i l l e r s 7 t o t a l s a l e s .
Twelve N o rth e rn G re at P la in s m ille r s r e p o r te d on th e p e r c e n t o f t o t a l
o u tp u t r e p r e s e n te d by th e v a rio u s ty p e s o f f l o u r .
B akery f l o u r re p r e s e n ts
l;O £ 0 p e r c e n t o f th e t o t a l o u tp u t f o r 5 o f th e 12 m i l l e r s .
I t r e p r e s e n ts
70 p e r c e n t o r more o f th e t o t a l o u tp u t f o r th e rem ain in g seven m i l l e r s .
T a b le I? g iv e s a com plete p i c t u r e o f th e f l o u r produced by th e s e 12 m i l l e r s .
F lo u rs in g e n e ra l have names a p p lie d to them which in d ic a te t h e i r q u a l­
i t y and r e f l e c t th e q u a l i t y o f th e w heat from which th e y were m ille d .
Names
v a ry w ith th e m i l l e r and a re d i f f i c u l t to compare u n le s s a com parison i s
made o f f l o u r s produced by one m i l l e r .
F lo u rs can be grouped e i t h e r as
”p a te n ts " o r " c l e a r s " , b u t b oth groups o v e rla p and w ill v a ry from one
m illin g l o c a t i o n to a n o th e r.
The term "p aten t" o r ig in a te d th ro u g h th e •
-3 0 -
T able IV6
• Type o f H o u r Produced by 12 F lo u r M ille r s i n th e
N o rth e rn G re at P la in s - 1933
Company
2
I
3
B akery
• i|ii
93 I 70
F am ily
a
3 'i3
S p e c ia lty
12
E x p o rt
3
6
9
10
11
12
Pd:" Cenj; o f To t a l - Outpu t
93 83 8 0 . Ho 3o 18
90
73
ho
10
23
20
h
3
13
20
7
6o
8
3o
32
I
ho
13
in v e n tio n o f th e m id d lin g s p u r i f i e r .
P r io r to t h i s tim e (1870) some o f th e
h ig h q u a l i t y f l o u r s to c k was l e f t i n th e m id d lin g s .
advantage to be a b le to r e c a p tu r e t h i s q u a l i t y s to c k .
I t was to th e m ille r s *
T his was accom plished
th ro u g h th e in v e n tio n o f th e m id d lin g s p u r i f i e r . . . The p u r i f i e r .was p a te n te d
and when added to th e m i l l e r 's m achinery caused th e m ille r to c a l l h is
f l o u r " p a te n t" f l o u r .
Today th e term h as l o s t i t s o r ig i n a l meaning because
a l l th e m ills now u se m id d lin g s p u r i f i e r s . 8/
H o u r s o f th e same name w i l l v a ry from one l o c a l i t y to th e n e x t.
The
m il.l e r m ust ta k e th e w heat t h a t i s a v a ila b le t o him and g rin d i t in to flo u r-.
S ince w heat d i f f e r s i n s iz e , sh ap e, q u a l i t y , and p r o te in , th e f l o u r s p ro ­
duced w i l l a ls o v a ry .
One m i l l e r 's p a te n t f l o u r may n o t be as h ig h in
q u a l i t y a s a n o th e r 's f i r s t c l e a r , th e r e f o r e , th e term s a re o n ly r e l a t i v e
in d ic a tio n s o f th e k in d and q u a l i t y o f f l o u r .
T his has caused m ille r s to
8/ H arry Snyder, B read, The M acm illan Company, New York, 1930, p . 1^ .
-3 1 -
b le n d w heats from s e v e r a l so u rc e s i n o rd e r to m a in ta in a more un ifo rm p ro ­
duct y ear a f te r y e a r0
The m ille r s would l i k e to be a b le to produce th e
same q u a l i t y o f f l o u r e v e ry y e a r, b u t t h i s i s n o t always p o s s ib le s in c e th e
raw m a te r ia l i s n ev er th e same tw ice i n a row.
B lending th u s becomes a
method f o r re d u c in g t h i s v a r i a t i o n .
C. 0 . Swanson m o d ified a c h a r t p re p a re d by th e American I n s t i t u t e of
B aking to give a p ic tu r e o f th e r e l a t i o n s h i p betw een v a rio u s g rad es o f
f l o u r . -9/
The c h a r t, shown i n f ig u r e I , in d ic a te s t h a t th e g rad es merge
in to each o th e r, making i t d i f f i c u l t to i d e n t i f y th e g rad es p r e c i s e l y .
A
95 p e r c e n t lo n g p a te n t may be v e ry s im ila r o r i d e n t i c a l w ith 95 p e r c e n t
s tr a ig h t flo u r.
An 80 p e r c e n t s h o r t p a te n t may be th e same as an 80 p e r
c e n t medium p a te n t .
Swanson a ls o found t h a t a p p ro x im a te ly tw o - th ir d s o f th e p r o te in con­
ta in e d in th e w heat goes in to th e f l o u r .
O n e -th ird goes i n t o th e fe e d .
T able V shows th e r e l a t i v e p r o te in p e r c e n ts o f p ro d u c ts made from h ard
r e d w in te r w h eat.
The b ra n and s h o r ts r e p r e s e n t ab o u t 27.7 p e r c e n t o f
th e w heat ground.
T h e ir p r o te in c o n te n t was 1 5 .1 p e r c e n t as a g a in s t 1 2 .5
p e r c e n t f o r th e raw w heat.-
T his in d ic a te s t h a t th e f l o u r from th e c e n te r
o f th e k e rn e l o r th e h ig h e s t q u a l i t y f l o u r , has a lo w er p r o te in c o n te n t
th a n th e whole w heat, and th e f l o u r from th e o u te r p a r ts o f th e endosperm
n e a r th e b ra n , a h ig h e r p r o te in c o n te n t th a n th e w heat.
T his h as been
found tr u e o f h a rd w heats b u t n o t o f s o f t w h e ats.
9 / C. 0 . Swanson, Wheat ,,and F lo u n ' Q u a lity , B urgess .P u b lish in g .Company,
M in n e a p o lis, 1938.
F ig u re I
The R e la tio n s h ip Between F lo u r Grades
100 Pounds o f Wheat#
12% o f w heat s 100% s t r a i g h t s a l l stream s
28%. o f w heat
lh% S h o rt
Fanby C le a r
E x tra S h o rt o r
Fancy P a te n t F lo u r
S h o rt o r F i r s t P a te n t F lo u r■'
70%
S h o rt P a te n t F lo u r
Medium P a te n t F lo u r
Long P a te n t F lo u r
S tr a i g h t F lo u r
Bran
S o u rce s
12% S h o rt
Cs 9» Swansbn, Wheat and F lo u r Q u a lity . B urgess P u b lis h in g Company, M in n ea p o lis,
1938, p - Lh5o
-3 3 -
Table V0
D i s t r ib u tio n o f P r o te in i n P ro d u cts from Hard Red W inter W h eat* '
P o rtio n s
Wheat
M idds. F lo u r
B reak F lo u r
T a ils F lo u r
Bran and S h o rts
.P ercen t o f Wheat
O btained i n M illin g
P r o te in P e rc e n ts
1 0 0 .0
H7.8
1 9 .7
3 .8
■ 27.7
P e rc e n t o f
T o ta l P r o te in
1 2 .H
1 0 .7
1 3 .1
12. H
iH .l
1 2 .Ho
H .l l
2.H8
.UB
li.33
*C« O0 Swanson5 IVheat and P lo u r Q u a lity , B urgess P u b lis h in g Company,
M in n ea p o lis5 19385 p 0 lR 8 e
T able VI shows th e p r o te in c o n te n t o f v a rio u s f l o u r stream s as compared
to th e whole w h eat.
Here th e 70 p e r c e n t p a te n t had a p r o te in c o n te n t o f
1 1 .2 p e r c e n t as a g a in s t 1 3 .0 p e r c e n t f o r th e w h eat.
c l e a r c o n ta in e d 1 3 .7 p e r c e n t p r o te in .
The 27 p e r c e n t
The f ig u r e a ls o shows th e p r o te in
c o n te n ts o f th e v a rio u s b re a k s i n th e m illin g p ro c e s s .
The f i r s t , .
T able %
V a ria tio n s i n P r o te in C ontent o f M ill Stream F lo u rs*
M ill Stream
Wheat
P a te n t - 10%
C le ar - 21%
Low Grade - y%
1 s t Break
2nd Break
3 rd B reak
Iith Break
5>th Break
P r o te in C ontent
1 3 .0 '
11.2
1 3 .7
111*!
11.H
1 2 .7
13.8
1U.-9
18.1
M ill Stream
1st
2nd
1st
2nd
3 rd
Iith
Hth
6th
7 th
.S iz in g s
S iz in g s
M id d lin g s
M iddlings
M iddlings
M iddlings
M iddlings
M iddlings
M iddlings
P r o te in C ontent
1 0 .8
11.L
11.0
11.1
n .H
1 2 .1
1 2 .0
1 2 .3
1 2 ,7
*0. 0 . Sw anson,- op. p i t . , p. 1R6, '
c o n ta in in g p a te n t f l o u r 5 had a 1 1 . H p e r c e n t p r o te in c o n te n t, w h ile th e
f i f t h which i s m o stly b ra n 5 had a p r o te in c o n te n t o f 1 8 .1 p e r c e n t.
I t can
-3b“
be s a id t h a t on th e average th e f l o u r o b ta in e d i n th e m illin g p ro c e ss con­
t a i n s about 1 . 2!? p e r c e n t p r o te in l e s s th a n th e w heat from w hich i t i s
m ille d j i . e . , a 1 3 .!? p e r c e n t p r o te in w heat would produce a 1 2 .2 5 p e r c e n t
p r o te in f l o u r .
Ho
P ro d u c tio n and Consumption o f F lo u r
The p ro d u c tio n and consum ption o f f l o u r i n th e U n ited S ta te s h a s r e ­
mained r e l a t i v e l y c o n s ta n t f o r th e l a s t 20 y e a r s .
The 1935-39 average
f l o u r p ro d u c tio n i n th e U. S. was 1 0 1 ,7 ^9 ,0 0 0 b a r r e l s (196# b a r r e l s ) , and
th e 1950 p ro d u c tio n was 116,826*000 b a r r e l s . 1 0 /
A s im ila r r e s u l t i s
o b ta in e d when com paring th e p ro d u c tio n in M in n eap o lis and B u ffa lo f o r th e
y e a rs 1935 th ro u g h 1953* H /
•A com parison o f th e consum ption o f f l o u r in th e U. S. shows r e s u l t s
s im ila r to th o s e m entioned p r e v io u s ly .
I n 1935, 1 9 ^,0 0 7 ,0 0 0 sack s (100#
sa c k s) o f co m m ercially produced f l o u r were consumed.
sack s were consumed. 1 2 /
I n 1952, 201, 656,000
However, w h ile th e t o t a l consum ption has rem ained
n e a r ly th e same, th e p e r c a p it a consum ption has d e c re a se d .
I n 1935, th e
p e r c a p it a consum ption o f com m ercially produced f l o u r was 150. 1). pounds.
I n 1952, i t was 1 2 9 .7 pounds. 1 3 /
1 0 / Commodity R esearch B ureau, Commodity Yearbook, New York, 1952, p . 351;.
1 1 / For com plete data* see T able I i n the. .Appepdix.
1 2 / F or com plete d a ta , see Table I I In th e A ppendix.
1 3 / For com plete d a ta , see Table I I I i n t h e ■A ppendix.
-
IIXo
35-
G eneral P r o p e r tie s d'f Bread F lo u r
ae
G lu ten
• The m ost im p o rta n t f a c t o r to be c o n sid e re d i n a good b re a d f l o u r i s
th e g lu te n o
The q u a l i t y and q u a n tity o f th e g lu te n 3 when c o n sid e re d
'jo in tly ,, have more to do w ith p ro d u cin g good b re a d th a n a l l o th e r f a c to r s
combined, l h /
The d ry g lu te n mass c o n ta in s ab o u t 85 p e r c e n t p r o te in , 8
p e r c e n t o f a p h o sp h o riz ed f a t - l i k e m a te r ia l t h a t a f f e c t s th e p h y s ic a l
b in d e r q u a l i t i e s o f th e g lu te n , and a p p ro x im a te ly 6 p e r c e n t s ta r c h mixed
w ith sm all amounts 'o f o th e r s u b s ta n c e s .
The p r o te in s in g lu te n a re g lia d in
and g lu te n in , two o f th e m ain p r o te in s i n wheat*
These p r o te in s form th e
b in d e r t h a t makes b re a d dough.
G lia d in i s th e cement o r b in d in g m a te r ia l i n th e g lu te n , and g lu te n in '
i s th e n e c e s s a ry b u lk or su b sta n c e to which th e g lia d in p a r t i c l e s a d h e re .
When th e s e two a re combined in th e r i g h t p r o p o r tio n s , a w e ll-b a la n c e d
g lu te n i s o b ta in e d .
to o s o f t and s tic k y .
I f th e r e i s to o much g l i a d i n , th en th e g lu te n becomes
However, i f th e r e i s to o much g lu te n in , th e dough
can n o t expand p ro p e rly because th e r e i s n o t enough g lia d in to h o ld th e
p a r t i c l e s to g e th e r and r e t a i n th e gas which expands th e dough.
I n good
h a rd w heats a p p ro x im a te ly 60 p e r c e n t o f th e g lu te n i s g l ia d in and 1*0 p e r
c e n t i s g lu te n in . 15/
When th e r i g h t q u a n tity and q u a l i t y o f g lu te n i s p re s e n t i n a f lo u r
th e n th e r e s u l t i n g dough w i l l tie e l a s t i c and p o s se ss good r e c o i l i n g
I i j / H arry Snjrder, .Bread, The M acm illan Company, 1930, p . 235*
15/ Xtiid*'
-3 6 p r o p e r tie s „
to le r a n c e .
I t i s th e g lu te n w hich d e term in e s th e l o a f volume and m ixing
G e n e ra lly , th e s tr o n g e r th e g lu te n i s , th e lo n g e r th e m ixing
tim e and th e g r e a te r th e to le r a n c e .
be
P r o te in and Ash
B e sid e s th e two g lu te n p r o te in s , th e r e a re fo u r o th e r and m inor p ro ­
t e i n s in w heat f l o u r t h a t a re n o t a p a r t o f th e g lu te n , b u t form a p a r t o f
th e p r o t e i n .
I t i s th e p r o te in s in th e f l o u r t h a t combine p h y s ic a lly and
p o s s ib ly c h e m ic a lly w ith w a te r to form b re a d dough. 16/
"Ash i s th e non -co m b u stib le m a tte r re m a in in g a f t e r f l o u r h as been
i n c in e r a t e d i n a fu rn a c e a t a high te m p e ra tu re , and i s an in d i c a t i o n o f
th e f l o u r e x t r a c t i o n and g ra d e ." I ? /
G e n e ra lly sp ea k in g , th e lo w er th e
ash c o n te n t, th e h ig h e r i s th e q u a l i t y o f th e f l o u r .
However, l i k e o th e r
p r o p e r tie s o f f l o u r , th e aph c o n te n t in i t s e l f does n o t alw ays in d ic a te
q u a lity f lo u r .
T t m ust be ta k en in to c o n s id e ra tio n a lo n g w ith o th e r
fa c to rs .
c.
O ther P r o p e r tie s
B esid es th e g lu te n , p r o t e i n , and ash th e r e a re o th e r g e n e ra l c h a r a c te r ­
i s t i c s t h a t in d ic a te good b re a d f l o u r .
These c h a r a c t e r i s t i c s a re e i t h e r
co n n ected w ith th e g lu te n and p r o te in i n some way o r e ls e a re s u b je c tiv e
q u a l i t i e s t h a t can Only be d eterm in ed a f t e r th e b re a d i s b ak ed .
W
-
Ibid.
1 7 / L e t t e r from Mr. T. R.. A itk e n , Chem ist, Board o f G rain Commissioners f o r
Canada, G rain R esearch B a b o ra to ry jl W innipeg, Canada, March 2, 1933.
-37*-
llMellownes s ^ i s a c h a r a c t e r i s t i c t h a t i s h ig h ly d e s ir e d i n modern
b re a d f l o u r s .
M ellowness r e f e r s to th e e l a s t i c p r o p e r tie s o f th e dough.
A s tro n g g lu terio u s f l o u r produces a dough t h a t i s tough and r e s i l i e n t .
A
mellow f l o u r produces a dough t h a t i s n o t as tough o r r e s i l i e n t as dough
made from s tro n g f l o u r s # and i s more a d a p ta b le to modern mass p ro d u c tio n .
A good b re a d f l o u r w i l l have good "w a te r-a b so rb in g " c h a r a c t e r i s t i c s .
The a b s o r p tio n o f a f l o u r i s th e amount o f w a ter u sed in making b re a d dough.
The more w a ter a g iv e n amount o f f l o u r w i l l a b so rb , th e l a r g e r th e l o a f w i l l
be.
A- la r g e l o a f i s d e s ir a b le i n modern b a k in g .
S im ila r ly , th e g r e a te r
th e w a te r a b s o r p tio n , th e g r e a t e r th e l o a f w eig h t w i l l be f o r a g iv en
amount o f f l o u r .
"M ining tim e" i s a n o th e r c r i t e r i o n o f b re a d f l o u r .
Today, w ith modern '
m ach in ery th e b a k e rs a re g e n e r a lly lo o k in g f o r a s h o r te r m ixing tim e th a n
th e y were 10 to lf> y ears ago.
g lu te n .
M ixing tim e i s r e l a t e d to th e q u a l i t y o f th e
The s tro n g e r th e g lu te n , th e lo n g e r th e m ixing tim e w i l l b e .
C lo se ly r e l a t e d to m ixing tim e i s th e dough " to le r a n c e " .
T o leran ce i s
th e amount o f leew ay a b ak er has betw een th e tim e th e dough i s made and th e
tim e i t i s baked.
ances.
S tro n g f l o u r s produce doughs w ith r e l a t i v e l y la r g e t o l e r ­
T his means t h a t th e bjaker has a r e l a t i v e l y lo n g tim e a f t e r making
th e dough b e fo re th e dough w i l l b reak down and d e t e r i o r a t e in q u a l i t y .
T h is i s e x tre m e ly im p o rta n t to th e sm all b a k e r, b u t n o t as much so to th e
l a r g e b a k er u s in g complex modern m ach in ery .
.F e rm e n ta tio n tim e i s th e amount o f tim e i t ta k e s f o r th e dough to r i s e .
The r i g h t fe rm e n ta tio n m ust ta k e p la c e i n o rd e r to conform to th e o th e r
=38™
re q u ire m e n ts s e t up by th e b a k e r.
A ll o f th e s e p r o p e r tie s a re g e n e r a lly
dependent upon each o th e r and connected to th e q u a l i t y and q u a n tity o f
g lu te n .
The m i l l e r s and b a k ers f e e l t h a t th e o n ly tr u e m easure o f a good
f l o u r i s th e s u b je c tiv e q u a l i t i e s o f th e f in i s h e d l o a f .
I n g en eral* a '
good b re a d l o a f m ust have th e r i g h t color* te x tu re * and good e a tin g
q u a litie s .
These a re th e u ltim a te q u a l i f i c a t i o n s f o r good f l o u r and th e
o n ly p o s i t i v e way o f t e l l i n g w hat i s good b re a d f l o u r .
These q u a lif ie s ,- '
tio n s* l i k e m ost o f th e o th e rs* , a re s u b je c t to a good d e a l o f o p in io n .
What may be good f l o u r in one p a r t o f th e c o u n try may n o t be good in
a n o th e r.
I n th e f i n a l a n a ly s is * th e r e i s no p r e c is e and u n iv e r s a l way o f
d e te rm in in g good b re a d f l o u r .
=39"
Part I I I
ANALYSIS OF THE DATA
P a r t I I I i s concerned w ith a n a ly s is and i n t e r p r e t a t i o n o f th e d a ta
c o lle c te d .
The im p o rta n t o b je c tiv e s o f P a r t I I I a re to ( l ) d e s c rib e th e
demand f a c t o r s , ( 2 ) in d ic a te th e im portance o f th e s e f a c t o r s and t h e i r
in flu e n c e upon p r ic e and ( 3 ) to m easure th e r e l a t i o n s h i p arid th e e f f e c t on
demand and p r ic e and where p o s s ib le to d eterm in e s t a t i s t i c a l l y i f a s i g n i ­
f ic a n t re la tio n s h ip e x is ts .
S e c tio n A i s concerned w ith e s ta b lis h in g a t h e o r e t i c a l framework from
w hich to an aly z e th e data*
C e rta in b a s ic co n cep ts a re d is c u s s e d and t h e i r
r e l a t i o n s h i p to th e demand f o r h ig h p r o te in w heat in d ic a te d .
The o th e r s ix
s e c tio n s o f P a r t I I I draw upon th e t h e o r e t i c a l fo u n d a tio n i n th e a n a ly s is
o f th e in d iv id u a l demand f a c t o r s .
■A.
X.
Theory o f Demand
D eriv ed Demand
The demand f o r w heat i s a {derived demand.
I t i s d e riv e d from th e
b a k e r s f demand f o r b re a d f l o u r and th e demand f o r m ill fe e d .
t h i s d is c u s s io n o n ly th e demand f o r f l o u r w i l l be c o n sid e re d .
However, i n
The demand
f o r f l o u r i s a f u n c tio n o f th e consum ers' demand f o r b re a d .a n d o th e r baking
p ro d u c ts .
B oulding g iv e s fo u r p r o p o s itio n s co n cern in g d e riv e d demands
'K l) An e x p e c te d r i s e i n th e demand f o r a p ro d u c t w i l l cause a r i s e in
demand f o r th e ty p e o f ( f a c t o r ) which p ro d u ces th e p ro d u c ts ( 2 ) th e sm a lle r
th e p a r t p la y e d by a f a c t o r o f p ro d u c tio n i n th e p ro d u c tio n o f a commodity,
th e more i n e l a s t i c i s th e demand f o r i t l i k e l y to b e j (3 ) th e more e l a s t i c
th e demand f o r a p ro d u c t, th e more e l a s t i c i s l i k e l y to be th e demand f o r
th e ty p e s o f ( f a c t o r s ) which go to make t h i s p ro d u c tj (b) th e b e t t e r , and
th e c h e a p e rJj th e s u b s t i t u t e s
f o r a f a c t o r o f p ro d u c tio n th e more l i k e l y i s
i t t o have an e l a s t i c demand"„ I /
A pplying th e s e p r o p o s itio n s to th e demand f o r w heat,' an e x p ec te d r i s e
i n th e demand f o r f l o u r w i l l
cause a r i s e i n
th e demand f o r w heat, th e
m ajor f a c t o r o f p ro d u c tio n .
Since w heat p la y s a la r g e p a r t in th e p roduc­
t i o n o f f l o u r , i t s dfemand u n d er p r o p o s itio n ( 2 ) w i l l be l e s s i n e l a s t i c
th a n , say , t h a t o f m ill la b o r o r power c o s ts .
However, because o f propo­
s i t i o n ( 3 ) , th e demand f o r w heat i s r e l a t i v e l y i n e l a s t i c .
The demand f o r
b re a d i s i n e l a s t i c because th e consumer does h o t resp o n d v e ry much to a
change i n p r i c e .
T h e re fo re ^ la r g e changes i n p r ic e a re accompanied by
o n ly a sm all change i n q u a n tity p u rc h a se d .
The i n e l a s t i c i t y o f demand f o r
b re a d r e f l e c t s i t s e l f back to th e b a k e r s ’ demand f o r f l o u r and th e m i l l e r s ’
demand f o r w h eat, c au sin g th e s e demands to be r e l a t i v e l y i n e l a s t i c .
The
more s u b s t i t u t e s and a l t e r n a t i v e u se s t h a t can be/- found f o r w heat, th e
g r e a te r w i l l be th e e l a s t i c i t y .
F ig u re 2 shows g r a p h ic a lly th e d e riv e d demand f o r w h eat.
shows th e assumed AR and MEt f o r f l o u r and th e MG f o r f l o u r .
F ig u re 2b
The i n t e r s e c ­
t i o n o f MG and MR curves g iv e s th e MR f o r f l o u r a t th e e q u ilib riu m p o s itio n .
F ig u re 2a shows th e assumed MPP and APP f o r w h eat.
The r e le v a n t range on
I / Kenneth E. Bould in g , Economic A n a ly s is , H arper and B ro th e rs P u b lish e rs^
New Y ork, 19U8, p p , 222~2iu
-Ill-
O utput o f F lo u r p e r U n it o f Wheat
F ig u re 2
D e riv a tio n o f th e Demand Curve f o r Wheat
U n its o f Wheat
U n its o f F lo u r
D o lla rs p e r U n it o f Wheat
(c)
Ql
U n its o f Wheat
«2
-h 2 th e MPP curve i s Q^Q2 o r betw een th e p o in t on th e MPP curve where th e APP
i s a maximum and th e p o in t where th e MPP i s z e ro .
To o b ta in th e demand
curve f o r wheat (DD) as shown i n F ig u re 2c, th e r e le v a n t p o rtio n o f th e MPP
curve i s m u ltip lie d by th e MR o f f l o u r o b ta in e d in 2b.
T his a r r iv e s a t th e
demand (MVP) f o r w heat as d e riv e d from th e demand f o r f l o u r .
The demand
f o r f l o u r can be d e riv e d from th e demand f o r b re a d by a s im ila r p ro c e s s .
One th in g im p o rta n t to n o te i s t h a t however e l a s t i c th e demand f o r
f l o u r i s , th e MR f o r f l o u r w i l l be l e s s e l a s t i c in e v ery c a s e .
T h is w ill
te n d to make th e demand f o r w heat l e s s e l a s t i c th a n th e demand f o r f l o u r .
Of c o u rs e , th e e l a s t i c i t y o f th e MPP curve f o r w heat a f f e c t s th e e l a s t i c i t y
o f demand f o r w heat and may be e l a s t i c enough to o f f s e t th e e f f e c t o f th e
MR f o r f l o u r .
A nother method f o r d e riv in g th e demand f o r high p r o te in w heat i s to
c o n s id e r th e su p p ly and demand curves o f f l o u r and th e su p p ly curve o f w h eat.
F ig u re 3.
D e riv a tio n o f th e Demand Curve f o r Wheat
D' D
flo u r
w heat
U n its of Wheat and F lo u r
-k3J lg u r e 3 shows th e su p p ly (SS) and demand (DD) curves o f f l o u r and th e
su p p ly
) curve o f w heat.
a rb itra rily .
The p o s itio n o f th e s e curves has been s e t
The e q u ilib riu m p o in t f o r f l o u r i s a and OX i s th e q u a n tity
o f f l o u r t h a t w i l l be ta k e n a t p o in t a .
P2 i s th e p r ic e a t which OX pounds
o f f l o u r w i l l be s o ld , Pj_ i s th e p r ic e o f OX pounds o f w heat needed to
make OX pounds o f f l o u r .
(T h is assumes t h a t r a illf e e d i s c o n sid e re d p a r t
o f th e f l o u r , o th e rw ise more th a n OX pounds o f w heat would be needed to
g rin d OX pounds o f f l o u r ) .
P2 - P1 i s th e p r ic e p e r u n i t o f w heat and
f l o u r o f a l l o th e r m an u fa ctu rin g u n i t s .
L e t any l i n e GX1 drawn p a r a l l e l to
th e Y a x is c u t DDji 88, and S1'S’ a t p o in ts c , e , and f .
Then P5 i s th e
demand p r ic e f o r f l o u r , P^ i s th e su p p ly p r ic e f o r f l o u r , and P3 i s th e
su p p ly p r ic e f o r t h a t q u a n tity o f w h eat.
e q u a l to e f .
E s ta b lis h p o in t d so t h a t qd i s
The d is ta n c e e f i s th e p r ic e p e r u n i t o f w heat and f l o u r o f
a l l o th e r m an u fa ctu rin g u n i t s .
T his p r ic e i s th e d iff e r e n c e betw een th e
demand p r ic e o f w heat and th e demand p r ic e o f f l o u r .
Then P^
i s th e
demand p r ic e f o r w heat b ecause i t i s th e d if f e r e n c e betw een Pg, th e demand
p r ic e f o r f l o u r and
- P^ w hich i s th e su p p ly p r ic e p e r u n i t o f w heat
and f l o u r f o r a l l o th e r m an u fa ctu rin g u n i t s .
Then th e lo c u s o f a l l p o in ts
such as d becomes th e d e riv e d demand curve (D-’D*) f o r w heat and p a sse s
th ro u g h p o in t b form ing an e q u ilib riu m p o in t h e r e . 2/
From th e s e exam ples i t fo llo w s t h a t th e demand f o r h ig h p r o te in w heat
i s d e riv e d d i r e c t l y from th e demand f o r f l o u r .
When th e demand curve f o r
f l o u r s h i f t s th e demand curvq f o r h ig h p r o t e i n w heat w i l l s h i f t a ls o arid
2 / A lfre d M a rs h a ll, P r in c i p le s o f Economics, M acm illan and Company, London,
19U6, p p . 383 and 3HHT“ ---------------------------'
“14i“
i n th e same d i r e c t i o n .
I f th e demand f o r f lo u r becomes more e l a s t i c th e
demand f o r h ig h p r o te in w heat w i l l a ls o become more e l a s t i c .
T h is re la =
tio n s h ip betw een dKtovtr 4 @nand> and b ig h p r o te in . yM#=* :deman^ w ill, ,be
exam ined i n s e c tio n Bi
T I.
Changes in Demand
Changes i n demand g e n e r a lly a r i s e from one o r more o f f iv e areas;?
(I). Changes i n th e i n t e n s i t y o f d e s ir e f o r a commodity^ ( 2) Changes in
incom e; (3) Changes i n p r ic e s o f o th e r com m odities, e s p e c i a l l y s u b s t i t u t e s
( t h i s may be s a id to in c lu d e com plem entary com m odities as wel])j (U) Changes
i n e x p e c ta tio n s co n cern in g f u tu r e p r i c e s ; and (3) Changes i n th e number o f
p o t e n t i a l consum ers.
S ince th e demand fo r. h ig h p r o te in Wheat i s a d e riv e d
demand i t i s o n ly i n d i r e c t l y a f f e c t e d b y changes i n d e s i r e , incom e, and
p o t e n t i a l consum ers.
These change6 would a f f e c t th e demand f o r b read more
d i r e c t l y and th e r e f o r e w i l l n o t be c o n sid e re d h e re .
Changes i n th e p r ic e s o f o th e r s u b s t i t u t e commodities w i l l a f f e c t th e
demand f o r a g iv en commodity.
"The e l a s t i c i t y o f demand f o r a commodity
depends p r im a r ily o n 'th e e x te n t to which s u b s t i t u t e s a re o b ta in a b le .
If a
commodity has good s u b s titu te s * a r i s e i n p r ic e w i l l d i v e r t th e expendi­
t u r e s Of consum ers to th e s u b s t i t u t e s , and t h e i r p u rc h a se s o f th e o r ig in a l
commodity w i l l d e c li n e .
. . . .
The demand w i l l th e r e f o r e be e l a s t i c .
I f , on th e o th e r hand, a commodity has poor s u b s t i t u t e s , consumers w i l l be
u n ab le, t o resp o n d to a r i s e o r f a l l i n p r i c e , and th e demand w i l l te n d to
be i n e l a s t i c " . 3/
3 / K enneth E. Bould in g . Economic A n a ly s is , H arper and B ro th e rs P u b lis h e rs ,
New Y ork, 19U8, p . 133.
F ig u re It
T h e o re tic a l Demand Curves f o r a Commodity
T
'3 -------
U n its o f Commodity
I n F ig u re U, DD i s th e demand curve f o r a commodity.
i n i t i a l p r ic e f o r t h i s commodity.
commodity a p p e a rs .
P ric e
i s th e
At Pg a new s u b s t i t u t e f o r th e g iv en
The appearance o f th e new s u b s t i t u t e a t Pg changes th e
o r i g i n a l demand curve and may a l t e r i t as shown i n F igure it to D1D.
If
th e p r ic e o f th e given commodity r is e s a n o th e r s u b s t i t u t e ap p ears a t P^.
T his may a l t e r th e demand curve a g ain as shown in F ig u re it to D11De
F ig u re 5
T h e o re tic a l Demand Curves f o r a Commodity
I
■o
Q
O
O
eS
0)
O
£
-1|6S im ila r ly , in F ig u re
i f th e commodity demand curve i s DD and th e r e
i s a sudden in c re a s e in th e p r ic e o f a s u b s t i t u t e , th e demand curve w ill
s h i f t to th e r i g h t (D 'D1) .
A f a l l i n th e p r ic e o f a s u b s t i t u t e m ig h t, on
th e o th e r hand, cause th e demand curve to s h i f t to th e l e f t (D11Dh )«
An a l t e r n a t i v e u se f o r th e commodity would have a s im ila r e f f e c t .
F ig u re 6, a t P ric e
where above
an a l t e r n a t i v e u se a p p e a rs .
In
T his would be a case
i t would n o t be w orth th e c o s t o f p u ttin g th e commodity to
th e a l t e r n a t i v e u s e , b u t below P^ i t would be p r o f i t a b l e .
T h e re fo re , below
P^ th e demand f o r th e commodity w i l l be more e l a s t i c th a n b e fo re , b u t above
P^ i t rem ain s th e same.
F ig u re 6
T h e o re tic a l Demand Curves f o r a Commodity
U n its o f Commodity
B oulding s t a t e s " t h a t th e s t a b i l i t y o r i n s t a b i l i t y o f p r ic e s depends
a ls o on a n o th e r f a c t o r , which we c a l l th e s t a b i l i t y o f demand o r su p p ly .
A demand curve may be s a id to be s ta b l e i f th e q u a n tity which would be
b o ught a t any giv en p r ic e i s n o t much a f f e c t e d by changes in th e f a c to r s
w hich d e term in e i t " , h / I n th e case o f h ig h p r o te in w heat th e demand curve
can be s a id to be r e l a t i v e l y u n s ta b le because th e q u a n tity t h a t i s p u rch ased
a t a g iv en p r ic e i s a f f e c t e d c o n s id e ra b ly by th e f a c to r s t h a t d eterm ine i t .
A change i n th e p r ic e o f a s u b s t i t u t e i s l i a b l e to have a marked e f f e c t on
th e q u a n tity o f h ig h p r o te in w heat demanded.
E x p e c ta tio n s p la y a la r g e p a r t in th e movement o f th e demand curve f o r
h ig h p r o te in w heat.
E x p e c ta tio n o f f u tu r e p r ic e movements i s one o f th e
d e te rm in a n ts o f demand.
A la r g e sh are o f th e s e e x p e c ta tio n s concern them­
s e lv e s w ith th e f u tu r e su p p ly o f w heat.
E x p e c ta tio n s as to what th e f u tu r e
s u p p lie s o f w heat w i l l b e , c o n s ta n tly change th e demand f o r w h eat.
I n F ig u re 7, DD i s th e i n i t i a l demand curve and SS th e su p p ly c u rv e .
I f th o se p u rc h a sin g w heat "ex p e c t" t h a t th e su p p ly curve w i l l move to th e
l e f t o r th e su p p ly w i l l n o t be as g r e a t, th e n th e demand curve m ight move.
F ig u re 7
T h e o re tic a l Demand and Supply Curves f o r a Commodity
D1
Rf
S
0
U n its o f Commodity
h / Kenneth E. Bould in g , op. c i t . . p . 11*7
X
18
- * -
a t l e a s t te m p o r a r i l y to DiDi „
T his would be a case where SS i s th e c u r r e n t
m arket su p p ly curve and DD th e m arket demand c u rv ee
Then, i f s a y th e new
crop i s e x p ec te d to be Small and th e hew su p p ly curve S*St , th e demand
curve w i l l s h i f t to s o m e .p o s itio n D»D' to th e r i g h t o f th e o ld .
Then th e
p u rc h a se rs would S tep up t h e i r p u rc h a se s to th e hew e q u ilib riu m p o in t a t th e
i n t e r s e c t i o n o f Di D1 and SS i n o rd e r to p u rc h a se f o r f u tu r e heeds a t a p r ic e
(P2 ) lo w er th a n th e y e x p e c t f o r th e f u t u r e .
I n g e n e r a l, th e demand f o r w heat i s h ig h ly i n e l a s t i c .
The e l a s t i c i t y
o f demand f o r w heat a t Chicago was e s tim a te d a t .3 6 fo r ! 896=1913 and .21*
f o r 1921-193ll*
The e l a s t i c i t y f o r th e U n ite d S ta te s farm w heat was e s tim a te d
a t .21 f o r 1921-19314«
The demand f o r h ig h p r o te in s p rin g w heat 5 / can be
c o n sid e re d more e l a s t i c th a n th e s e f ig u r e s because i t has more s u b s titu te s »
T his s tu d y i s concerned w ith lo c a t in g th e f a c t o r s t h a t d eterm in e th e demand
f o r h ig h p r o t e i n hard, r e d s p rin g w heat and exam ining how th e y change th e
demand.
The changes i n demand t h a t t h i s Study i s concerned w ith a re th o se
t h a t come ab o u t th ro u g h s u b s titu tio n * a l t e r n a t i v e use* and e x p e c ta tio n s .
S e c tio n s B* C, D, E, and F a re concerned w ith th e s e ty p e s o f changes and
t h e i r e f f e c t on th e demand f o r h ig h p r o te in h a rd re d s p rin g w h eat.
B0
I.
F lo u r O rders R eceiv ed b y th e M ille r
The E f f e c t on Demand
I n S e c tio n A i t was shown how th e demand f o r h ig h p r o te in s p rin g w heat
i s d e riv e d from th e demand f o r f l o u r .
I t WaS in d ic a te d how th e demand f o r
$ J W„ C. ' W aite and H. C. T re lp g a n , A g r ic u ltu r a l M arket P r ic e s , John W ilev
and Sons, In c .* New York, p . 1*6.
“ ——-------
°h9°
h ig h p r o te in w heat s h i f t s as th e demand f o r f l o u r s h i f t s .
I f th e demand
f o r f l o u r becomes more e l a s t i c , th e demand f o r h ig h p r o te in w heat w ill
become more e l a s t i c .
The demand f o r b re a d f l o u r i s th e g r e a t e s t s in g le
d e te rm in a n t o f th e demand f o r h ig h p r o te in s p rin g w heat.
The m i l l e r s in te rv ie w e d s t a t e d t h a t th e y use s a le s f o r e c a s t s ( f lo u r
s a l e s ) o r e s tim a te s o f f l o u r o rd e rs to d eterm in e t h e i r e s tim a te d demand
f o r h igh p r o te in s p rin g w h eat.
Out o f f iv e companies r e p o r tin g on th e
breakdown o f t h e i r s a l e s , one company r e p o r te d 70 p e r c e n t o f s a le s r e p r e ­
s e n te d by f l o u r , two companies had 75 p e r c e n t o f s a le s re p re s e n te d by
f l o u r , and two r e p o r te d 90 and 95 p e r c e n t o f s a le s re p re s e n te d by f l o u r .
The m i l l e r s p u rch ase m ost o f th e h ig h p r o te in s p rin g w h eat.
The
s a le s ' o f f l o u r o r f l o u r o rd e rs re c e iv e d by th e m i l l e r s l a r g e l y determ ine
th e demand f o r h ig h p r o te in s p rin g w h eat.
The fo llo w in g d is c u s s io n a tte m p ts
to p r e s e n t e m p iric a l evidence to dem o n strate how and why f l o u r o rd e rs f l u c ­
tu a t e and i n t u r n cause th e demand f o r h ig h p r o te in s p rin g w heat to f l u c t u ­
a te .
Ho
H o u r and F lo u r S a le s Made by th e M ille r s
M ille r s p la c e t h e i r o rd e rs f o r w heat f o r th e m ost p a r t a f t e r th e y
have re c e iv e d o rd e rs f o r f l o u r .
c h a s in g a f u t u r e s c o n tr a c t.
These o rd e rs a re u s u a ll y hedged by p u r­
The f u tu r e s c o n tr a c t e n a b le s th e m i l l e r to
g u a ra n te e th e maximum he w i l l pay f o r th e w heat to be m ille d f o r ev ery
o rd e r o f f l o u r re c e iv e d .
T h is i s n e c e s s a ry s in c e th e p r ic e o f f l o u r i s
l a r g e l y d eterm in ed by th e p r ic e o f w heat.
H olbrook Working s a y s , "There
a re th r e e elem en ts i n th e c a lc u la tio n o f th e p r ic e o f flo u rs
( I ) th e
m illin g m argin judged to be a v a ila b le in th e c u r r e n t s t a t e o f m ill com­
p e t i t i o n ! ( 2) th e p r ic e s a t which m ill b y -p ro d u c ts can be s o ld ; and ( 3 ) th e
-SOc o s t o f th e raw m a te r ia l w h eat.
-The l a s t i s th e l a r g e s t o f th e th re e
ite m s ." 6/ The m i l l e r , in q u o tin g a f l o u r p r i c e , must b ase t h i s on th e
c u r r e n t p r ic e o f w h eat.
The o n ly way th e m i l l e r can in s u re p u rc h a sin g
w heat a t th e c u r r e n t p r ic e i s to buy a f u tu r e s c o n tr a c t and th en buy i n
th e cash m ark et w henever th e d e s ir e d ty p e o f w heat appears*
At th e tim e
th e c ash p u rc h a se i s made, th e f u tu r e s c o n tr a c t i s re v e rse d * 7/
T able IV in d ic a te s th e ty p e o f f l o u r produced by th e N o rth ern G reat
.P la in s m i l l e r s .
T his f l o u r ra n g e s i n p r o te in from 12 to 13 p e r c e n t f o r
b a k e ry f l o u r and I l to 12 p e r c e n t f o r fa m ily .
Table VEI g iv e s a com plete
p i c t u r e o f th e m i l l e r s r e p o r tin g on th e p r o te in c o n te n t o f t h e i r f l o u r .
These f l o u r s and t h e i r p r o t e i n c o n te n ts a re p e c u li a r to th e s p rin g w heat
m ille rs .
c o n te n ts .
M ille r s i n o th e r a re a s have t h e i r own ty p e s o f f l o u r and p r o te in
The S outhw estern m i l l e r s , f o r in s ta n c e , may have b a k e ry f lo u r
a s low as 1 1 .3 p e r c e n t p r o te in and fa m ily f l o u r w ith 9 .0 p e r c e n t p r o te in .
T able VEH shows th e p r o te in c o n te n t o f w heat u sed by N o rth e rn G reat
P la in s m ille r s i n th e p ro d u c tio n o f d i f f e r e n t ty p e s o f f l o u r .
The p r o te in
c o n te n t o f th e w heat u sed f o r th e v a rio u s p ro d u c ts co rre sp o n d s v e ry c lo s e ly
to th e p r o te in s shown i n Table V H .
The p r o te in s i n th e w heat w i l l be
h ig h e r th a n th o s e in th e f l o u r s in c e th e r e i s a drop o f ab o u t 1 ,2 5 p e r b e n t
p r o t e i n i n th e p ro d u c tio n o f f l o u r .
The k i l l e r s s t a t e t h a t th e Only way
th e y can hedge th e p r o te in premiums t h a t th e y have to pay i s th ro u g h fo rw a rd
6/ H olbrook W orking, "Hedging R eco n sid ered ^" J o u r n a l. o f Farm Econom ics,
V o l. 35, No. 3h, November, 1953, p . 5dli,
7/ i b i d .
"!xLflo u r s a le s .
They can hedge th e b ase p r ic e o f th e w heat th ro u g h th e f u tu r e s
m arket b u t th e r e i s no p r o v is io n f o r hedging p r o te in premiums.
Table V II
The P r o te in C ontent o f th e M a jo rity o f F lo u r Produced by lii
F lo u r M ille r s i n th e N o rth ern G re a t P la in s
Company
H I.
B akery
(P e r C ent)
Fam ily
(P e r C ent)
I
1 2 .0
2
1 2 .0 - 1 2 .3
1 1 .0 - H . 3
3
' l 2.it
1 2 .0
Ii
12*0 - 12.-75
l l . o - 1 1 .7 5
5
1 1 .5 - 1 2 .0
1 0 .0 - 1 1 .0
6
1 2 .it
7
1 2 .6
1 2 .0
8
1 2 .7 5
1 1 .0 - 1 1 .5
9
1 2 .2
1 2 .0
10
1 2 .5
1 2 .1
11
1 2 .0
n .5
12
12»0 ~ 1 2 .5
Ilci 75
13
1 2 .5
lit’
ir .lt
” ”
" ” "
1 2 .0
•B akers and T h e ir P r a c tic e s
The b a k e rs p r e f e r to u se a blen d ed f l o u r because th e y f e e l i t g iv e s
b e t t e r h a n d lin g q u a l i t i e s in th e ty p e o f p ro d u c t i n which i t i s u s e d .
Of
-3 2 - .
c o u rs e , t h i s b le n d v a r ie s a c c o rd in g to i t s u se and a ls o a c c o rd in g to th e
l o c a t i o n o f th e b a k e r„
T able V lII
D if f e r e n t P r o te in C ontent Wheat Used f o r th e P ro d u c tio n o f S e v e ra l Types o f
F lo u r by I U F lo u r M illin g Companies i n th e N o rth ern G reat P la in s
W inter Wheat
P r o te in C ontent
(P e r Ce n t)
-
8-10
B akery F lo tir
. S p rin g Wheat
P r o te in C ontent
( P e r :Ce n t)
11-12
13 -1 1
16
and
p Ver
7
9
3
8
7
8-10
11-12
' 16
and
13-15 over- -
11
lU
8
12
10
I
K a is e r R o ll F lo u r
i
10
Whole Wheat FlO ur
7
2
F ren ch Bread F lo u r
I
9
F am ily F lo u r
2
2
Four o f th e b ak ers in te rv ie w e d who a re lo c a t e d e-aSp o f th e Rpcky
M ountains p u rc h a se t h e i r f l o u r a t M in n eap o lis and Kansas City*
They p ro ­
b a b ly p u rc h a se a l i t t l e more f l o u r a t Kansas C ity th a n a t M in n e a p o lis.
One
b a k er s t a t e d t h a t he p u rc h a se d 60 p e r c e n t o f h i s f l o u r from Kansas C ity
and Uo p e r c e n t from M in n e a p o lis. ■A nother b ak er p u rch ased h a l f o f h is f l o u r '
from each l o c a t i o n .
A nother b ak er bought p a r t o f h is f l o u r from B u ffa lo .
I n d e te rm in in g th e p r ic e th e y w i l l pay f o r f lo u r th e b a k ers c o n sid e r
such f a c t o r s as th e p r ic e o f w heat oh th e m ark et, t h e i r own s p e c if ic a tio n s
f o r f l o u r , th e p r o te in and ash c o n te n t o f th e PLouri th e S e c tio n o f th e
c o u n try in w hich th e w heat i s growni th e c o s t o f t r a n s p o r t a t i o n , and th e
“53“
q u a l i t y and q u a n tity o f th e g lu te n .
These f a c t o r s , j o i n t l y c o n sid e re d ,
cause th e b a k e rs to buy f l o u r i n b o th th e m ajo r m ark ets in o rd e r to o b ta in
th e m ost advantageous p r ic e and to o b ta in th e b e s t b len d o f f l o u r p r o p e r tie s .
F lo u rs u se d to be b le n d ed m ain ly by th e b a k e rs b u t th e r e i s more o f a
tr e n d to d a y tow ard b le n d in g a t th e m i l l e r l e v e l .
o rd e r f l o u r w ith v e ry e x a c t s p e c i f i c a t i o n s .
This e n a b le s th e b a k e r to ■
However, th e r e i s a ls o some­
w hat o f a te n d en c y to s e t j u s t enough re q u ire m e n ts to g iv e th e m i l l e r an
id e a o f th e e x a c t ty p e o f f l o u r d e s ir e d .
Then, i t i s up to th e m i l l e r to
su p p ly a f l o u r t h a t w i l l produce a good b re a d l o a f .
T his a tte m p t by th e
m i l l e r to produce a f l o u r s a t i s f a c t o r y to th e in d iv id u a l b a k er a t tim es
may cause th e m i l l e r to pay more f o r a p a r t i c u l a r p r o te in w heat th a n i s
w a rra n te d b y th e p r ic e he r e c e iv e s f o r h i s f l o u r .
The o rd e rs p la c e d w ith th e s p rin g w heat m i l l e r s f l u c t u a t e e v e ry day
p a r t l y i n re sp o n se to th e b a k e rs' o p in io n o f th e w heat m a rk e t.
Not o n ly
a re th e m i l l e r s and o th e rs a c t u a l l y p u rc h a sin g w heat on th e m arket tr y in g
to buy a t th e m ost fa v o ra b le tim e , b u t a ls o th e bakers- are, attem pting" to
p la c e t h e i r o rd e rs b ased on th e m ost fa v o ra b le m arket c o n d itio n s .
The
b a k e rs know t h a t th e p r ic e th e y pay f o r f l o u r i s to a la r g e e x te n t d e te r ­
mined by th e p r ic e th e m i l l e r s have to p ay f o r w heat a t th e moment o f r e ­
c e iv in g an o rd e r f o r f l o u r .
F ig u re s 8 and 9 show th e g r e a t v a r ia tio n s
t h a t ta k e p la c e i n th e r e c e i p t o f f l o u r o rd e rs by th e m i l l e r s and i n th e
p r ic e o f f l o u r .
The p e r io d June I , 19li7 to J u ly l $ s 19h7 i s a good example- o f th e
r e a c t i o n s o f th e b ak ers to th e m arket p r ic e o f w h eat. I n e a r ly June th e
I
m i l l e r s rem arked t h a t i t had been many y e a rs s in c e th e tr a d e (b a k e rs) had
Figure 8
The P r ic e o f F lo u r a t M in n eap o lis as
Compared to th e R e c e ip t o f F lo u r O rders
a t M inneapolis by Weeks f o r th e Year
19h6 a /
High G lu ter F lo u r /
lo u r O rders
Weeks
&/ The N o rth w estern M i l l e r , M ille r P u b lis h in g Company, M in n e a p o lis,
Jan u a ry I , 19^6 to December 31, 191+6
P ric e o f F lo u r
S ta n d a rd P a te
F l o u r ----_
-
55-
Figure 9
The P r ic e o f F lo u r a t M in n eap o lis as Compared
to th e R e c e ip t o f F lo u r a t M inneapolis by Weeks
f o r th e Year 19^7 a /
R e c e ip t o f F lo u r O rders by P e rc e n t o f M ill C ap a c ity
High G luten F lou r
P r ic e o f F lour
P a ten t
F lou r
our Orders
Weeks
a / The N orthw estern M i l l e r , M ille r P u b lis h in g Company, M in n eap o lis,
Jan u a ry I , l9l±7 to !December 31 , 19^7.
-5»6shown so l i t t l e i n t e r e s t i n fo rw ard needs a t t h i s tim e .
The o rd e r re c e iv e d
by th e m ille r s were ru n n in g a l i t t l e over f o p e r c e n t o f c a p a c ity a t t h a t
t DJiie6
(See F ig u re p ) .
The f i r s t week i n J u ly found buying o f f l o u r a t a
low ebb w ith th e b a k e rs a l l e x p e c tin g lo w e r p r i c e s .
The second week o f
J u ly showed a heavy r e c e i p t Sf w heat Sn th e m a rk e t.
I n one day th e p r ic e
S f No. I Dark N o rth e rn S p rin g Wheat d e c lin e d from ah average c lS s in g p r ic e
S f # 2 .9 0 to an av erag e c lo s in g p r ic e o f $ 2 .61n
O ther g rad es o f w heat de­
c lin e d c o rre sp o n d in g ly oh th e M in n eap o lis m a rk e t. 8/
b akerp moved i n and p la c e d o rd e rs in la r g e volume.
Im m ed iately , th e
The av erag e bookings
■for th e week ended J u ly 15 were I 56 p e r c e n t S f c a p a c ity i n c o n tr a s t to 72
p e r c e n t th e week b e f o r e .
However* th e p r i s e drop was s h o r t l i v e d because
th e C. G. C. moved i n q u ic k ly arid b ro u g h t th e p r i s e baSk
U pi
W ith a p r ic e
in c r e a s e th e b a k e rs q u i t b u y in g i n l a r g e q u a n t i t i e s & T his i s in d ic a te d by
th e drop i n f l o u r O rders f o r th e week ended J u ly 21s
The in c r e a s e i n th e
n e x t week was due more to two la r g e b u y ers th a n th e b ak in g tr a d e as a wholes
■The b a k e rs who d id n o t g e t i n on th e p r ic e b re a k c o n tin u e d to h o ld back
th e ir o rd e rss £ /
The b a k e rs r p u rc h a se s o f f l o u r §2?§ b ased upon t h e i f c u r r e n t heeds fS r
flo u r* t h e i r e x p e c ta tio n o f f u tu r e needs o f flo u r* th e S u rre h t p r ic e o f
w h eat, arid t h e i r e x p e cta tio n o f th e f u tu r e p r ic e o f w heat.
However, ta k e n
8/ M in n eap o lis G rain Exchange, " D a ily C lo sin g P r ic e s o f CaSh Wheat"* S ix ty f i f t h Annual R epO rt, December 51* 19h7* Ps 20.
9 / The Miller P u b lis h in g Company* "Comments .oh th e B lpur,.T fadel ” UsSg Floup
M ark ets, 1 The:N o rth w estern M ille p * June 3 ^ -19h7 th ro u g h J u ly , ^9* 19h7.
-57
on th e b a s is o f a y e a r th e f l o u r o rd e rs w i l l av erag e o u t to a t o t a l q u a n tity
t h a t rem ain s r e l a t i v e l y c o n s ta n t from y e a r to year*
FVe
G ra p h ic a l and S t a t i s t i c a l Comparison
F ig u re s 8 and 9 in d ic a te th e g r e a t v a r i a t i o n s t h a t ta k e p la c e i n f l o u r
p r ic e s and o rd e rs r e c e iv e d .
I n F ig u re 1 0 a com parison i s made o f s p rin g
w heat p r ic e in d e x a t M in n eap o lis and th e M in n eap o lis S tan d ard P a te n t F lo u r
p r ic e in d e x .
They b o th appear to fo llo w th e same p a tte r n and th e r e la tio n =
s h ip betw een th e two i s c lo s e w ith th e e x c e p tio n o f th e p e rio d b e fo re J u ly
I.
P r io r to J u ly 1«, th e r e was a p r ic e c e i l i n g on b o th w heat and f l o u r .
The p r ic e o f w heat f lu c t u a t e d soiiie below th e c e i l i n g and up to i t , w h ile
th e p r ic e o f f l o u r rem ained a t th e c e i l i n g f o r th e f i r s t p a r t Of 19i|6.
T h is i s th e cause o f th e s t e a d i l y d e c lin in g f l o u r p r ic e in d ex i n th e f i r s t
s i x months o f I9 b 6 and th e trem endous in c re a s e i n J u ly , 1916.
The r e s t o f
I 916 and a l l o f 19l 7 shows th e norm al r e l a t i o n s h i p betw een th e two in d e x e s .
•This i n d i c a t e s t h a t th e p r ic e o f f l o u r i s v e ry c lo s e ly t i e d to th e p rid e o f
w heat a s was m entioned p re v io u s ly .
A c o r r e l a t i o n was made betw een th e M in n eap o lis f l o u r p r ic e in d ex and
th e f l o u r o rd e rs r e c e iv e d a t M inneap o lis each week in 1916 and I9l7<s
c o e f f i c i e n t o f c o r r e l a t i o n o b ta in e d i s .3«
The
T h is i s n o t a v e ry h ig h c o rre ­
l a t i o n , how ever, i t does e x p la in 10 p e r c e n t o f th e movement o f f l o u r
p ric e s .
F ig u re 11 shows a s c a t t e r diagram and a l e a s t sq u a re s l i n e o f
r e g r e s s io n o f t h i s same d a ta .
The f ig u r e shows a p o s itiv e r e l a t i o n s h i p
betw een f l o u r p r ic e in d e x and f l o u r o rd e rs r e c e iv e d .
The l i n e o f r e g r e s s io n
i n d i c a t e s t h a t f o r e v e ry in c re a s e o f 100 p e r c e n t o f m ill c a p a c ity in f lo u r
F ig u re 10
Comparison o f M inneapolis F lo u r and Wheat P ric e
Indexes by Weeks f o r th e Years 19^6
and 191*7
Index i n P e rc e n t
\
CD
S ta n d a rd P=.te n t F ln u r
I
S p rin g Wheat
1/22
3 /2 6
6/U
8/13
10/22
12/31
3 /1 1
5/13
7/22
191*7
9 /3 0
12/23
F ig u re 11
A Com parison o f M inneapolis F lo u r P r ic e Index
and F lo u r O rders R eceived in M inneapolis byWeeks f o r th e Y ears 19U6 and 19U7
F lo u r P ric e In d ex in P e rc e n t
\o
I
20
I o O 200
F lo u r O rders R eceived b y P e rc e n t o f M ill C ap a c ity
=6o~
o r d e r s s th e f l o u r p r ic e in d ex in c re a s e s 2 ,6 p e r cent*
Since th e r e ap p ears
to be a f a i r l y c lo s e r e l a t i o n s h i p betw een w heat and f l o u r p r ic e in d e x e s,
th e r e l a t i o n s h i p betw een f l o u r o rd e rs and f l o u r p r ic e in d ex es m ig h t be
a p p lie d to w heat p r ic e in d e x es and f l o u r o rd e rs as 'w e ll.
There u n d o u b te d ly a re many o th e r f a c t o r s w hich a f f e c t th e p r ic e o f
f l o u r and w heat as w e ll a s th e r e c e i p t o f f l o u r o rd e rs b u t a com plete de­
te rm in a tio n o f e v ery f a c t o r may p o t be p o s s ib le b e ca u se, as has been shown
e a r l i e r , a l a r g e p a r t o f th e movement i s due to th e e x p e c ta tio n s and o p in ­
io n s o f th e b a k e rs , m i l l e r s , and o th e rs a c t i v e l y engaged in th e m ark et.
However, th e c lo s e r e l a t i o n s h i p t h a t e x i s t s betw een th e demand f o r f lo u r
and th e demand f o r h ig h p r o te in s p rin g w heat has been in d ic a te d .
Any move­
ment o f th e demand curve f o r f l o u r w i l l cause a s im ila r movement i n th e
demand curve f o r h ig h p r o te in s p rin g w h eat.
C.
I.
O ther Wheat and F lo u r M arkets
The Movement Between M arkets
The s p rin g w heat m arket i s n o t th e o n ly m arket which u se s h ig h p r o te in
s p rin g w h e at.
E very y e a r l a r g e q u a n t i t i e s o f s p rin g w heat a re sh ip p ed to
th e West C oast f o r b le n d in g w ith w heat grown in th e c o a s ta l and interm ourita in a re a s.
S ev en ty p e r Cent o f th e w heat produced i n th e P a c if ic N orthw est
i s w h ite w heat and f o r t y p e r c e n t i s s o f t w h ite w h eat.
Only 2$ p e r c e n t o f
t h e i r w heat crop i s re p r e s e n te d by h a rd r e d w in te r w h eat. 1 0 /
The amount
o f s p rin g w heat which goes to th e West C oast e v e ry y e a r w i l l depend upon
■
'
'
------
■
------— ................. -
- ---------- -----------------------
-------------------:
. . .
........................... .......................
-
-
i o / W illa rd N. C raw ford, "Wheat P ro d u c tio n i n th e P a c if ic N o rth w e st", The
N o rth w estern M i l l e r , P ro d u c tio n S e c tio n , F e b ru a ry 1 1 , l ^ ? .
-6 lth e p r o t e i n c o n te n t o f th e w heat from th e P a c if ic N orthw est and n e ig h b o rin g
s ta te s .
I f t h e i r p r o te in i s h ig h e r th a n u s u a l f o r one y e a r
o n ly
enough
s p rin g w heat w i l l be sh ip p ed i n to give th e n e c e s s a ry s tr e n g th to th e r e ­
s u l t i n g b re a d f l o u r .
However, i f th e p r o te in c o n te n t i s lo w er th a n u s u a l, :
th e n more h ig h p r o t e i n s p rin g w heat w i l l move to th e W est C oast i n o rd e r to
make up f o r th e d e f ic ie n c y i n t h e i r p r o te in ,
A s im ila r r e a c tio n w i l l ta k e p la c e betw een th e h a rd re d w in te r w heat
a re a and th e s p rin g w heat m a rk e t.
Here a g a in , i n y e a rs when th e Southw est
i s d e f i c i e n t i n p r o t e i n , th e s e m i l l e r s e n te r th e s p rih g w heat m arket and
p u rch ase h ig h p r o te in s p rin g w h eat.
An example o f t h i s happened i n 19^3
when th e r e was a la r g e su p p ly o f h ig h p r o te in s p rin g w heat i n Montana and
y e t th e p r o te in premiums were h ig h .
T his can be p a r t l y a t t r i b u t e d to th e
f a c t t h a t th e r e was a la c k o f p r o te in i n th e h a rd w in te r w heat a re a as
w e ll as much o f th e s p rin g w heat a r e a , and th e w in te r w heat m i l l e r s e n te r e d
th e s p rin g w heat m arket to p u rc h a se h ig h p r o te in S pring w h eat.
T his e n tr y
in to th e s p rin g w heat m arket by b u y ers from o th e r m ark ets r e p r e s e n ts a l t e r s
n a tiv e u s e s f o r h ig h p r o te in s p rin g w h eat.
IT th e s i t u a t i o n were r e v e r s e d and th e s p rin g w heat m i l l e r s were
e n te r in g o th e r m arket a re a s f o r t h e i r w heat th en o th e r ty p e s o f w heat w ould
become s u b s t i t u t e s f o r h ig h p r o te in s p rin g w heats
There i s good in d ic a tio n
t h a t s p rin g w heat m i l l e r s do go i n t o th e h a rd f e d w in te r Wheat a re a f o r
p a r t o f t h e i r w heat re q u ire m e n ts when th e re i s a p rid e ad vantage o f a
sh o rta g e o f s p rin g w heat p r o te in s
There i s l i t t l e re a so n to " b e lie v e t h a t
th e s p rin g w heat m i l l e r s e v e r go i n t o th e S o ft w heat tre a S f o r any w heat •
b e 6ati.se s o f t w heat does n o t p f OdtiBe a b re a d f lo t if s a t i s f a c t o r y to th e
*■62“•
s p rin g w heat m i l l e r s and th e r e id g e n e r a lly enough h a rd w heat to meet
m illin g h e e d s .
T I.
The E l a s t i c i t y o f S u b s titu ti o n .
K ald o r, i n an a n a ly s is o f th e e l a s t i c i t y o f s u b s t i t u t i o n betw een
v a rio u s c la s s e s o f w heat, showed th e p o s s i b i l i t y o f c o n s id e ra b le s u b s t i t u ­
t i o n betw een h a rd re d s p rin g w heat and h a rd re d w in te r w h eat. 1 1 /
He
a r r iv e d a t a s u b s t i t u t i o n e l a s t i c i t y o f about - 6.£ which i n d i c a t e s t h a t a
sm all change i n th e r e l a t i v e p r ic e s o f h a rd r e d s p rin g w heat and h ard re d
w in te r w heat causes a la r g e change i n th e q u a n t i t i e s u t i l i z e d b y m i l l e r s .
(See F ig u re 1 2 ) .
K aldor a ls o a r r iv e d a t a s u b s t i t u t i o n e l a s t i c i t y o f «2S2
betw een h a rd s p rin g w heat and s o f t re d w in te r , and - 3 . bh betw een s o f t
w h ite w heat and h a rd s p rin g w h eat.
T his would in d ic a te t h a t f o r a g iv en
change in p r ic e r a t i o s th e change i n q u a n t i t i e s u t i l i z e d betw een hard
s p rin g w heat and s o f t r e d w in te r would be ab o u t o n e - t h i r d 'a s much as th e
change i n q u a n t i t i e s u t i l i z e d betw een h a rd s p rin g and h ard w in te r w heat.
I n o th e r w ords, f o r a g iv en change i n p r ic e r a t i o s th r e e tim es as niUch
h a rd w in te r w heat a s s o f t r e d w in te r would be s u b s tit u te d f o r h a rd s p rin g
w h e at.
S im ila r ly , tw ice as much h ard w in te r w heat would be s u b s t i t u t e d
f o r h a rd s p rin g w heat as would h a rd s p rin g w heat be s u b s t i t u t e d f o r s o f t
w h ite w heat w ith a giv en change i n p r ic e r a t i o s .
T his i s s u b s ta n tia te d
by th e f a c t th e r e i s more s u b s t i t u t i o n betw een s p rin g w heat and w h ite w heat
th a n betw een s o f t w in te r and s p rin g w heat w h ile n e ith e r approaches th e
amount o f s u b s t i t u t i o n c a r r ie d on b etw een "th e h a rd s p rin g w heat a re a and
th e h a rd w in te r w heat area*
11 / D. R« K ald o r ,, U npublished m ark etin g S tudy, Economics D epartm ent^ Idttfd
S t a t e C o lle g e , 19JlOe
-6 3 P ro d u c tio n and p r ic e r a t i o s were computed f o r th e y e a rs 19Ul through
19$0 f o r h a rd re d w in te r and h ard re d s p rin g w heat.
The p r ic e o f No. I
Dark N o rth ern S p rin g w heat a t M in n eap o lis and th e p ric e o f No. 2 Hard
W inter a t Kansas C ity were u sed to compute th e p r ic e r a t i o s .
F ig u re 13
shows th e s e r a t i o s f o r th e y e a rs in d ic a te d as w e ll as f o r th e y e a rs 193h1937. 1 2 /
The s u b s t i t u t i o n e l a s t i c i t y a r r iv e d a t i s a p p ro x im a te ly - 6 .3 .
T his compares v e ry c lo s e ly w ith th e f ig u r e s g iv en by K ald o r.
The p o in ts
F ig u re 12
The E l a s t i c i t y o f S u b s titu ti o n betw een Hard
Red S p rin g Wheat and Hard Red W inter Wheat,
1929-1938
-S
I
<D
1 2 / The d a ta u sed were ta k e n from th e A g r ic u ltu r a l S t a t i s t i c s , U n ited S ta te s
D epartm ent o f A g r ic u ltu r e , 1932. F i r s t , th e p e rc e n t o f t o t a l p ro d u c tio n
f o r each c la s s o f w heat was o b ta in e d . The p e rc e n t o f one c la s s was d iv id e d
i n t o th e p e r c e n t o f a n o th e r to o b ta in th e p ro d u c tio n r a t i o s . The p r ic e
r a t i o s were o b ta in e d by d iv id in g th e y e a r ly average p ric e f o r one c la s s
in to th e y e a r ly average p r ic e f o r a n o th e r c l a s s .
-614F ig u re 13
P r ic e R atio
S p rin g Wheat to W in ter Wheat
The E l a s t i c i t y o f S u b s titu ti o n betw een Hard
Red S p rin g Wheat and Hard Red W in ter W heat,
1931-1937 and 191*1-1950
ItO
P ro d u c tio n R a tio
S pring Wheat to W in ter Wheat
50
60
70 80
—6^—
f o r th e y e a rs 193lt-37 f a l l i n l i n e w ith th o s e o f th e l a t e r p e rio d and th u s ,
seem
to confirm K a ld d rj s f i g u r e s .
I t i s a p p a re n t a ls o t h a t th e r e has been
v e ry l i t t l e change i n th e r e l a t i o n s h i p betw een h a rd w in te r and h a rd s p rin g
w heat i n th e l a s t 20 y e a r s .
19lll-19SO .
Supply r a t i o s were a ls o computed f o r th e p e riq d
T hese, how ever, do n o t check w ith K a ld o r1s f i g u r e s .
T his i s
because i t was n o t p o s s ib le to o b ta in com parable su p p ly d a ta , w hereas i t
whs p o s s ib le to o b ta in com parable p ro d u c tio n d a ta .
An a tte m p t to recom pute
K a ld o rr s 193^-37 su p p ly r a t i o s was n o t s u c c e s s f u l.
I t was s u c c e s s fu l i n
th e case o f th e p ro d u c tio n r a t i o s .
T h e re fo re , i t i s assumed t h a t f o r th e
p r e s e n t i t i s n o t p o s s ib le to compare th e r e s u l t s when u s in g su p p ly r a t i o s .
W hile i t i s d i f f i c u l t to o b ta in d e f i n i t e e m p iric a l ev id en ce o f th e
i n t e r p l a y o f th e v a rio u s w heat m a rk e ts, K a ld o r1s f ig u r e s and th e ones men­
tio n e d above s u g g e s t d e f i n i t e s u b s t i t u t i o n .
Comments from members o f th e
g r a in tr a d e in d ic a te t h a t t h i s s u b s t i t u t i o n e x i s t s ,
HXi
The E f f e c t on Demand
S u b s titu ti o n in c r e a s e s th e e l a s t i c i t y o f demand f o r h ig h p r o te in s p rin g
w heat and th e g r e a te r th e number o f s u b s t i t u t e s , th e more e l a s t i c i t s de­
mand w i l l b e , • .In l i k e m anner, when b u y ers from o th e r a re a s e n te r th e s p rin g
w heat m ark et to buy h a rd s p rin g w heat f o r b le n d in g w ith t h e i r w heats th e y
c r e a te a l t e r n a t i v e u s e s f o r h ig h p r o te in s p rin g w heat.
A lte r n a tiv e u s e s
w i l l in c r e a s e th e e l a s t i c i t y o f demand a ls o .
I n S e c tio n A a number o f examples were g iv e n on th e e f f e c t s o f s u b s t i ­
t u t e s and a l t e r n a t i v e s & The a c tio n o f th e v a rio u s m ark ets on each o th e r
would te n d to be a s i t u a t i o n where th e demand curve f o r h ig h p r o t e i n s p rin g
-6 6 w heat be more e l a s t i c above a c e r t a i n p r ic e and l e s s e l a s t i c below th a n i t
m ig h t o th e rw is e be w ith o u t t h i s in f lu e n c e .
(See F ig u re Ij)*
The c lo se
c o n n e c tio n betw een th e s e m ark ets te n d s to keep th e v a rio u s p r ic e s i n l i n e
w ith each o th e r .
I f th e demand curve above a c e r t a i n r e l a t i v e p r ic e i s
more e l a s t i c because o f th e p o s s i b i l i t y o f s u b s t i t u t i o n , th e p r ic e w i l l
te n d to rem ain n e a r t h i s r e l a t i v e l e v e l .
I f i t does n o t, a la r g e amount o f
s u b s t i t u t i o n w i l l ta k e p la c e u n t i l th e p r ic e r e tu r n s to th e e q u ilib riu m
le v e l.
The f a c t t h a t t h i s s u b s t i t u t i o n p ro b a b ly e x i s t s in d ic a te s t h a t th e
demand curve f o r a c e r t a i n ran g e i s more e l a s t i c th a n i t m ig h t be o th e rw is e .
I).
I0
The V a r ia tio n s in Wheat Shipm ents on th e G reat L ak es
S hipping on th e G re at Lakes
E very y e a r th e G re at L akes f r e e z e and a l l s h ip p in g on th e s e w aters
c ease f o r a p e rio d o f about th r e e m onths„
B u ffa lo i s th e l a r g e s t s p rin g
w heat m illin g c e n te r , exceed in g th e £ -d a y week c a p a c ity a t M in n eap o lis by
a lm o st 200,000 b u s h e ls .
B u ffa lo depends v e ry h e a v ily on th e cheap tr a n s ­
p o r t a t i o n p ro v id e d by th e G reat Lakes to o b ta in i t s su p p ly o f w h eat.
Dtiring
th e tim e t h a t th e G reat Lakes a re c lo se d th e B u ffa lo m i l l e r s m ust u se w heat
t h a t was re c e iv e d and s to r e d b e fo re th e c lo s in g o r r e s o r t t o h ig h e r tra n s *
p o r t a t i o n c o s ts over th e la n d r o u te s .
For t h i s re a so n i t i s eco n o m ically
sound f o r th e B u ffa lo m ille r s to s to r e a l l th e w heat th e y can b e fo re th e
L akes c lo s e each W in te r.
Each f a l l t h i s ru s h to g e t w heat to th e G reat
L akes d r iv e s th e p r ic e o f s p rin g w heat tip .
The m ille r s would be w illin g to
p ay a p r ic e d i f f e r e n t i a l e q u a l to th e d if f e r e n c e i n f r e i g h t betw een la n d
and w a te r tr a n s p o r t a t i o n i f . n e c e s s a ry .
The p r ic e o f S pring w heat a t D uluth
-6 7 -
seems to r e f l e c t th e c o n d itio n s on th e G reat Lakes and to Some e x te n t so
does th e p r ic e a t M in n ea p o lis.
X I0
S t a t i s t i c a l R e la tio n s h ip s
I n o rd e r to d eterm in e w hat r e l a t i o n s h i p e x i s t s between th e G reat Lakes
and th e p r ic e o f s p rin g WhSatjl an 11-y e a r m onthly average p r ic e f o r No. I
D ark N o rth ern s p rin g w heat was c a lc u la te d .
T h is was o b ta in e d by u s in g th e
m o n th ly average f o r each month o f each y e a r computed from th e d a i l y c lo s in g
p r ic e s a t D uluth and fin d in g th e mean o f th e s e m onthly a v erag e s f d r th e 1 1 y e a r p e r io d . 1 3 /
These average p r ic e s were compared to th e 9 -y e a r average
m onthly shipm ents from D u lu th b A 9- y e a r av erag e was used h erd sim p ly b e cause d a ta f o r 11 y e a rs was n o t a v a il a b le .
The shipm ents from D uluth con­
t a i n f ig u r e s f o r la n d shipm ents as w e ll as t h a t Over th e G re at Lakes b u t
th e amount go in g over la n d i s so i n s i g n i f i c a n t t h a t i t does n o t a l t e r th e
p ic tu r e any.
These a v erag e s a re p l o t t e d i n F ig u re I l t s and a l e a s t sq u a re s l i n e m ath­
e m a tic a lly f i t t e d to them .
The r e s u l t shows a d e f i n i t e p o s i t i v e r e l a t i o n ­
s h ip betw een th e q u a n tity Shipped o v er th e G re at Lakes and th e p r ic e o f
s p rin g w heat a t D u luth.
To make a com parison w ith o th e r m a rk e ts s im ila r
f ig u r e s were p l o t t e d on two g ra p h s:
Ones th e p r ic e s re c e iv e d by th e U .S .
fa rm e rs a g a in s t th e q u a n tity r e c e iv e d a t 12 p rim a ry i n t e r i o r m a rk e tsj and
th e o th e r th e p r ic e o f No. I Dark N o rth ern Wheat a t M in n eap o lis a g a in s t th e
q u a n tity o f w heat re c e iv e d on th e M in n eap o lis m d rk et.
Both o f th e s e show a
1 3 / The y e a rs 19h& th ro u g h I £53 were 1ised_except f o r 19h9« The d a ta f o r
T9h9 were in co m p lete so th e y e a r was e lim in a te d from th e c a lc u la tio n s .
D
-6 8 -
F ig u re Ili
Average M onthly P r ic e o f No. I Dark N o rth ern S p rin g Wheat
a t D uluth - 11 Year Average a /
The P rice o f Spring Wheat on the Duluth Market
as Compared to th e Shipments o f Wheat from
Duluth fo r th e Years 19^2 - 1953
A p ril
June
M onthly Shipm ents o f S p rin g Wheat from D uluth
i n M illio n s o f B u sh e ls, 9 y e a r Average a /
a / Annual R e p o rts , D uluth Board o f T rad e , D u lu th , 19U2-1953
-6 9 n e g a tiv e r e l a t i o n s h i p betw een th e q u a n tity r e c e iv e d and th e p r i c e , although,
th e r e l a t i o n s h i p id h o t so pronounced a t M in n eap o lis as i t i s f o r th e UeS.
as a w hole.
(See f i g u r e s 1$ and 1 6 ) .
This would su g g e st t h a t th e Minneapo­
l i s m arket i s a f f e c t e d to some e x te n t by th e D u lu th m a rk e t.
F ig u re 17
shows t h a t Ja n u a ry , F e b ru a ry , and March, th e months when th e Lakes a re
■
g e n e r a lly c lo s e d , a re th e lo w e s t b o th in p r ic e and q u a n tity o f sh ip m e n ts.
The shipm ents i n t h i s p e rio d u n d o u b te d ly c o n s is t o f Ik n d t r a n s p o r t a t i o n .
O cto b er, .November, and December, th e months j u s t p re v io u s to th e c lo sin g
o f th e L ak es, a re conspicuous by t h e i r p la c e a t th e o th e r end Of th e c h a r t .
H ere, a l l th r e e p r ic e s a re h ig h and th e shipm ents th e h ig h e s t o f th e y ears
A lo o k a t th e movement o f th e D uluth p r ic e s shows ah in c r e a s e from
A ugust to December w ith a drop i n Ja n u a ry and F e b ru a ry , and some re c o v e ry
i n M arch.
A p r il, th e month when th e Lakes g e n e r a lly open* Shows an in c re a s e
i n p r ic e w hich s u g g e s ts t h a t th e d e s ir e o f th e B u ffa lo m ille r s to g e t wheat
moving a c ro s s th e Lakes as soon as p o s s ib le te n d s to r a i s e th e p r ic e a t
t h i s tim e .
The p r ic e in c r e a s e s in May, d ro p s o f f i n Ju n e, and r i s e s
s l i g h t l y i n J u ly b e fo re th e. A ugust d ro p .
The 2 0 -y ear av erag e o f S pring
w heat p r i c e s a t G re at F a l l s , M ontana, shows a s im ila r movement which may
be p a r t l y due to th e f a c t t h a t a l a r g e p a r t o f Montana S p rin g w heat moves
o v er th e G re at L a k e s.
A S im ila r lo o k a t th e movement o f th e UsSb and M in n eap o lis p r ic e s
shows a d i f f e r e n t s e a s o n a l p a t t e r n . ■There
is
a ten d en cy fo b th e U5Sb
w heat p r id e s t o r i s e from A ugust th ro u g h May o f th e n e x t y e a r , l i t /
l i t / S ta n fo rd U n iv e r s ity , " V a r ia tio n s i n Wheat P r i c e s , " Wheat S tu d ies, o f th e
Food R ese arch I n s t i t u t e , Vol5 V, No. 7S C a l if o r n ia , Jtine, 1929.
-7 0 Figure 15
The P rice o f Spring Wheat on the M inneapolis
Market as Compared to th e R eceip ts o f
Wheat a t M inneapolis fo r the Years
19U1-1951
Ju n
3
A p ril
CD h O
1— I 1— I
O
r—I
0 a?
•H
CD
Wheat R eceived in M in n eap o lis in M illio n s o f B ushels b /
12 Year Average
a / Commodity R esearch B ureau, Commodity Yearbook, New York, 1952.
b / Annual R e p o rts , M inneapolis Board o f T rad e, M in n eap o lis, 19^1-1951.
-7 1 Figure 16
Average M onthly P r ic e o f Tfheat - 11 Year Average
The P rice o f Wheat Paid to U .S. Farmers;
as Compared to th e R eceip ts o f Wheat a t
12 P r in c ip a l Markets fo r th e Years
19U1 - 1951 a /
• A p ril
June
Wheat R eceived in M illio n s o f B u sh e ls, 11 Year Average
a / Commodity R esearch B ureau, Commodity Yearbook, New York, 1952.
-7 2 -
Figure 17
The M onthly P r ic e o f S p rin g Wheat on th e D uluth M arket
as Compared to th e M onthly Shipm ents o f S pring Wheat
from D uluth f o r an Average Y ear.
P r ic e
M illio n s o f B ushels
age M onthly P r ic e o f
I D ark N o rth ern S pring
■Wh e a t a t D ultrbhAverage
Ioipme n ts <j>f
Spring
from Eulutty Year Average
“ 73“
M iin e a p o lis p r ic e s show a s im ila r movement* a lth o u g h i t i s n o t so pronounced*
The sm all r i s e i n J a n u a ry , th e v e ry sh arp drop i n F e b ru a ry , and th e f l u c t u ­
a tio n o f p r i c e s i n th e s p rin g months su g g e s t some in flu e n c e n o t p r e s e n t i n
th e UeS 0 p r i c e s .
The U .S , p r ic e i s g r e a t l y d eterm in ed by th e p r ic e o f w in te r
w heat i n th e Kansas C ity m ark et s in c e h a rd w in te r w heat r e p r e s e n ts th e
l a r g e s t p ro p o r tio n o f th e t o t a l w heat c ro p .
T his d i f f e r e n t movement o f
UeS0 p r ic e s i s a ls o shotip by Green in a s tu d y on th e s e a s o n a l v a r ia tio n o f
UeSe w heat p r i c e s i n 1925). If?/
H is f in d in g s in c lu d e d to a la r g e e x te n t
th e e f f e c t o f f o r e ig n w heat on th e d o m estic m a rk e t.
However, t h i s r e l a t i o n ­
s h ip no lo n g e r e x i s t s because o f th e h ig h s u p p o rt p r ic e on d o m estic w heats
Green p o in te d o u t th r e e p o t e n t i a l weak s p o ts i n th e UsS. w heat p r i c e s s
( I ) . Ju n e , J u ly , and A ugust, which a re a f f e c t e d by p ro s p e c tiv e and a c tu a l
movement o f th e w in te r w heat crop o f th e U n ite d S ta te s j (2 ) November, when
th e new S pring w heat (pre-com bine) and Canadian cro p s move; and (3) F e b ru a ry
and M arch, when w heat from A u s t r a lia and A rg e n tin a a rriv e *
o u t th r e e p o t e n t i a l s tro n g s p o ts s
He a ls o p o in ts
( l ) Septem ber and O cto b er, when th e move­
m ent o f w in te r w heat has d e c re a se d and th e s p rin g w heat crop h a s n o t y e t
begun to moVej (2) Ja n u a ry , when th e G reat Lakes a re c lo s e d and th e C anadian
w heat i s s h u t o f f and i t i s to o e a r l y f o r f o r e ig n w heat; and (3) A p r il,
when th e f o r e ig n w heat h a s p a sse d i t s peak and th e G reat L akes have n o t y e t
opened. -The h ig h s p o t he m en tio n s f o r Ja n u a ry , which i s in C o n tra s t to th e
Ja n u a ry drop on th e D uluth m a rk et, i s l a r g e l y due to h is em phasis oti fo r e ig n
1 5 / R. M0 G reen, ,S easonal F lu c tu a tio n s o f TfJheat P r ic e s , Kansas A g r ic u ltu r a l
E xperim ent S ta tio n , M anhattan, C irc u la r 121, 1925.
'
-Tilw heat (C anadian^ A u s tr a lia n , and A rg e n tin a ) and i t s e f f e c t on th e U0Se
p r ic e o f w h eat.
F u r th e r s t a t i s t i c a l a n a ly s is i n d ic a te s t h a t any c o r r e l a t i o n betw een
D uluth p r ic e s and th e q u a n tity o f shipm ents i s n o t s i g n i f i c a n t .
P r ic e i n ­
dexes were c a lc u la te d f o r D u lu th , M in n e a p o lis, and th e U n ite d .S ta te s , • An
11 and 12-month average o f U ,S 0 Farm p r ic e in d e x es and th e D u lu th p r ic e
in d e x e s i s shown i n F ig u re I S d A d if f e r e n c e in th e in d e x p a t t e r n can be
seen.
The U„S, farm in d ex te n d s to r i s e from th e summer low to .J a n u a ry
w ith a deep drop i n F e b ru a ry , which a p p a r e n tly i s a normal phenomenon t h a t
i s y e t to be e x p la in e d , and a re c o v e ry i n March and A p r il,
The D aluth
in d e x r i s e s t o November and drops o f f i n December, J a n u a ry , and F e b ru a ry ,
I t r i s e s a g a in i n March, j u s t p r i o r to th e G re at Lakes o p en in g , and th en
l e v e l s o f f a g a in i n A p r il, May, and Ju n e 6
From th e s e in d e x es a c o r r e l a t i o n was made betw een th e d i f f e r e n t i a l b e­
tw een D a lu th and M in n eap o lis d e v ia tio n s from th e tr e n d (D uluth d e v ia tio n s
were s u b tr a c te d from M in n eap o lis d e v ia tio n s ) and th e q u a n tity o f w heat
sh ip p ed o v e r th e G re at L a k e s,
The r e s u l t was t h a t a g a in th e r e i s a p o s itiv e
r e l a t i o n betw een th e q u a n tity o f shipm ents and th e d i f f e r e n t i a l betw een
D uluth and M in n eap o lis in d e x e s .
I n o th e r w o rd s, th e l a r g e r th e shipm ents
th e l a r g e r th e d i f f e r e n t i a l betw een D u lu th and. M in n eap o lis p r ic e s w ith
D uluth b e in g above M in n e a p o lis,
T h is conforms t o th e l o g i c t h a t d u rin g th<:
heavy s h ip p in g sea so n th e B u ffa lo m ille r s w i l l pay more f o r s p rin g w heat
th a n th e M in n eap o lis m i l l e r s ,
At th e tim e o f peak shipm ents th e d i f f e r e n t
t i a l betw een D uluth and M in n eap o lis i s th e g r e a t e s t ,
IfJhen th e la k e s c lo s e ,
th e D uluth p r ic e drops down c lo se to th e M in n e a p o lis, and may even go below
it.
F ig u re 19 Shows th e r e l a t i o n s h i p .
F ig u re 18
Com parison o f U .S. Farm P r ic e Index and D uluth
P r ic e Index f o r Wheat by Months
Farm P r ic e Index
P r ic e Index
Iu th P r ic e Index
-7 6 -
Figure 19
D i f f e r e n t i a l Between D uluth and M inneapolis
Com parison o f th e D i f f e r e n t i a l betw een D uluth
and M in n ea p o lis, P r ic e Indexes f o r Wheat and
th e Q u a n tity o f Shipm ents o v er th e G reat L akes,
M onthly F ig u re s f o r 11 Y ears, 19lpL - 1951
M illio n s o f B ushels
“77-
The c o r r e l a t i o n a n a ly s is in d ic a te s t h a t th e r e l a t i o n s h i p betw een dif=>
f e r e r i t i a i and q u a n tity o f shipm ents i s n o t s i g n i f i c a n t a t a l l .
I t in d ic a te s
t h a t a t b e s t o h ly one per -cent o f th e v a r i a t i o n s in d i f f e r e n t i a l s could be
e x p la in e d by th e q u a n tity o f sh ip m en ts.
There a p p a re n tly m ust be o th e r
f a c t o r s w hich e n te r th e p ic tu r e t h a t have a more d i r e c t e f f e c t on th e p r ic e
movement a t D uluth and causes th e seeming r e l a t i o n s h i p betw een p r ic e and
sh ip m e n ts.
However, i t can be s a id t h a t th e s e a s o n a lit y o f shipm ents on
th e G reat L akes does have a s e a s o n a l e f f e c t on th e demand f o r h ig h p r o te in
s p rin g w heat.
Th th e f a l l when th e q u a n tity demanded i s g r e a t and sh ip p in g
a t i t s peak, th e demand curve may be c o n sid e re d to have s h i f t e d to th e r i g h t
and become more e l a s t i c below a c e r t a i n p r i c e .
T his p r ic e i s th e poi n t
where i t no lo n g e r b e n e f its th e B u ffa lo m ille r s to o b ta in w heat over th e
G re a t L ak es.
Above t h a t p r ic e i t w i l l c o s t them j u s t as much as i t would
i f th e y sh ip p ed over la n d r o u te s and t h e r e f o r e , th e y p ro b a b ly would be
r e l u c t a n t to p u rc h a se any more th a n im m ediate re q u ire m e n ts .
Below t h i s
p r i c e , how ever, th e curve w i l l be more e l a s t i c th a n b e fo re .
T h is i s shown
i n F ig u re 20.
H ere, Pg - ,Bj_ w i l l r e p r e s e n t th e d i f f e r e n t i a l o v er th e
M in n eap o lis p r i c e , assum ing M inneap o lis and D uluth were about th e same b e ^
f o r e th e f a l l s h ip p in g se a so n s t a r t e d .
The M in n eap o lis p r ic e w i l l r i s e
some due to th e in flu e n c e from D u lu th , how ever, th e D uluth p r ic e Will, r e ­
m ain above i t u n d e r norm al c irc u m sta n c e S5
As soon as th e G re a t Lakes
c lo s e th e g r e a t demand a t D uluth w i l l no lo n g e r e x i s t and th e demand curve
w i l l ten d t o r e t u r n to i t s form er p o s i t i o n .
A lthough, t h i s h a s n o t proven
o u t s t a t i s t i c a l l y , th e r e l a t i o n s h i p s t i l l a p p e a rs to e x i s t and p ro b a b ly i s
th e h e s u i t o f o th e r f a c t o r s which can n o t be lo c a te d a t t h i s tim e .
-7 8—
F ig u re 20
T h e o re tic a l Demand Curves f o r High P r o te in S p rin g Wheat
1o
4)
%
t)
O
•H
6
Q u a n tity o f Wheat
E.
I.
B lending o f P r o te in
V a ria tio n s i n Supply o f P r o te in
The p ro d u c tio n o f w heat i s a somewhat p re c a rio u s b u s in e s s because no
two c ro p s a re e v er e x a c tly a l i k e .
The w heat r a i s e d e v e ry y e a r v a r ie s in
p h y s ic a l and chem ical c h a r a c t e r i s t i c s .
High p r o te in w heat v a r ie s b o th in
th e q u a n tity and th e q u a l i t y o f th e p r o te in .
I n th e s t a t e o f Montana th e
p r o te in c o n te n t f o r th e y e a rs 1951 and 1952 v a r ie d as fo llo w s s 16/
Per c e n t o f T o tal Crop
P r o te in
1951
1952
Under 1 3 .0 #
21
18
1 3 .0 - 1 3 .9
Iln O - l l i . 9
1 5 .0 and ov er
18
17
20
26
JA
100
9 5 ,0 3 3 ,0 0 0
100
8 3 ,5 1 8 ,0 0 0
T o ta l Crop (B u sh els)
1 6 / Montana D epartm ent o f A g ric u ltu re and U. S„ D epartm ent o f A g ric u ltu re ^
P r o te in C ontent o f Montana W heat, 1951 and 1952 C rops, H elena, 1952»
=79=
These f ig u r e s show th e g r e a t v a r i a t i o n t h a t took p la c e i n Montana
a lo n e i n j u s t one y e a r .
The amount o f w heat t e s t i n g over l h . 0 p e r c e n t
p r o t e i n dropped 1 1 ,0 7 6 ,2 0 0 b u s h e ls i n t h i s one y e a r .
S im ila r v a r ia tio n s
can be found th ro u g h o u t th e s p rin g w heat a r e a .
II.
O b je c tiv e s o f M ille r s and B akers
The s o le o b je c tiv e o f th e b a k er i s to make a p r o f i t s e l l i n g good
b re a d .
The b a k e r, i f he could be co m p le tely c e r t a i n t h a t a l l th e f l o u r he ■
r e c e iv e d would make th e b e s t l o a f p o s s ib le , would n o t c a re w hat k in d o f
f l o u t he u s e d .
The b a k er w ants a q u a l i t y l o a f and a l l th e S p e c if ic a tio n s
he g iv e s to th e m i l l e r a re m e re ly w hat <he b e lie v e s a re th e c r i t e r i a f o r a
good baking f l o u r .
The b a k e r r e a l i z e s t h a t th e w heat produced f l u c t u a t e s e v e ry y e a r in
q u a lity .
Both th e q u a n tity and q u a l i t y o f p r o te in f l u c t u a t e y e a r ly .
There*=
f o r e , i n a tte m p tin g to m a in ta in w hat he f e e l s iS a q u a l i t y b re a d l o a f , th e
b a k e r a l t e r s h is f l o u r s p e c i f i c a t i o n s from y e a r to y e a r to m eet th e changes
i n th e w heat.
The b a k e rs in te rv ie w e d a l l a g re ed t h a t p ro d u c tio n o f th e
b e s t b re a d l o a f i s w hat th e y a re i n t e r e s t e d i n .
Most o f th e s e b a k e rs
a l t e r e d t h e i r s p e c i f i c a t i o n s from y e a r to y e a r .
However, some m erely s e t
minimum and maximum v a lu e s f o r ash and p r o te in c o n te n t and l e f t th e r e s t
up to th e m i l l e r .
One b ak er s t a t e d t h a t he t r i e s n o t to h in d e r th e m ille r
w ith to o many r i g i d s p e c i f i c a t i o n s .
A ll he w ants i s a good IO af o f b re a d
■and i f th e f l o u r th e m i l l e r d e liv e r s w i l l produce s a t i s f a c t o r i l y , th e n he
iig s a t i s f i e d and d o e s n 't c a re abou t th e p a r t i c u l a r p r o p e r t i e s .
The m i l l e r s a re anJcious to s a t i s f y th e b a k e r s ' d e s ir e f o r f l o u r t h a t
w i l l produce th e same q u a l i t y b re a d l o a f y e a r a f t e r y e a r.
The m ille r s t r y
-Go­
to produce a f l o u r t h a t has th e same q u a n tity and q u a l i t y o f p r o te in e v ery
y e ar.
S ince th e q u a n tity and q u a l i t y o f p r o te in in w heat i s n ev er th e same
th e m i l l e r s r e s o r t to b le n d in g o f w h e ats.
One w heat may be d e f i c i e n t i n
th e q u a n tity o f p r o t e i n and a n o th e r w ith s u f f i c i e n t q u a n tity may be d e f i ­
c i e n t i n p r o te in o r g lu te n q u a l i t y .
A b le n d o f th e two w i l l s tre n g th e n th e
r e s u l t i n g f l o u r and make i t a b e t t e r p ro d u c t.
111.
B len d in g P r a c tic e s
E very one o f th e m i l l e r s in te rv ie w e d s t a t e d t h a t th e y p u rch ased a ll
o f t h e i r w heat on th e b a s is o f p r o te in and b le n d ed th e w heat a f t e r p u r­
c h a s in g .
As m entioned, th e m i l l e r s ' o b je c tiv e i n b le n d in g i s to produce a
h ig h q u a l i t y u n ifo rm f l o u r .
However, th e r e l a t i v e p r ic e s and s u p p lie s o f
th e v a rio u s p r o te in s determ in e e x a c tly w hat w i l l be b le n d e d .
The demand
f o r a p r o te in w heat w i l l f l u c t u a t e from seaso n to seaso n and y e a r to y e ar
depending upon a m u ltitu d e o f f a c t o r s which p ro b a b ly n ev er can be t e s t e d
e m p ir ic a lly .
These f a c t o r s in c lu d e th e s u p p lie s o f v a rio u s p r o te in s i n th e
h a rd r e d s p rin g w heat a r e a , th e s u p p lie s o f V arious p r o te in s i n th e h a rd
r e d w in te r w heat a re a , and th e r e l a t i v e p r ic e l e v e l s o f th e two m a rk e ts.
The h ig h g lu te n f l o u r which i s u sed to make s p e c ia lty p ro d u c ts i s made
from s p rin g w heat t e s t i n g 15»5 - 1 6 .0 p e r c e n t p r o t e i n . ' The m ill§ r r e q u ir e s
a c e r t a i n amount o f t h i s e x tr a h ig h p r o te in w heat e v ery y e a r and th e demand
f o r i t can be c o n sid e re d more i n e l a s t i c th a n f o r o th e r p r o te in s because i t
h as no s u b s t i t u t e .
S p e c ia lty p ro d u c ts can n o t be made o u t o f lo w e r p r o te in
s p rin g w heat f l o u r n o r o u t o f h ig h p r o te in w in te r w heat f l o u r .
T his e x tr a
h ig h p r o t e i n s p rin g w h e a t.is n e c e s s a ry to th e p ro d u c tio n o f th e s p e c i a l t y
-8 1 -
prcsductSo
T able 8 i n d i c a t e s t h i s by showing t h a t o n ly v e ry h ig h p r o te in
s p rin g w heat i s u sed f o r th e s e p ro d u c ts .
T h is s p e c i f i c demand cau ses th e
p r ic e o f 1 5 .5 - 1 6 .6 p e r c e n t p r o t e i n s p rin g w heat to rem ain r e l a t i v e l y
h ig h e v e ry y e a r .
T able 8 in d ic a te s t h a t t h i s e x tr a h ig h p r o te in w heat i s u s e d to b le n d
w ith low er p r o te in s to produce b a k e ry f l o u r 6
The r e l a t i v e p ro p o r tio n o f
t h i s e x tr a - h ig h p r o te in w h e a t•t h a t i s u sed f o r b le n d in g i s n o t known.
However, i t i s s u sp e c te d t h a t o n ly a sm all p ro p o rtio n o f th e 1 5 .5 = 1 6 .0
p e r c e n t s p rin g w heat m ille d i s u sed to b le n d w ith lo w er p r o t e i n s .
One
m i l l e r commented t h a t u n d er th e p r e s e n t premiums o n ly a sm all amount o f
e x tr a h ig h p r o te in would be b le n d ed down.
I t i s th e s p rin g w heat betw een 1 2 .0 p e r c e n t and l 5 . 5 p e r c e n t p r o te in
t h a t i s g e n e r a lly u se d f o r b le n d in g p u rp o s e s.
The demand f o r th e v a rio u s
p r o te in s i s a f u n c tio n o f r e l a t i v e s u p p lie s o f v a rio u s p r o te in c a te g o r ie s
and th e r a t i o o f s u b s t i t u t i o n betw een them .
I f , f o r exam ple, th e m ille r
d e s ir e d a m illi n g w heat o f 13«5 p e r c e n t p r o te in , t h i s co u ld be s a t i s f i e d
by m ixing i n e q u al p ro p o r tio n s 1 3 .0 p e r c e n t and l l |. 0 p e r c e n t p r o te in .
Or 1 2 .5 p e r c e n t and l k . 5 p e r c e n t p r o te in co u ld be mixed i n e q u al p ro p o r­
tio n s .
Or o n e -h a lf co u ld be 1 3 .5 p e r c e n t p r o te in , o n e -fo u rth 1 2 .5 p e r
c e n t p r o t e i n , and o n e -fo u rth l k . 5 p e r c e n t p r o te in .
There a re c o u n tle s s
m ixes t h a t c o u ld be u s e d to produce a m illin g w heat o f 1 3 .5 p e r c e n t p ro ­
te in .
The p a r t i c u l a r mix w i l l depend to a l a r g e e x te n t on th e r e l a t i v e
s u p p lie s and p r ic e s o f th e v a rio u s s p rin g w heat p r o te in s as w e ll as th o se
i n th e h a rd w in te r w heat a r e a .
A la r g e su p p ly o f one p r o te in i n r e l a t i o n
to o th e rs m ight cause t h i s p r o te in to be u s e d more i n th e mix because o f
-8 2 -
th e p r ic e a d v an ta g e .
At th e same tim e , th e in c re a s e d demand f o r t h i s p ro ­
t e i n would te n d to m a in ta in a h ig h e r p r ic e f o r t h i s p r o te in th a n would
o th e rw ise be w a rra n te d .
IV .
The E f f e c t on Demand
To o b ta in a b e t t e r p ic tu r e o f th e e f f e c t th e changes i n p r o te in su p p ly
have on demand, some t h e o r e t i c a l models have been s e t u p .
I n F ig u re 21,
DD and SS a re th e demand and su p p ly cu rv es f o r each p r o te in in th e i n i t a l
p o s itio n .
Now suppose th e r e i s e i t h e r an a c tu a l o r e x p ec te d s h i f t in th e
r e l a t i v e s u p p lie s .
There i s a la r g e in c re a s e in th e su p p ly o f 1 3 .0 p e r
c e n t p r o t e i n , a sm all in c r e a s e in th e su p p ly o f lU.O p er c e n t p r o te in , and
a d e c re a se i n th e s u p p lie s o f 15>.0 and 1 6 .0 p e r c e n t p r o t e i n .
Because o f
th e in c re a s e d s u p p lie s o f 1 3 .0 and llj.O p e r c e n t p r o te in th e p r ic e w ill
d rop from
to Pg.
t e i n w i l l in c r e a s e .
S im ila r ly , th e p r ic e s o f 1 $ .0 and 1 6 .0 p e r c e n t p ro ­
Im m ed iately , b u y ers w i l l b eg in to p u rch ase 1 3 .0 and
lii.O p e r c e n t p r o te in and d e c re a se t h e i r p u rc h a se s o f 1 $ .0 and 1 6 .0 p er
F ig u re 21
T h e o re tic a l Demand and Supply Curves f o r High P r o te in S p rin g Wheat
13.0% P r o te in
Q u a n tity
llt.0% P r o te in
Q u a n tity
15.0% P r o te in
Q u a n tity
1 6 .0 P r o te in
Q u a n tity
ci 83“
c en t p ro te in .
T h is w i l l change th e demand c u rv e s.
The demand f o r 1 3 .0 per*
c e n t p r o t e i n s h i f t s to th e r i g h t b ecau se i t i s an in c re a s e d demand sch ed u le
and i t w i l l te n d to become more i n e l a s t i c because th e r e i s a l i m i t to th e
amount o f t h i s p r o te in th e m i l l e r s w ant r e g a r d le s s o f th e p r i c e .
s h i f t i n demand r a i s e s th e p r ic e b u t o n ly to some p o in t
T his
betw een th e
i n i t i a l p r ic e Pj_ and p r ic e Pg which was th e r e s u l t o f an in c re a s e d su p p ly .
The demand f o r Ilu O p e r c e n t p r o te in w i l l s h i f t to th e r i g h t and r a i s e th e
p r ic e h e re a l s o .
S ince th e r e i s a p r ic e r i s e f o r 1 3 .0 p e r c e n t p r o te in ,
m i l l e r s w i l l c u r t a i l t h e i r p u rc h a se s and s u b s t i t u t e o th e r w heat which w i l l
cause th e demand curve to s h i f t to th e l e f t and become more e l a s t i c .
It
becomes more e l a s t i c because th e m ille r s s t i l l would l i k e to have more o f
t h i s p r o te in th a n th e y can g e t a t th e m ark et p r ic e so any drop i n p r ic e
would b r in g about a c o rre sp o n d in g ly g r e a te r in c re a s e in th e q u a n tity de­
manded.
Any in c re a s e i n p r ic e w i l l have a c o rre sp o n d in g ly g r e a te r d e c re a se
i n th e q u a n tity demanded.
The p r ic e f o r 1 6 .0 p e r c e n t p r o t e i n r i s e s a ls o
and so b u ying i s c u r t a i l e d and th e demand curve s h i f t s to th e l e f t .
. S in ce
th e demand f o r t h i s p r o te in i s g e n e r a lly more i n e l a s t i c th a n th e o th e r s th e
s h i f t i n th e demand curve i s much s m a lle r th a n th e o th e rs and i t r e t a i n s
th e same e l a s t i c i t y .
T h is s h i f t i n g d e c re a s e s th e p r ic e from Pg to P^ b u t
i t s t i l l i s above th e i n i t i a l p r i c e .
The change in q u a n tity demanded i s
v e ry s m a ll.
S im ila r a c tio n i s shown i n F ig u re 22.
h ap p en in g .
Only h e re , th e o p p o s ite i s
I n t h i s c a s e , th e p r ic e o f 1 6 .0 p e r c e n t p r o te in d ro p s and
th e r e i s an im m ediate ru s h to buy i t up th u s r a i s i n g th e p r ic e because o f
a s h i f t i n g o f th e demand c u rv e .
I n t h i s s i t u a t i o n th e curve would become
-8 4 -
F ig u re 22
T h e o re tic a l Demand and Supply Curves f o r High P r o te in S p rin g Wheat
1 3 .0 $ P r o te in
lii.0 $ P r o te in
1 $ .0 $ P r o te in
1 6 .0 $ P r o te in
Q u a n tity
Q u a n tity
Q u a n tity
Q u a n tity
-p
ed
I
Sh
O
t>
O
•H
6
more e l a s t i c because th e buyers would be e a g e r to buy t h i s p r o te in , as
much a s p o s s ib le , i f th e p r ic e dropped.
a r e v e rs e e f f e c t .
However, a p r ic e r i s e would have
T his example would n o t h o ld as tr u e f o r 1 6 .0 p e r c e n t
p r o te in i f th e in c re a s e d su p p ly was r e a l and due to an abundant p ro d u c tio n
o f i t d u rin g th e crop y e a r .
I n t h a t c a s e , th e m ille r s would n o t be so
anx io u s to buy i t up im m ediately and th e p r ic e would rem ain a t o r n e a r Pg.
E v e n tu a lly , th e y would b eg in to buy i t up and cause th e demand to s h i f t to
th e l e f t to some p o in t D1D1.
The a c tu a l demand f o r each p r o te in i s h ig h ly in ta n g ib le and s u b je c t to
many f a c t o r s .
E x p e c ta tio n s p la y a la r g e p a r t in th e s h i f t i n g o f demand f o r
th e v a rio u s p r o t e i n s .
T h e re fo re , an e x a c t d e te rm in a tio n o f th e s e p r o te in
demands and th e e f f e c t th e y have on th e demand f o r h ig h p r o te in w heat in
g e n e ra l p ro b a b ly can n o t be made.
F.
I.
B lending With Durum Wheat
The Use o f Durum Wheat
Durum w heat i s u sed to make sem olina f l o u r which i s u s e d to make th e
-8 5 v a rio u s m acaroni p ro d u c ts „ ■Durum w heat i s u se d because f l o u r made from i t
has s tr e n g th to h o ld to g e th e r and n o t become soggy when cooked.
M acaroni
made o u t Of o rd in a ry w heats becomes slim y and mushy a f t e r co o k in g .
Durum
f l o u r , however,, does n o t have th e r i s i n g p r o p e r tie s found i n b re a d f l o u r s .
The a b i l i t y o f a f l o u r to r i s e i s an a s s e t f o r b re a d making b u t a d e trim e n t
to m acaroni p ro d u c tio n .
Durum w heat a ls o g iv e s a tough "bend b u t n o t
b reak " q u a l i t y to th e d r ie d m acaroni St c k s. I ? /
■H o
The S u b s titu tio n , o f S p rin g Wheat f o r Durum
I n m ost y e a rs some s p rin g w heat i s u se d in making sem o lin a.
I n th e
l a s t two y e a rs l a r g e amounts o f s p rin g w heat have been u sed b ecau se o f th e
sh o rta g e o f durum.
N orm ally, hard s p rin g w heat can be s u b s t i t u t e d f o r
durum up to 50 p e r c e n t o f th e t o t a l f l o u r .
Beyond t h a t p o in t, th e f lo u r
ta k e s on more o f th e s p rin g w heat c h a r a c t e r i s t i c s and l e s s o f durum.
The
p ro p o r tio n o f s p rin g w heat u se d w ith durum w i l l depend upon th e r e l a t i v e
s u p p lie s and p r ic e s o f b o th w h e a ts.
-In a y e a r such as 1953 when th e durum
cro p was v e ry poor and th e p r ic e s v e ry h ig h , i t i s advantageous f o r th e
durum m i l l e r s to Use as much s p rin g w heat as p o s s ib le .
The consum ption o f m acaroni p ro d u c ts h as been on a s te a d y in c re a s e
f o r th e l a s t t h i r t y y e a r s . . I n 1920 th e p e r c a p it a consum ption was a p p ro x i­
m a te ly 3 .7 pounds. ■By 1952$ th e p e r c a p it a consum ption re a c h e d 6 .8 pounds,
w hich r e q u ir e s 25 m illio n b u s h e ls o f durum to m eet th e consumer demand. 18/
'
~ ■ --r.
..
. .T --JL .--
f -— I
----------------' —
--------------- -
-----------------------------■ I - - -
- —■
J----------------------------- _____________
I ? / John S. C ooper, " S p a g h e tti and 1 5 -B ," The M all S tr e e t Jo u rn a l., Volb
E O lV 9 No. 219, Dow Jones and Company, I n c . , "Chicago, August- ^ '," 1951, p . l .
1 8 / N orthw est Crop Im provem ent A s s o c ia tio n , More Durum i s Needed, Minnea­
p o l i s , 1953.
-8 6 -
S in ce th e war th e r e h as been a 60 p e r c e n t in c r e a s e i n m acaroni consum ption
w h ile th e consum ption o f o th e r b a k e ry p ro d u c ts made o f f l o u r h as d e c re a se d
15 p e r c e n t. 1 9 /
The p ro d u c tio n o f durum w heat in th e l a s t th r e e y e a rs has la g g e d con­
s id e r a b ly b ehind th e demand f o r i t „
I n 19^2, th e p ro d u c tio n was 23,097«, 000
b u s h e ls w h ile th e t o t a l d isa p p e a ra n c e was 31,1*27,000 b u s h e ls .
Complete
f ig u r e s f o r th e p a s t few y e a rs a re a s f o llo w s : 20/
Tear
C a rry ­
o v er
J u ly I
P ro ­
d u c tio n Im ports
19.1*8 1 0 ,2 9 9 1*5,82 9
191*9. 1 8 ,0 3 6 39,2.03
1950 21,958 37,91*8
1951 23, 621* 35,1*92
1952 15, Oil* 23,097
6,81*2 13,883
1953
T o ta l
I Supply
1,000 Bue
56,128
57,539
211* 63,120
398
59,511*
158
38,269
Used
For
Seed
M ille d
G rain O ther T o ta l
Only
Uses D isap­
E x p o rts
pearance
5 ,265
I*, 085
3,610
3,218
2,997
21,681*
21,630
23,337
25,533
23,668
2*537
1*125
9*620
Ii*, 536
3 ,0 7 5
8,606
5,71*1
2,929
1 ,2 1 3
1)687
38,092
32,581
39,496
44,500
31,427
The c u r r e n t e s tim a te s f o r th e 1951* cro p a re ap p ro x im a te ly 1 2 ,0 0 0 ,0 0 0
b u s h e lso
However, th e r e i s in d ic a tio n t h a t i t m ig h t be somewhere around
8 ,0 0 0 ,0 0 0 b u s h e ls .
T his y e a r w i l l p ro b a b ly be th e s m a lle s t cro p s in c e 1936
when th e p ro d u c tio n was o n ly 8 ,8 7 1 ,0 0 0 b u s h e ls , 2 1 /
I t i s e s tim a te d t h a t
betw een 35 and 1*0 m illio n b u s h e ls w i l l be needed i n 1951* to m eet th e imme­
d ia te re q u ire m e n ts f o r m acaroni p ro d u c ts , s e e d , fe e d , and p ro v id e a sm all
1 9 / John S. Cooper, op, c i t ,
2 o / A g r ic u ltu r a l M arketing S e rv ic e , The Wheat S it u a tio n , WS-I38, U n ite d
S ta te s D epartm ent o f A g r ic u ltu r e , W ashington D0C8, A p ril 26, 1951*, p . 23.
21/ Ib id 8
=■87”
c a rry -o v e ro 2 2 /
The need th e n w i l l d e f i n i t e l y f a l l somewhere betw een th e
25> m illi o n needed f o r m illin g and th e t o t a l e s tim a te d needs o f 35 m illio n ,,
Assuming a p ro d u c tio n o f 8 m illio n ,, a demand f o r 35 m illio n ^ th e q u a n tity
o f h a rd re d s p rin g w heat t h a t w i l l be heeded to s u b s t i t u t e f o r durum w i l l
be 27 m illio n l e s s 7 m illi o n o f c a rry -o v e r o r a t o t a l o f 20 m illi o n bu sh els,.
The O ctober 1„ 1951t government crop e s tim a te f o r s p rin g w heat i s IS S s 358s000
b u s h e ls , 2 3 /
On t h i s b a s i s , ab o u t 10 p e r c e n t o f t h i s y e a rn s
be u s e d i n th e m an u factu re o f sem o lin a.
crop would
U ndoubtedly, some w in te r w heat
w i l l a ls o be s u b s t i t u t e d f o r durum b u t th e amount p ro b a b ly does n o t match
t h a t f o r s p rin g w h eat.
S ince th e r e i s such a sh o rta g e o f durum w heat t h i s
y e a r , th e m acaroni tr a d e e x p e c ts to u se a b le n d o f 25$ durum and 7 5 $ 's p rin g
w heat some tim e a f t e r Jan u ary * ' 2 h f A t th e p r e s e n t, t h i s i s an o p tio n a l
b le n d
f o r durum m i l l e r s b u t i f th e p r e s e n t crop e s tim a te s p ro v e to be to o
h ig h t h i s b le n d may become m andatory.
U sin g a m illin g f ig u r e o f 25 m illio n
b u s h e ls , t h i s would mean t h a t 19 m illi o n b u s h e ls o f s p rin g w heat w i l l be
u s e d i f th e 25 - 75$ r a t i o i s u se d th ro u g h o u t th e y e a r .
S a le s i n th e f i r s t
s i x months o f t h i s y e a r a re ru n n in g ab o u t 6 p e r c e n t h ig h e r th a n th e y were
f o r th e same p e rio d l a s t y e a r .
So, i t i s l i k e l y t h a t more th a n 25 m illio n
b u s h e ls w i l l be ground i n t o sem o lin a.
b u s h e ls o f s p rin g w heat to be u s e d .
T his w i l l cause more th a n 19 m illio n
I n g e n e r a l, however, i t can be
2 2 / N orthw est Crop Improvement A s s o c ia tio n , og. c i t ,
2 3 / D a ily M ark et'R ec o rd , Government Crop E s tim a te , Np. 195» M inneapolis^,
O ctober 1 1 , 195US Po 7»
2 k / John S„ C ooper,
o jj.
c i t . , p . 5«
88-
e x p e c te d t h a t about 10 p e r c e n t o f t h i s year* s s p rin g w heat crop w i l l be
s u b s t i t u t e d f o r durum w heat.
I t can be seen from th e s e f ig u r e s t h a t th e u se o f s p rin g w heat as a
s u b s t i t u t e f o r durum wheat i s n o t n e a r ly as im p o rta n t a f a c t o r a f f e c t in g
demand a s some o f th e o th e rs l i k e f l o u r s a l e s .
A lso , m ost o f th e s p rin g
w heat u se d w i l l be low er i n p r o te in th a n w heats u se d f o r making b re a d
flo u r.
However, i t does r e p r e s e n t an a l t e r n a t i v e u s e f o r h ig h p r o te in
s p rin g w heat and w i l l te n d to make th e demand more e l a s t i c ,
X-II,
S u b s titu ti o n E l a s t i c i t i e s
K ald o r1s s tu d y i n d i c a t e s t h a t th e r e was a s u b s ta n tia l change i n th e
r e l a t i o n s h i p betw een durum and s p rin g w heat d u rin g th e p e rio d 1929-1938,
He s t a t e s t h a t , " In 1931 th e crop o f durum w heat was o n ly 32 p e r c e n t as
la r g e as i n th e p re c e d in g f iv e - y e a r p e r io d .
The 193^1 crop was o n ly 7
m illi o n b u s h e ls o r 10 p e r c e n t as la r g e as p ro d u c tio n d u rin g th e 1926 to
1930 p e r io d ,
A t no tim e s in c e 1930 h as th e cro p o f durum been e q u al to
p ro d u c tio n d u rin g t h i s p e r io d ," 2 3 / He o b ta in e d two s e t s o f su p p ly and
p ro d u c tio n r a t i o s in d ic a tin g a s h i f t i n th e r e l a t i o n s h i p betw een durum and
s p rin g w h eat.
The e l a s t i c i t y o f th e p r ic e and p ro d u c tio n r a t i o s was l e s s
th a n - 2 ,0 in each c a s e .
However, i f th e s h i f t i n th e r e l a t i o n s h i p i s d i s ­
re g a rd e d th e n th e p r ic e and p ro d u c tio n r a t i o s have an e l a s t i c i t y o f = 3 ,0 ,
K ald o r f u r t h e r s t a t e s t h a t , " I t would seem t h a t e i t h e r th e r e h as be§h a
d e c lin e i n th e demand f o r th e p ro d u c ts p re p a re d from durum or th e re has
2 3 / D, R, Kaldor, og, c i t , , p, 2 9 .
-8 9 “
o c c u rre d s u b s t i t u t i o n on a l a r g e s c a le betw een durum and th e common w h e a ts ,”'
26/
K a ld o r1s l a t t e r o p in io n has p ro v ed c o r r e c t i n th e l a s t few y e a r s ,
As
in d ic a te d above, th e r e has been a s u b s t a n t i a l in c re a s e i n th e demand f o r
durum p ro d u c ts and ah in c r e a s e i n th e amount o f s u b s t i t u t i o n betw een s p rin g
and durum w h eat.
To compare u p - to - d a te f ig u r e s w ith K a ld o rt s , p ro d u c tio n and p r ic e
r a t i o s w ere computed f o r each y e a r o f th e p e rio d 19ljl=1950,
F ig u re s were
a ls o computed from th e same so u rce f o r th e y e a rs in c lu d e d i n K a ld o r's s tu d y .
The r e s u l t s o f th e s e a re shown i n F ig u re 23.
The p e rio d 19^1-19^0 i s
p l o t t e d on one s e t o f a x es, and 1921-1937 on a n o th e r.
As K aldor m entioned,
th e r e was a d e f i n i t e s h i f t i n th e r e l a t i o n s h i p f o r th e two p e rio d s he
c o v e re d .
The f ig u r e s f o r 19141 ”19^0 show a f u r t h e r s h i f t i n th e e la s tic ity ^
o f s u b s t i t u t i o n betw een s p r in g and durum w h eat.
The 19^1=19^0 r a t i o s would
in d ic a te a p o s s i b i l i t y f o r la r g e s c a le s u b s t i t u t i o n .
I n th e e a r l y ho®s a
l a r g e c a r ry -o v e r was b u i l t u p .. However, t h i s was p r a c t i c a l l y u sed up by
I 9I46.
The c a r ry -o v e r was th e n b u i l t back by 1950 b u t n o t to th e e x te n t to
w hich i t was done i n th e e a r l y I4O1s„ 2 ? /
I n th o s e y e a rs th e r e p ro b a b ly
was s u b s t i t u t i o n betw een s p rin g and durum w heat.
I n th e l a s t th r e e y e a r s ,
th e amount o f s u b s t i t u t i o n has in c re a s e d s u b s t a n t i a l l y th ro u g h n e c e s s ity .
T h is in c re a s e d s u b s t i t u t i o n over th e y e a rs s u b s ta n tia te s th e r e s u l t s ob­
ta in e d by u s in g th e p r ic e and p ro d u c tio n r a t i o s as in-. F ig u re 23.
The r a t i o s
in d ic a te an in c r e a s e in th e e l a s t i c i t y o f s u b s t i t u t i o n and in a c tu a l p ra c ­
t i c e th e r e h as been more s u b s t i t u t i o n .
26/ Ib id .
2 7 / For com plete f ig u r e s on durum w heat see T able I I I i n th e A ppendix.
-9 0 F ig u re 23
The E l a s t i c i t y o f S u b s titu tio n betw een Durum
Wheat and Hard Red S p rin g Wheat
120
•
(A)
------_____________
Ih •
X ll
100
--- ------------------JtNx-
N.
^32
P r ic e R a tio s - JDurum Wheat to Hard Red S p rin g Wheat
r
.26
?8
30^
25> 2
80
1925 - 1937
(B)
--- ----- h 5
h6
, 14
iS
I49
80
191a - 1950
!
;
10
20
30
UO
50
P ro d u c tio n R a tio s - Durum Wheat to Hard Reo S p rin g Wheat
I
I
.i
-9 1 IV e
The E f f e c t on Demand
S ince th e use o f high p r o te in s p rin g w heat in making sem olina r e p r e ­
s e n ts an a l t e r n a t i v e u se f o r s p rin g w heat i t w i l l te n d to make th e demand
curve more e l a s t i c .
The e f f e c t w i l l n o t be g r e a t because o f th e r e l a t i v e l y
sm all amount b ein g u se d .
I n th e l a s t two y e a r s , p r ic e has n o t been a m ajor
f a c t o r i n d e te rm in in g th e amount o f s p rin g w heat u s e d .
demand curve as a whole w i l l te n d to be more e l a s t i c .
T h e re fo re , th e
The demand curve
w i l l a ls o move to th e r i g h t because o f an in c re a s e in th e q u a n tity demanded
a t a l l g iv e n p r i c e s .
F ig u re 2b i l l u s t r a t e s th e movement.
I n y e a rs when
th e durum crop i s o f s u f f i c i e n t s iz e to m eet demand, some s p rin g w heat may
be u sed i f th e p r ic e r e l a t i o n s h i p i s such t h a t i t would be b e n e f ic ia l to do
so.
I n t h i s c a s e , th e q u a n tity demands w i l l in c re a s e some b u t o n ly below
a c e rta in p ric e .
Even th e n th e s h i f t i n th e demand curve w i l l o n ly be
s lig h t.
F ig u re 2b
T h e o re tic a l Demand Curves f o r High P r o te in S pring Wheat
Q u a n tity
-9 2 The s u b s t i t u t i o n f o r durum even i n y e a rs such as 195>h i s n o t a g r e a t
f a c t o r a f f e c t in g th e demand.
B ut i n a y e a r l i k e 19^hs i f th e poor durum
crop i s coupled w ith a s i m i l a r l y poor s p rin g w heat cro p , th e s u b s t i t u t i o n
f a c t o r m ight have c o n s id e ra b le e f f e c t .
G.
I.
Changing Technology in th e Baking and
M illin g I n d u s t r i e s
Changes i n th e Baking I n d u s tr y
The b ak in g in d u s tr y has made many advances i n b ak in g te c h n iq u e s d u rin g
th e l a s t f i f t e e n y e a r s .
A utom atic m achines, h ig h speed p ro d u c tio n , and
in c r e a s in g s iz e o f o p e ra tio n a re th e p rim a ry changes t h a t th e in d u s tr y h as
u n d erg o n e.
The in d u s tr y i s becoming more h ig h ly c o n c e n tra te d e v e ry y e a r .
One m i l l e r s t a t e d t h a t a p p ro x im a te ly ll* p e r c e n t o f th e b a k e rs i n th e
U n ite d S ta te s buy
p e r c e n t o f th e f l o u r .
Because o f th e s e i n d u s t r i a l
changes and th o s e o f consumer d e s ir e , th e b a k e rs a re u s in g lo w e r p r o te in
f l o u r to g e th e r w ith more s u g a r, m ilk and s h o rte n in g .
High p r o te in f l o u r h as a much h ig h e r to le r a n c e f o r te m p e ra tu re and
m ixing th a n does low p r o te in f l o u r .
T h is e n a b le s th e b ak er to have few er
w o rrie s over th e e f f e c t s o f te m p e ra tu re and v a r ie d m ixing tim e s .
T his i s
v e ry im p o rta n t i n th e s m a lle r shops where dough i s made and th e n s e t a s id e
to a w a it b a k in g , and where th e te m p e ra tu re can n o t be r i g i d l y c o n tr o lle d .
I n l a r g e m echanized b a k e r ie s , however, t h i s to le r a n c e i s n o t so n e c e s sa ry .
W ith r i s i n g c o s ts , p a r t i c u l a r l y la b o r , i t has become im p o rta n t f o r th e la r g e
b a k e r to make th e m ost e f f i c i e n t u se o f t h a t la b o r and l i m i t th e number o f
w orking h o u rs .
T his has caused a s h i f t to a more r a p id b ak in g p ro c e ss and
t h i s i n tu r n n e c e s s i t a t e s a s h o r te r m ixing tim e f o r th e dough.
-9 3
M ixing tim e depends m a in ly on th e q u a l i t y o f th e p r o t e i n .
However,
v a r i e t a l c h a r a c t e r i s t i c s a ls o can in flu e n c e th e m ixing tim e . ■There have
been in s ta n c e s o f low p r o te in w ith lo n g m ixing tim es b u t, in g e n e r a l, th e
h ig h e r p r o te in s have a lo n g e r m ixing tim e .
W ith s h o r te r m ixing tim e need ed , th e b a k e rs no lo n g e r have to have as
h ig h a p r o t e i n
flour
a s th e y once d id .
F if te e n y e a rs ago th e average p ro ­
t e i n c o n te n t o f th e f l o u r u se d by th e n in e b a k e rs in te rv ie w e d was 1 2 .3 p e r
c e n t.
Ten y e a rs ago th e average p r o te in c o n te n t was 1 1 .9 p e r c e n t.
th e av erag e p r o te in c o n te n t i s 1 1 .It p e r c e n t.
cen t in f if te e n y e ars.
Today
T his i s a drop o f .9 p e r
T his drop h as n o t b een tr u e o f a l l a r e a s .
For
in s ta n c e , i n th e South where th e b a k ers o v er th e p a s t f i f t e e n y e a rs have
been u s in g more h a rd w heats i n p la c e o f n a tiv e s o f t w heats f o r b re a d making,
th e p r o t e i n c o n te n t h as gone u p .
However, g e n e r a lly i n th o se a re a s where
h a rd w heats have been predom inate th e p r o te in c o n te n t o f th e f l o u r used
h a s d e c re a se d .
T his a ls o means t h a t th e p r o te in c o n te n t o f th e w heat m ille d
h as d e c lin e d by a s im ila r amount.
Assume f o r a moment t h a t th e m i l l e r s d id no b le n d in g o f w heat by p ro ­
t e i n c o n te n t and th e y m ille d th e v a rio u s p r o te in s as th e y p u rc h a se d them .
T his would mean t h a t f i f t e e n y e a rs ago th e m i l l e r s were p u rc h a sin g and
m illin g w heat .9 p e r c e n t h ig h e r th a n th e y a re to d a y .
T h is drop o f .9 p e r
c e n t p r o te in i f p u t in to d o l l a r term s would cause a l o s s to th e p ro d u cer o f
a p p ro x im a te ly 3 c e n ts p e r b u sh e l f o r e v e ry b u sh e l so ld .- 2 8 /
Of c o u rs e , th e
2 8 / Based oh a 2 6 -y e a r average p r ic e o f No. I Dark N o rth ern S p rin g Wheat a t
G re a t F a l l s , M ontana. Average o f d i f f e r e n t i a l s betw een v a rio u s p r o te in
premiums.
-9 k assum ption i s n o t r e a l i s t i c b u t i t
i l l u s t r a t e s t h a t th e d e c lin e in p r o te in
u s e d by th e b ak ers has a te n d en c y to red u ce fa rm e rs' incom e.
I n a d d itio n ^
i f th e d e c lin e i n demand f o r h ig h p r o te in f l o u r lo w ers th e premiums as w e ll,
i t causes an a d d itio n a l l o s s i n rev en u e to th e fa rm e r.
S ince th e b a k e rs no lo n g e r r e q u ir e f l o u r as h ig h i n p r o te in a s p re ­
v io u s ly , th e y may n o t be w i l l i n g to pay h ig h p r ic e s f o r h ig h p r o te in f l o u r .
Not o n ly a re th e b a k e rs u s in g a lo w er p r o te in f l o u r b u t th e y a re u s in g more
w in te r w heat f l o u r i n t h e i r f l o u r m ixes because i t produces a "m ellow er"
f l o u r and a s o f t e r dough w hich th e y l i k e f o r p r e s e n t day b ak in g p ro c e s s e s .
T h is h as a d u a l e f f e c t on th e demand f o r h ig h p r o te in s p rin g w h e at.
The
q u a n tity o f h ig h p r o te in s p r in g w heat demanded w i l l be l e s s i n b o th c a s e s .
II0
Changes i n M illin g I n d u s tr y
There i s an in d ic a tio n t h a t f l o u r m i l l e r s a re f in d in g ways in w hich to
t r e a t s o f t w heat f l o u r s I n o rd e r to improve t h e i r bread-m aking q u a l i t i e s .
I f s o f t w heat f l o u r s can be t r e a t e d so t h a t th e y w i l l produce good b re a d
lo a v e s , th e y w i l l become a s u b s t i t u t e f o r h a rd w h eat. ■S o f t w heat p r ic e s
■are now below th o s e o f h a rd s p rin g w heat.
I f s o f t w heat became a s u b s t i t u t e
f o r h a rd s p rin g w heat i t would p ro b a b ly cause th e p r ic e o f h a rd s p rin g
w heat to d rop u n t i l th e r e was some s o r t o f e q u a liz a tio n betw een th e two
p ric e s .
III.
E f f e c ts on Demand
I n S e c tio n A i t was shown how th e demand curve f o r h ig h p r o te in wheat
co u ld be d e riv e d from th e demand curve f o r f l o u r .
I f th e b a k e rs do n o t need
h ig h p r o te in w heat l i k e th e y p r e v io u s ly d id and th e y p u rch ase i t o n ly when
-9 5 th e p r ic e i s r i g h t , th e demand f o r f l o u r w ill become more e l a s t i c .
25)
(F ig u re
I n o th e r w ords, any in c re a s e i n th e p r ic e o f th e h ig h p r o te in f lo u r
and th e r e would be a l a r g e r c o rre sp o n d in g drop in th e consum ption o f t h i s
f l o u r and a g r e a te r consum ption o f lo w er p r o te in f l o u r .
same r e a c tio n on th e demand f o r h ig h p r o te in w heat.
T his causes th e
Due to a r i s e in p r i c e ,
l e s s o f th e h ig h e r p r o te in w heat w i l l be p u rch ased .
F ig u re 25
T h e o re tic a l Demand and Supply Curves f o r
High P r o te in S pring Wheat and F lo u r
!
whea1
I
"5
«
wheat.
tS
V
O
flo u r
w heat
wheat
w heat f l o u r
S
Q u a n tity o f Wheat and F lo u r
S im ila r ly , i f s o f t w heat f l o u r s can be t r e a t e d so t h a t th e y can com­
p e te w ith h ard w heat f lo u r s f o r b re a d m aking, th en s o f t w heat f lo u r s w ill
be a s u b s t i t u t e f o r h ard s p rin g w heat f l o u r .
S o ft wheat w i l l th e n become
a s u b s t i t u t e f o r h ig h p r o te in s p rin g w h eat.
As a s u b s t i t u t e , i t w i l l make
th e demand f o r h igh p r o te in s p rin g w heat more e l a s t i c and may s h i f t to th e
l e f t u n t i l th e p ric e o f s p rin g w heat dro p s to a l e v e l t h a t i s c o m p etitiv e
w ith s o f t w heat.
The demand curve f o r h ig h p r o te in would move from DB to
DrD1 as i n F ig u re 26.
-9 6 F ig u re 26
T h e o re tic a l Demand and Supply Curves f o r High P r o te in S p rin g Wheat
Q u a n tity
The p r in c ip a l e f f e c t o f th e s e te c h n o lo g ic a l changes i s to make th e
demand f o r hig h p r o te in h a rd re d s p rin g w heat more e l a s t i c .
T h is may low er
th e p r ic e th e farm er r e c e iv e s f o r h is w heat b u t a t th e same tim e i t w ill
l e s s e n th e am plitude o f p r ic e movements and te n d to s t a b i l i z e p ric e to a
g r e a te r e x te n t th an p re v io u s ly .
-9 7 P a r t IV
CONCLUSION
Ae
Summary
The a n a ly s is has shown t h a t th e demand f o r h ig h p r o te in h a rd re d
s p rin g w heat i s l a r g e l y dependent on and d eterm in ed by th e demand f o r
flo u r.
I f th e demand f o r f l o u r s h i f t s and becomes more e l a s t i c th e demand
f o r h ig h p r o te in s p rin g w heat w i l l a l s o .
The f l o u r o rd e rs re c e iv e d by
th e f l o u r m i l l e r s i s th e l a r g e s t and m ost im p o rta n t f a c t o r a f f e c t i n g th e
I
demand f o r h ig h p r o te in s p rin g w heat. W hile th e demand f o r f l o u r i s th e
l a r g e s t d e te rm in a n t o f th e demand f o r h ig h p r o te in s p rin g w h eat, th e o th e r
f a c t o r s in c lu d e d i n th e i n v e s t ig a ti o n add to th e c o n s ta n t f l u c t u a t i o n in
demand and w heat p r i c e s .
When buyers from o th e r m arket a re a s e n te r th e s p rin g w heat m arket
th e y p ro v id e an a l t e r n a t i v e u se f o r h ig h p r o te in s p rin g w h eat.
When
b u y ers from th e s p rin g w heat a re a s go in to o th e r m arkets to p u rch ase w heat
th e y c r e a te a s u b s t i t u t e f o r h ig h p r o te in s p rin g w heat.
The r e s u l t s o f
th e s e a c tio n s i s to cause th e demand fo r' h ig h p r o te in w heat to become more
e l a s t i c th a n i t would i f th e o th e r m ark ets were n o t a v a il a b le .
I t was
i n d ic a te d t h a t th e s u b s t i t u t i o n e l a s t i c i t y betw een s p rin g and w in te r w heat
i s r e l a t i v e l y h ig h and t h a t a g r e a t d e al o f s u b s t i t u t i o n does ex istsA c u rs o ry g lan ce a t th e r e l a t i o n s h i p betw een D uluth p r ic e s and th e
q u a n tity o f shipm ents over th e G reat Lakes seems to show t h a t th e D uluth
p r ic e i s g r e a t l y a f f e c t e d by th e sh ip m en ts.
There i s a d e f i n i t e p o s itiv e
-9 8 r e l a t i o n s h i p betw een th e tw o.
There i s a ls o a p o s itiv e r e l a t i o n s h i p betw een
th e D uluth-M innea p o li s d i f f e r e n t i a l and th e q u a n tity o f sh ip m e n ts.
th e s e r e l a t i o n s h i p s do n o t prove to be s t a t i s t i c a l l y s i g n i f i c a n t .
However,
There
a p p a r e n tly a re o th e r f a c t o r s which a re p r e s e n t and h e lp p ro v id e th e p o s itiv e
re la tio n s h ip s .
I n o rd e r to produce th e r e q u ire d f l o u r s , m i l l e r s m ust r e s o r t to b le n d in g
p ro te in s .
The demand f o r each in d iv id u a l p r o te in w i l l depend to a la r g e
e x te n t on th e r e l a t i v e s u p p lie s o f each p r o t e i n .
O ther f a c t o r s in c lu d e th e
s u p p lie s o f v a rio u s p r o te in s i n th e h a rd w in te r w heat a re a , and th e r e l a t i v e
p r ic e l e v e l s o f th e two m a rk e ts.
S ix te e n p e r c e n t p r o te in h as a more li m i t e d
u se th a n th e o th e r p r o te in s and i t s p r ic e rem ains r e l a t i v e l y h ig h e v ery y ears
The demand curve f o r each p r o te in w i l l s h i f t and change i n e l a s t i c i t y a cc o rd ­
in g to i t s r e l a t i v e su p p ly and p r i c e .
E very y e a r some s p rin g w heat i s u se d a s a s u b s t i t u t e f o r durum w heat i n
th e making o f sem olina f l o u r .
been v e ry s u b s t a n t i a l .
I n th e l a s t two y e a rs th e s u b s t i t u t i o n has
The s u b s t i t u t i o n e l a s t i c i t i e s computed f o r th e y e a rs
1921-195>0 in d ic a te a s h i f t i n th e r e l a t i o n s h i p tow ard more s u b s t i t u t i o n .
T h is s u b s t i t u t i o n w i l l cause th e demand f o r h ig h p r o te in s p rin g w heat to
become more e l a s t i c .
As m entioned , t h i s s u b s t i t u t i o n h o ld s a m inor r o le
i n a l t e r i n g th e demand c u rv e , b u t under th e p ro p e r circu m stan ce i t could
grow to c o n s id e ra b ly more im p o rtan c e .
The change i n te ch n o lo g y t h a t has ta k e n p la c e in th e l a s t f i f t e e n y e a rs
has caused a d e c lin e i n th e p r o te in c o n te n t o f th e f l o u r u sed by th e b a k e r s .
The b a k e rs , th e r e f o r e , do n o t need to p u rch ase as h ig h a p r o te in f lo u r
as p r e v io u s ly .
Thus, th e y a re n o t w illin g to pay h ig h p r ic e s f o r th e h ig h e r
-9 9 -
p r o te in f l o u r and w i l l be more p r ic e co n scio u s th a n b e f o r e 6
h ig h p r o te in s p rin g w heat w i l l be l e s s f o r t h i s reason*
The demand f o r
There i s a ls o
i n d i c a t i o n t h a t s o f t w heat f l o u r can be t r e a t e d and u sed as a S u b s titu te f o r
h a rd w heat f l o u r s .
I f t h i s i s t r u e , i t w i l l te n d to make th e demand f o r
s p rin g w heat more e l a s t i c and may cause a drop in s p rin g w heat p r i c e s .
Be
C onclusions
The d e f i n i t e c o n c lu s io n s t h a t can be drawn from t h i s s tu d y a re r a t h e r
g e n e ra l in n a tu r e .
The demand f o r h ig h p r o te in h a rd re d s p rin g w heat i s a
f u n c tio n o f th e demand f o r f l o u r .
The demand f o r f l o u r i s th e l a r g e s t f a c t o r
a f f e c t i n g th e demand f o r h ig h p r o te in s p rin g wheat*
However, th e demand
f o r f l o u r i s s u b je c t to many, in flu e n c e s t h a t a re n o t e a s i l y d eterm in ed .
The o th e r f a c t o r s c o n sid e re d in t h i s s tu d y a f f e c t demand b u t a g a in th e
r e s u l t i s in d e te rm in a n t.
T h is s tu d y c o n sid e re d each f a c t o r s e p a r a te ly in
o rd e r to f a c i l i t a t e th e a n a l y s i s .
B u t, when any c o n c lu sio n i s to be d e riv e d
from th e s e f a c t o r s , t h e i r e f f e c t on demand m ust be c o n sid e re d j o i n t l y .
change i n one f a c t o r has an e f f e c t on a l l th e o th e r f a c t o r s .
A
Since th e
demand f o r h ig h p r o te in s p rin g w heat i s a r e s u l t o f m ark et c o n d itio n s , i t
i s s u b je c t to th e e f f e c t s o f e x p e c ta tio n s .
The b a k e rs, m i l l e r s , e le v a to r
o p e r a to r s , m erch an d isin g f ir m s , and o th e rs i n th e g r a in tr a d e a re a l l
a tte m p tin g to p erfo rm t h e i r p a r t i c u l a r b u s in e s s o p e ra tio n s i n co n n ec tio n
w ith th e w heat m a rk e t.
Each one a tte m p ts to keep h im s e lf i n th e b e s t pods*
i b l e p o s itio n i n r e l a t i o n to th e m ark et.
Each h as h is own id e a o f what i s
I
g o in g to happen n e x t on th e m a rk e t.
These id e a s c o l l e c t i v e l y in flu e n c e th e
m ark et and may a t tim es o f f s e t th e norm al e f f e c t o f th e f a c t o r s Hientibned8
I - / ,
1H779
“100™
The h y p o th e s is s t a t e d a t th e b e g in n in g o f t h i s Study a re i n g e n e ra l
c o r r e c t w ith th e e x c e p tio n o f th e e f f e c t o f th e G reat L akes sh ip p in g on th e
D uluth p r i c e .
e x is ts .
S t a t i s t i c a l l y , th e r e i s no e v id en c e t h a t t h i s r e l a t i o n s h i p
The f a c t o r s c o n sid e re d , o th e r th a n f l o u r o rd e rs , te n d to in c re a s e
th e e l a s t i c i t y o f demand.
However, t h e i r e f f e c t f l u c t u a t e s and i s n o t
r e a d i l y d e te rm in a b le in a p r e c is e m anner.
I t m ust be concluded th e n t h a t th e demand f o r h ig h p r o te in h a rd re d
s p r in g w heat i s a f u n c tio n o f th e demand f o r f l o u r and i s l a r g e l y a f f e c te d
b y e x p e c ta tio n s and c irc u m sta n c e s .
The o th e r f a c t o r s c o n sid e re d e n te r th e
p ic tu r e a s f a c t o r s a l t e r i n g th e b a s ic demand curve i n th e manner d e sc rib e d
p r e v io u s ly .
C,
im p lic a tio n s o f th e Study
The purpose o f t h i s s tu d y i s to g iv e th e p ro d u cer a b e t t e r u n d e rs ta n d ­
in g o f th e m a rk e tin g s t r u c t u r e and th e f a c t o r s b eh in d th e p r ic e he re c e iv e s
f o r h is h ig h p r o te in h a rd r e d S pring w h eat.
I t i s f e l t t h a t t h i s stu d y has
g iv e n th e p ro d u c e r a p ic tu r e o f th e u s e s f o r h i s w heat, w hat happens to h is
w heat when i t i s s o ld , th e m ajor f a c t o r s b eh in d th e p r ic e he r e c e iv e s f o r
h i s w h eat, and has c o n tr ib u te d to a b e t t e r u n d e rs ta n d in g o f th e fu n c tio n in g
o f th e f l o u r m illi n g and b a k in g i n d u s t r i e s .
The s tu d y has in d ic a te d th e
f a c t o r s t h a t c o n tr ib u te to th e demand f o r h ig h p r o te in s p rin g w heat and th e
g e n e ra l way i n which th e y a f f e c t demand.
I t i s hoped t h a t th e p ro d u cer
w i l l have a b e t t e r u n d e rs ta n d in g o f some o f th e re a so n s why demand and
p r ic e f l u c t u a t e So g r e a t l y .
W ith th e s e id e a s i n mind, th e p ro d u c e r can
a p p ly them to h is s p e c i f i c o p e ra tio n i n o rd e r to m arket h is p ro d u c t b e t t e r
-1 0 1 -
and o b ta in th e b e s t p o s s ib le p r i c e .
D.
A reas f o r PXirther Study
Any a n a ly s is o f m arket demand i s a trem endoiis u n d e rta k in g .
M arket
demand iS h ig h ly v a r ia b le and s u b je c t to a l l k in d s of ta n g ib le and in ta n ­
g ib le - in f lu e n c e s .
I t i s f e l t t h a t f u r t h e r s tu d y on a l l p h ases o f th e de­
mand f a c t o r s would be re w a rd in g .
S ince th e demand f o r h ig h p r o te in s p rin g
w heat i s l a r g e l y d e term in e d by th e demand f o r f l o u r , i t would be w ise to
an aly z e f l o u r demands
A lso , i t would be h e lp f u l to have a m u ltip le c o r r e la ­
t i o n o f s e v e r a l o f th e f a c t o r s c o n sid e re d in t h i s stu d y .
-1 0 2 -
AP P E NDI X
-1 0 3 TABLE I
Wheat F lo u r P ro d u c tio n a t P r in c ip a l C en ters i n th e UeS. a /
Y ear
1923
1922 •
1921
1920
I9h9
19bB
\9 h l
1946
1942
1944
1943
1942
1941
1940
1939
1938
1937
1936
1932
M inneapo lis
1 3 ,2 7 8 ,0 6 3
1 4 ,3 8 6 ,9 6 6
13 ,7 1 8 ,2 1 1
1 3 ,3 6 7 ,0 1 0
13 ,0 6 6 ,2 1 7
1 3 ,8 4 4 ,0 7 9
1 8 ,6 9 9 ,2 2 6
1 6 ,4 3 1 ,8 0 1
1 6 ,4 4 9 ,8 0 7
1 4 ,7 8 3 ,2 8 9
1 4 ,4 3 6 ,8 2 0
1 1 ,6 9 3 ,1 3 2
1 1 ,0 1 9 ,7 2 4
1 0 ,2 7 3 ,4 2 4
1 0 , 896,210
1 2 ,4 3 8 ,2 7 2
1 1 ,1 3 2 ,2 4 4
1 2 ,6 4 7 ,2 2 7
1 3 ,0 0 6 ,8 7 2
B u ffa lo
2 6,216,130
24,082,428
24,8 4 3 ,7 6 4
23, 068,889
26,383,307
26,8 1 7 ,3 2 6
2 7 ,6 3 4 ,4 7 0
2 3,988,030
26,341,479
24,8 4 9 ,9 3 6
23,9 9 0 ,3 6 2
20,408,663
1 9,923,137 '
1 9 ,2 1 4 ,3 3 1 ■
1 9 ,9 6 9 ,1 1 3
194992,822
20,093,242
2 0,433,637
1 8 ,8 8 4 ,7 9 6
a / N o rth w estern M ille r Almanack. 195k, p . 30, M ille r P u b lish in g
C o ., M in n e a p o lis, M inneso ta.
TABLE i l
U. S. Wheat F lo u r Consumption, 1935-52 a /
Wheat F lo u r—C iv ilia n Consumption, U. S. 1935-52
Consumption y e a r b eg in n in g s
Y ear
1935
1936
1937
1938
1939
19W
191a
19U2
I 9h3
I 9 hh
I9k5
19I16
1914-7
1918
19h9
1950
1951
1952
Jan u ary
C om m ercially
Com m ercially and
produced
non-com m ercially
produced
T o ta l
P er
T o ta l
P er
c a p ita
1 ,0 0 0
c a p ita
1 ,0 0 0
sacks
lb .
sacks
lb .
194,007
1 5 0 .4
200,795
1 5 5 .7
1 56.2
202,68?
209,104 ' 161.1
1 5 2 .0
204,292
198,509
1 5 6 ,4
201,716
207,481
1 53.3
1 5 7 .7
1 5 2 .1
207,081
1 5 6 .1
201,755
1
4
9,2
1 5 2 .6
199,939
204,539
1
5
0.1
153.2
200,677
204,834
151.8
202,365
1 5 4 .4
205,859
207,254
160.8
1 58.7
210,033
188,656
1 44.8
191,038
1 4 6 .6
205,190
1 56.8
207,310
1 5 8 .4
1 5 3 .2
214,899
216,687
1 5 4 ,4
136.1
1 9 6 ,751
1 3 7 .2
198,443
1 34.8
200,076
198,467
1 3 5 .9
200,206
133,8
198,835
1 32.9
1
3
2
.0
202,240
201,003
1 3 2 .8
200,608
201,791
1 3 0 .9
1 3 1 .7
201,656
1 2 9 .7
202,783
1 3 0 .4
J u ly
Com m ercially and
non- commer d a i l y
produced
T o ta l
Per
T o ta l
Per
1 ,0 0 0
c a p ita
1 ,0 0 0 c a p ita
sack s
lb .
sack s
lb .
1 9 7 ,0 2 6
152.1
203,970 1 5 7 .5
200,322
206,212 1 5 8 .3
153.7
198,716
204,392 1 5 5 .8
i5 i.5
202,968
206,822 1 5 8 .0
1 5 3 .5
201,686
1 51.3
206,444 154.9
202,616
207,058 1 5 4 .6
i5 i.3
195,212
i4 5 .6
199,084 1 4 8 .5
207,436
1 5 7 .6
210,552 1 6 0 .0
200,136
1 5 3 .2
202,758 1 55.3
196,100
198,422 1 5 2 .0
150.3
201,540
203,458 1 4 9 .3
1 4 7 .9
205,457 ' 1 4 3 .8
207,115 1 4 4 .9
205,401 i4 o „ 6
203,675
1 3 9 .4
1 3 4 .8
200,050
201,542 135.8
133.8
202,175
203,425 1 3 4 .6
1 3 1 .6
201,035
202,259 1 3 2 .4
200,646
201,788 1 3 0 .7
1 3 0 .0
1 2 7 .2
201,012 1 2 8 .0
1 9 9 ,8 9 4
Com m ercially
produced
a / The M ille r P u b lis h in g Company, N o rth w estern M ille r Almanack, M in n ea p o lis,
I 95I1.5" p . 7it...
-IO ^a
T able I I I
Durum Wheats U n ite d S ta te s su p p ly and d is trib u tio n ^ , m ark etin g
■y e a rs 1933-53 (in c lu d e s b o th amber and
r e d durum w heat) a /
Y ear
b e g in ­
n in g
J u ly
6 4 ,O63
48,969
42,954
2*1,581
53,819
2,931
2,826
.3,482
4,162
4,581
20,409
26,031
22,242
21,365
28,179
G rain
• o n ly
O ther
e x p o rts u s e s
_ I / ■ 3/
1 ,0 0 0
1 ,0 0 0
bu.
bu.
9,598
457
5 ,8 i6
4,761
7 ,7 8 6
7,222
1 ,7 6 5
51o 1 0 ,9 4 6
300
6,8o5
l,o 4 9
9,079
22,774
26,432
1 1 ,9 7 6
12 ,3 0 7
6 ,2 2 6
921
8,441
2,319
56,128
57,539
63,120
59,514
38,269
5,265
4,085
3 ,6 io
3,218
2,997
21,684
21,630
23,337
25,533
23,668
2,537
1 ,1 2 5
9,620
1 4 ,5 3 6
3 ,075
1933
1931
1935
1936
1937
1938
1939
192*0
192*1
192*2
C arry ­
over
J u ly I
1 ,0 0 0
bn.
16,2*77
8,621
5,059
6,769
3,2*33
5,217
18,002
1 9 ,2 1 6
22*, 92*0
32*, 256
P ro ­
Im p o rts T o ta l Used
d u c tio n
supply f o r
I/
see d
1 ,0 0 0 1 ,0 0 0
1 ,0 0 0 1 ,0 0 0
bu„
bu.
bu.
bu.
.———
17,622
34^099 2,684
21,320 3 ,5 5 6
6,794 5 ,9 0 5
33,510 5,202
24, 62*1 3,810
8,871 9,293
24,933 4,687
28,688
50
32,171 5 ,5 3 8
2*1,201
46,418 4,6o8
5l,'o46 4,951
33,01*4
32,942
52,158 3 ,6 i4
41,403
66,343 2,998
469
41,836
76,561 2,976
192*3
192*2*
192*5
192*6
192*7
26,931
ll*, 291
8,136
4,923
8,907
34,265
30,328
33,281
36,308
44,912
191*8
192*9
1950
1951
1952
10,299
1 8 ,0 3 6
24,958
23,624
15,014
45,829
39,503
37,948
35,492
23,097
1953
Me* M
MMM
2,867
4,350
1,537
350
MMM
MM—
MMM
214
398
158
M ille d
.2 /
_
1 ,0 0 0
bu.
13 ,1 9 6
12,248
15,723
12,052
1 3 ,6 3 0
14,821
15,423
16,499
18,961
23,880
T o tal
d is a p ­
p e a r­
ance
1 ,0 0 0
W
25,478
16,261
26,741
21,500
26,954
28,416
31,830
27,218
32,087
49,630
49,772
40,833
38,031
32,674
43,520
8 ,6 0 6
5,741
2,929
1 ,2 1 3
1 ,6 8 7
38,092
32,581
39,496
44,500
31,427
MMM
MMM
MMM
6,842 13,883
l / Im p o rts a re b a se d on C anadian shipm ents to th e Ut Sa and e x p o rts on
in s p e c tio n s f o r e x p o r t.
2 / Q u a n tity o f Durum w heat m ille d com piled from m ill r e p o r t s .
3 / In c lu d e s q u a n tity u sed f o r fe e d and c e r e a l s . A lso in c lu d e s w a ste , l o s s ,
and s t a t i s t i c a l e r r o r s o f e s tim a te s .
a / A g r ic u ltu r a l M arketing S e rv ic e , The Wheat S i t u a t i o n , U n ite d S ta te s D epart-,
ment o f A g r ic u ltu r e , WS-138, W ashington D. C ., A p ril 26, 19$ks p* 23*
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“
D a ily M arket R eco rd , M in n ea p o lis, A p ril 235 1951 to May 1 0 , 195k.
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Hard W heats, O ctober 12«, 1951.
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------------------------------ ------- -------
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"
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MONTANA STATF iiu t u pb , , , . . ____
3 1762 10015359 0
/V 5 7 8
C<rp.£.
I 4 «770