Seasonal variability, land values and willingness-to-pay for a forward wheat contract with protein premiums and discounts
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This article investigates the impact of a protein premiums and discounts system on
the income stream from growing wheat. Based on a biological relationship
between protein and yield in uncertain seasonal conditions, it shows that such a
system reduces the expected level and variability of wheat income. It is subsequently argued, using a numerical analysis, that protein payments affect both
the attraction to wheat growers of forward contracts and the value of land used
for wheat. The nature of both of these impacts is related to the level of seasonal
variability affecting the land. Consequently, wheat growers in the more unreliable
regions of the wheatbelt may have been particularly disadvantaged by the system.