SUPPLY AND DEMAND

Supply and Demand

Supply and Demand

5- Consumption of wheat for food derives from consumer preferences which are not static. Diets have become more eclectic over time and this has led to a reduction in the demand for staples such as bread/wheat. This has been one of the factors limiting the growth of consumption of wheat in developed countries. In developing countries diets have similarly widened particularly consuming more meat and therefore wheat as animal feed. Since both occur over long periods it is difficult to distinguish the effects of changes in income from those of changing preferences.

As the Figure below shows there is increasing consumption of wheat, an average increase of 2.2% from 1961 to 2007, so that over this period consumption rose by 168.0%. Most of this increase 90.3% occurred in low and middle income countries.

6- The demand factors considered above, indicate that this growth in wheat demand has been driven by the growth of World population, growth of world income combined with until recently falling real prices. With demand in the developing countries growing slowly, it is rising population and incomes in developing countries that is generating this growth in wheat demand.

Wheat is produced by millions of farmers around the world, although some of these enterprises can be large, they are all small in relation to the total market. Although there are different varieties of wheat, it can be regarded as homogeneous product, because the variation is limited and the different varieties are close substitutes for one another. It is also easy for producers to switch into and out of the production of wheat, it uses similar resources to other agricultural products and even specialised capital equipment can be hired or contractors can be used.

7- Normally it is expected that as the price of a product rises then ...