Changed Payment System for Wheat Grades: Consequences for Farming Systems in the Central West of NSW

The new AWB Ltd payment system for wheat grades has changed the incentives for farmers to grow and market wheat varieties in Australia. Based around standard quality characteristics, the payment system provides incremental premiums and discounts for deviations in protein and screenings around this standard. The aim of this paper is to compare the optimal crop-pasture rotation using the previous cliff-face pricing structure with the new premiums and discounts pricing structure. The optimal rotations are analysed by applying a linear programming model of farming systems in the Central West of NSW (PRISM Condobolin). To assess the robustness of our results, optimal rotations are also compared for a range of cereal and oilseed prices. It was found that the new pricing structure favours increased cereal production by reducing the relative economic importance of beneficial rotation crops, particularly canola. This is an important finding, given the need to develop and promote more ecologically sustainable farming systems that are not dominated by cereal production.