The Impact of the GOP's Wheat Pricing Policy on Flour Prices

Abstract

The GOP attempts to influence flour prices by fixing its own wholesale price for wheat-the "release price"-at below market levels. We will try to determine who benefits from this intervention. In other words is the open-ended subsidy passed on to consumers, does it end up as excess profits for flour millers or is it dissipated in the pure economic waste of excessive investment in mills .. The analysis has implications for alternative subsidy options which will be considered. The paper is divided into three sections. We will begin with a brief institutional description which will set the framework for the following economic and statistical analysis.