Evaluating the U.S. Wheat Protein Complex

In this paper, we modeled the economic linkages between a commodity (wheat gluten) and a commodity characteristic (wheat protein). The purpose of this research was to address several issues in the wheat protein complex including the impact of the U.S. gluten import quota on producer protein premiums. Four important conclusions were found. First, the hard red winter (HRW) protein market strongly influenced wheat gluten market but the wheat gluten market had its greatest influence on the hard red spring (HRS) protein market. Second, the demand for intrinsic protein was estimated to be very elastic. Thus, the returns to breeding or biotechnology programs designed to raise protein levels of wheat are likely to remain stable in response to small increases in wheat protein content. Third, the U.S. import quota on wheat gluten was estimated to provide a 14% increase in the price of wheat gluten in the first year. By the third year, prices will be only 5% above the pre-quota price. U.S. gluten supplies will increase about 15% in the first year and remain at about that level for the next two years. Although these are small estimated impacts, they are not far from what the USITC had anticipated. Finally, the 3-year quota increased protein premiums and provided about $500 ($1000) in additional revenue for an average 1000 acre farm producing HRW (HRS) wheat