provided by Research Papers in Economics
Hedonic Prices in the Malting
Barley Market
William W. Wilson
An important characteristic in the malting barley market is the multitude of quality
variables which affect the value of particular samples. The purpose of this study was to estimate
implicit (or hedonic) prices for selected quality factors. An econometric model was used to
analyze factors affecting the variability in malting barley prices, and to estimate implicit prices
for plumpness and protein. The results indicate that a change may be evolving in the price
determination process for malting barley. In particular, the feed grains sector has had increas-
ingly less effect on malting barley prices in recent years.
The major domestic use for barley has
traditionally been in feed rations for live-
stock and poultry. However, since 1970
the proportion of barley used for malting
purposes has been increasing, and in re-
cent years nearly 50 percent of total do-
mestic use has been for malt production.
Malt is used as an input to the brewing
process for the production of fermented
alcoholic beverages, primarily beer. Be-
cause of the brewers’ taste preferences,
buyers of malting barley are very sensitive
to the quality characteristics contained in
different samples. Many factors affect the
value of particular samples of barley in
malting. Test weight, foreign material,
skinned and broken kernels, soundness,
and damaged kernels—all of which are
part of the grade standards—influence
buyers’ decisions on the suitability of a
malting barley sample. In addition, non-
grade factors, such as protein content and
plumpness, and factors inherent to each
variety (e.g., color, extraction rate) affect
the value of particular barley samples. In
any given day, observed large price dif-
ferentials may exist for relatively small
William W. Wilson is an Assistant Professor in the
Department of Agricultural Economics at North Da-
kota State University.
Journal Paper No. 1293, Agricultural Experiment
Station, North Dakota State University, Fargo.
Western Journal of Agricultural Economics, 9(1): 29-40
© 1984 by the Western Agricultural Economics Association
variations in quality. Indeed, one of the
more frustrating problems for producers,
merchandisers, processors, and breeders is
the large differences in malting barley
prices across shipments.
The effect of quality variability on price
can be analyzed using characteristic de-
mand functions. The logic of these models
is that productive inputs or consumer
goods are demanded because of the char-
acteristics they possess. The quantity of
each quality characteristic (as opposed to
the quantity of the input or consumer
good) is an argument for the production
or utility function. The theory of consum-
er goods characteristics demand is attrib-
uted to Lancaster. Ladd provides a thor-
ough review of applications of both the
consumer goods characteristics model and
the neoclassical input characteristics mod-
el. The input characteristics approach to
empirical price analysis in agriculture has
been used previously by Waugh for fresh
vegetables; by Johnson, as well as Men-
kaus and Kearl, for cattle; and by Hyslop
for wheat. Ladd and Martin used it for
evaluation of the grading system for corn
in the United States. Ladd and Suavan-
nunt used the approach in price analysis
of consumer foods. More recent research
in hedonic prices have been reported in
Rosen; Carl et al.; Margolius and Tilley;
Edmonds; and Ethridge and Davis. He-