July 1984
Western Journal of Agricultural Economics
provides the enzymes necessary to convert
starch to fermentable sugars. Barley with
a high level of protein, however, is un-
desirable because it produces a beer with
unstable clarity. Consequently, maltsters
generally try to avoid barley over 14 per-
cent protein (Heid and Leath) and pay
premiums for lower levels. Kernel plump-
ness affects the evenness of germination
and the amount of extract that can be pro-
duced from a bushel of barley (Briggs).
Since kernel plumpness is associated with
a higher rate of germination, premiums
are paid for high levels of plumpness.
Malting barley is usually sold by variety
(i.e., variety identification is preserved) on
the basis of a sample. An industry associ-
ation approves varieties of barley for
malting purposes, each with inherent
“varietal characteristics” (e.g., color and
extraction rates). The structure of the
characteristics demand for barley is vari-
ety dependent because tastes and prefer-
ences of brewers (and therefore maltsters)
are subjective with respect to these var-
ietal characteristics. Each sample of bar-
ley is assigned a grade according to the
Official United States Standards for Grain
(United States Department of Agricul-
ture). Grades and grade requirements dif-
fer for each barley subclass.5 Those for
six-rowed malting barley are as follows:
minimum limits of test weight, suitable
malting type and sound barley; and max-
imum limits of damaged kernels, foreign
material, other grains, thin and black bar-
ley, and skinned and broken kernels. There
are three grades for this subclass which
depend on the values of these grade fac-
tors.
5 There are three classes of barley in the official stan-
dards (six-rowed barley, two-rowed barley, and
barley) and subclasses within each class. There are
three subclasses of the class six-rowed malting bar-
ley (six-rowed malting barley, six-rowed blue malt-
ing barley, and six-rowed barley). All of the samples
analyzed in this study were in the subclass six-rowed
malting barley.
32
The quality attributes and grading sys-
tem indicate the variables to be included
in the empirical specification of hedonic
price function for malting barley. Plump-
ness and protein are continuous variables
indicating the quality attributes of a sam-
ple of malting barley; variety is intro-
duced as a binary variable. In the first two
years of the study, Beacon and Larker
were the only varieties included in the
sample. In 1980/81 and 1981/82 two ad-
ditional varieties, Morex and Glenn, were
included. Each is a six-rowed variety
which is the predominate subclass sold at
the Minneapolis Grain Exchange.6 Even
though each individual grade factor may
influence buyers’ decisions on the value of
particular samples, only the assigned grade
(i.e., 1, 2, or 3) is reported. Consequently,
two binary variables were included in the
empirical specification to account for
grade. The price of feed barley was also
included in the model to account for in-
tracrop year changes in fundamentals af-
fecting the feed grains sector which is an
important potential alternative use for
malting barley.
The general empirical equation was
specified as:
P» = % + ∑ γ.v. + 2 δrGr
a=2 r=2
+ ()lPRO,, + ⅛PLU∣, + 0FDBARt + e,l. (5)
Where
Pil is the price of the ilh sample
of malting barley in time t;
Va is the intercept shifter for va-
riety, n = 2 in 1978/79 and
1979/80 and n = 4 in 1980/
81 and 1981/82;
Gr is the intercept shifter for
grade;
β Two-rowed varieties are generally of lesser impor-
tance in the United States and are grown predom-
inantly in the western states.