Pursuing International Competitiveness in Iranian Wheat Policy

Subject Areas : Environmental policy and management

S.S. Hosseini ¹ ( Professor, Agricultural Economics Department, University of Tehran )
M. Torshizi ² ( Ph.D. student, Department of Bioresource Policy, Business & Economics, University of Saskatchewan, Canada )

Received: 2015-08-30 Accepted : 2015-08-30 Published : 2011-09-01

Keywords: Iran, Wheat, Producer Support Estimate (PSE), Budgetary Payments, Consumer Support Estimate, Causality Relationship, Competitiveness,

Abstract :

After the war with Iraq which ended in 1988, Iran implemented several agricultural support policies based on Five-Year National Development Plans. The main objective of these plans in the agriculture sector was to make the agricultural economy more market-oriented and to encourage sustainable agriculture. This paper investigates the extent to which Iran's government has been able to achieve this objective in the case of wheat. For this purpose, Producer Support Estimate (PSE) and Consumer Support Estimate (CSE) indicators for Iranian wheat are calculated and discussed. Generally, producers’ and consumers’ support is achieved chiefly by distorting market prices. As will be shown, from 1989 to 2006, the PSE increased about 20 times (in real prices), while the level of production increased 1.69 times. However, the PSE had no significant causal relationship with either wheat yield or its area under cultivation. With respect to consumers’ support, this was found to be positive for Iranian wheat, a result that is uncommon for most developed and developing countries. Recent agricultural policies in Iran do not appear to encourage international competitiveness for wheat and are making the wheat economy more dependent on support prices. We suggest that policy makers reconsider the method of subsidization and the pricing system, at least in the case of wheat.

References:

1- Alston, J.M. and B.H. Hurd, (19900. Some NeglectedSocial Costs of Government Spending inFarm Programs. American Journal of AgriculturalEconomics, 72: 149-156.

2- Alston, J.M., V.H. Smith, A. Acquaye, and S.S,Hosseini, (1999). Least-Cost Cheap Food Policies:Some Implications of International Food Aid. Journalof Agricultural Economics, 20: 191-201.

3- Amid, J., (2007). The Dilemma of Cheap FoodPolicy and Self-Sufficiency: The Case of Wheat inIran. Journal of Food Policy, [DOI via Crossref]    [DOI via Crossref]

4- Anonymous, (2005a). The Process of AgriculturalPolicies Evolution in Iran (and evidence from othercountries). Tehran: The Ministry of Jihad-e Agriculture,Agricultural Planning and Economic Institute.

5- Anonymous, (2005b). The National Law of Agricultureand Natural Resource Sector Developmentin Fourth Five-Year National Development Plan.Tehran: The Ministry of Jihad-e Agriculture, AgriculturalPlanning and Economic Institute.

6- Azari, A. (2008). Calculating Aggregate Measurementof Support and Examining its CausalityRelationship with Production Growth of AgriculturalProducts. M. Sc. Thesis: University of Tehran,Tehran.

7- Cakmak, E.H., (2003). Evaluation of the past andfuture agricultural policies in Turkey: are theycapable to achieve sustainability? Department ofEconomics, Middle East Technical University, Ankara(Turkey).

8- FAO/FAOSTAT-Agriculture/TradeSTAT: http://faostat.fao.org/site/406/default.aspx

9- Gardner, B.L., (1988). Export Policy, DeficiencyPayments, and a Consumption Tax. Journal of AgriculturalEconomic Research, 40(1): 38-41.

10- Hsiao, C., (1981). Autoregressive Modeling andMoney-Income Causality Detection. Journal of MonetaryEconomics, PP. 85-106.

11- Hoseini Darvishani, S.M. and A. Gharib Reza,(2003). Study and Comparison of Support Policiesin Iran and World. Conference of Agriculture andNational Development: Agriculture and EconomicGlobalization, Tehran.

12- Hosseini, S.S., and J. Spriggs, (1998). IranianWheat Policy: Implications for Trade. World TradeOrganization, edited by: T. Yildrim, Schmitz, andW.H. Furtan: Westview Press.

13- Hosseini, S.S., and M. Torshizi, (2009). AnEvaluation of Wheat Support Policy in Iran. IranianJournal of Agricultural Economics and DevelopmentResearch. 40-2(2): 1-13.

14- Hosseini, S.S., A. Dourandish, and H. Salami,(2010). Evaluation of Iranian Government ProtectionPolicy in Wheat Market. Iranian Journal of AgriculturalEconomics, 3(4): 95-120.

15- Hosseini, S.S., S. Eravani, and A. Nikoukar,(2009). Investigation the Effects of Support Policiesof Government on Income Risk Paultry Producersin Iran. Journal of Economics and Agriculture Development,(Agricultural Science and Technology).23(1): 88-97.

16- Hosseini, S.S., S. Rezaei, and H. Rezaei, (2009).Evaluating the Effect of Support Policy on GeneralServices of the Iranian Government on Productivityof Agricultural Sector. Iranian Journal of AgriculturalEconomics, 3(1): 73-88.

17- Islamic Republic News Agency. April, 19th,(2009). News Code: 442795.

18- Krause, M. A., Lee, J.H., and W.W. Koo, (1995).Program and Nonprogram Wheat Acreage Responsesto Prices and Risk. Journal of Agricultural and ResourceEconomics, 20(1):96-107.

19- Longworth. J., and P. Knopke, (1982). AustralianWheat Policy 1948-79: A Welfare Evaluation. AmericanJournal of Agricultural Economics, 64(4): 642-654.

20- Mahmood, M.A., A D. Sheikh, and M. Kashif,(2007). Acreage supply response of rice in Punjab.Journal of Agricultural Research, 45(3). 231-236.

21- Melyukhina, O., (2002). The Measurement ofthe Level of Support in Selected Non OECD Countries.In China and the World Economy: AgriculturalPolicy Adjustments in China after WTO Accession.Paris: Organization for Economic Co-operation andDevelopment.

22- Ministry of Jihad-e Agriculture/ Statistics/CultivationData Base: http://www.maj.ir/english/Statistic/Default.asp?p=statistic

23- Mullen, K., D. Sun, D. Orden, and A. Gulati,(2004). Producer Support Estimates (PSEs) for Agriculturein Developing Countries: Measurement Issuesand Illustrations from India and China. InternationalFood Policy Research Institute, MTID DiscussionPaper No. 74. Washington, D.C.: International FoodPolicy Research Institute.

24- Orden, D., K. Mullen, D. Sun, and A. Gulati,(2004). Agricultural Producer Support Estimates forDeveloping Countries, Measurement Issues and Evidencefrom India, Indonesia, China, and Vietnam.International Food Policy Research Institute, ResearchReport Abstract, 152.

25- OECD (Organization for Economic Co-operationand Development), (2003). Agricultural Policies inOECD Countries, Monitoring and Evaluation. Paris:OECD.

26- OECD (Organization for Economic Co-operationand Development), (2005). Agricultural Policies inOECD Countries, Monitoring and Evaluation. Paris:OECD.

27- Permeh, R., and M. Seiedi, (2003). SupportPolicies, International Views and Iran's Agriculture.Conference of Agriculture and National Development:Agriculture and Economic Globalization, Tehran.

28- Portugal, L., (2002). Methodology for the Measurementof Support and Use in Policy Evaluation.Paris: OECD.

29- Salassi, M.E. (1995). The Responsiveness ofU.S. Rice Acreage to Price and Production Costs.Journal of Agriculture and Applied Economics,27(1995):386–99.