Agricultural Economics
S. Sadafi Abkenar; A.H. Chizari; H. Rafiee; H. Salami
Abstract
Iran Mercantile Exchange is striving to become a regional hub for price discovery of essential commodities and raw materials, providing producers with financial instruments and risk management tools. This study investigates the optimal hedge ratio in future and commodity deposit receipts (spot) contracts ...
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Iran Mercantile Exchange is striving to become a regional hub for price discovery of essential commodities and raw materials, providing producers with financial instruments and risk management tools. This study investigates the optimal hedge ratio in future and commodity deposit receipts (spot) contracts for Round Fandoghi pistachios. Using the BEKK-VAR-TARCH model, the impact of seasonal and daily volatility on returns and hedge ratios was assessed over the period from 19 October 2018 to 18 January 2022. The results showed that volatility on specific days of the week and during different seasons affect speculative and investment decisions in the commodity exchange. Particularly, sharp volatility during certain periods can lead to significant changes in returns and hedge ratios. These findings suggest that investors should update their investment strategies based on seasonal and daily volatilities. Additionally, the importance of utilizing financial instruments suited to market conditions for managing existing risks was confirmed. Ultimately, investors, speculators, and policymakers in the commodity exchange are advised to pay special attention to temporal changes and existing volatilities when composing their investment portfolios and adjusting hedge strategies. Furthermore, the use of futures contracts and derivative instruments is recommended as risk management approaches. This study contributes to a better understanding of volatility behavior and offers strategies for improved risk management in the Round Fandoghi pistachio market.
H. Salami; A. Salim
Abstract
Introduction: Risk is considered as a negative factor in producing agricultural products. Yet, the presence of risk is not restraining producers from production as long as the generated revenue is proportional to the perceived risk and thereby, the cost of the risk is compensated. The purpose of this ...
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Introduction: Risk is considered as a negative factor in producing agricultural products. Yet, the presence of risk is not restraining producers from production as long as the generated revenue is proportional to the perceived risk and thereby, the cost of the risk is compensated. The purpose of this study is to measure systematic risk of wheat production in Iran's provinces, and evaluate how the risk is offset in these regions.Materials and Methods: According to Markowitz, there is a tradeoff between risk and returns in considering alternative investment by rational investors. That is, investors expect higher returns for accepting higher risk in considering any investment. Capital Asset Pricing Model (CAPM) is an equilibrium model based on this theory which measures systematic risk of an investment (activity) and shows how an asset is priced according to its perceived risk. Thus, this model can be used to examine the systematic risk of producing wheat in different regions and the relationship between the risk of producing this crop and the expected price to generate appropriate returns to compensate the undertaken risk by producers. According to Sharp, by regressing the returns of an investment on the returns of market portfolio, the systematic risk factor for such investment is obtained. The risk factor which takes different values from zero to greater than one is a measure of systematic risk of an activity relative to the risk of overall portfolio. This risk factor is used to compute the returns required to compensate the risk associated to the activity.Results and Discussion: Results reveal that Yazd province with 0.45 beta coefficient is the least risky province and Mazandaran province with 1.26 beta coefficient is the riskiest province for wheat production in Iran. In fact, based on the results, 20 percent of the wheat producing provinces are classified as high risk in production of this crop. Ardebil, Zanjan and Alborz provinces with systematic risk coefficient of 0.96, West Azerbaijan and Isfahan with systematic risk coefficient of 0.90 are grouped as risky ones. Gilan, Semnan and Hormozgan with systematic risk factor of 0.73 and Bushehr and North Khorasan provinces with systematic risk factor of 0.72 that have similar risk factor are classified as other risky zones. As the results indicate, with 15 percent risk-free rate on investment in the country, wheat producers expect a minimum return of 18 percent in producing wheat in Iran. On the other hand, if the risk-free rate of return on investment rises to 20 percent, wheat producers expect a minimal rate of 19.5 percent. Based on these calculations, prices of this product, and consequently the generated revenues, are in such a way that the returns offset the risk of wheat production in 14 provinces. From this point of view, wheat production in Kurdistan province has the best condition while the production of wheat in the southern province of Kerman shows the worst situation. In addition, results revealed that uncompensated risk in most of the provinces is the result of low yield per hectare and consequently, high average cost in these regions. Thus, focusing on improving productivity is suggested for the specified provinces.Conclusion: According to the results, uncompensated risk in most of the provinces is the result of low level of yield per hectare and consequently, high level of average cost in these regions. Therefore, it is expected that in the long run, crops with higher yield will be replaced for the wheat and this crop will gradually be removed from the cultivation plan in such provinces. Since wheat is a strategic crop in Iran and to guarantee its production, improving productivity of this product is recommended for the specified provinces.
Z. Sarabi; V. Ansari; H. Salami; S.S. Hosseini
Abstract
Introduction: The exchange rate in Iran has experienced considerable increase with some fluctuations over last two decades. This has resulted in an increased cost of food production in Iran. Since, further increase in exchange rate is expected in the future, it is important to determine which groups ...
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Introduction: The exchange rate in Iran has experienced considerable increase with some fluctuations over last two decades. This has resulted in an increased cost of food production in Iran. Since, further increase in exchange rate is expected in the future, it is important to determine which groups of agricultural products, produced in different agricultural sub-sectors, are more sensitive to these changes and also to specify the major paths through which exchange rate increase is transmitted to different agricultural products. The main objective of this study is to provide explanations for these questions.Materials and Methods: To achieve the objectives of the study, a social accounting matrix (SAM) has been constructed based on the latest Iranian Input-Output Table released in 2011 by the Statistical Center of Iran. This SAM is a 110× 110 matrix and consists of different accounts. Three accounts for factors of production (labor, land and capital), 6 household accounts (rural and urban households divided into three groups of low, middle and high income), one government account, one capital account, one account for rest of the world, and finally, one account for commodities which includes 49 domestic commodities and 49 imported commodities. To trace the effects of changes in exchange rate on prices of different products, the matrix of SAM is transformed to a SAM-based price analytical model. Then, the structural path decomposition approach is used to specify the major paths through which the effects of increase in exchange rate are transferred to major agricultural products in different sub-sectors.Results and Discussion: Results of this study revealed that livestock and poultry products are the most responsive products to a shock on the exchange rate. Thus, the effect of the shock on the prices of these products is significant. Forestry and agricultural services are in the second place from this point of view. Crop farming products, fish and other fisheries products, and horticultural products are ranked on the next place. Since producing livestock and poultry products extensively depend on the imported feed materials, the production cost and consequently, the prices of the first group of products experience the highest increase. Subsidizing feed materials, following an exchange rate shock, or direct payment to the low income households’ group might be a way to mitigate the negative effects of the exchange rate shock on food security in Iran. The results of structural path analysis indicate that the effects of increase in exchange rate on the prices of agricultural products are mostly transmitted through increasing import prices in six main economic sectors namely; “materials and chemical products”, “crop farming products”, “food products” “textiles, leather and their products”, “the machinery and equipment” and “hotel and restaurant services”. However, impacts of the above sectors on prices are not the same in all agricultural subsectors. Price of “crop farming products” is mostly affected by prices of imported “crop farming products” as well as “materials and chemical products”. Prices of “horticultural products” and “forestry and agricultural services” are mainly affected by increasing prices of imported “materials and chemical products”. On the other hand, price of “livestock and poultry products” changes considerably with increase in import prices of “crop farming products (raw materials)” and “food products”. Finally, price of “fish and other fishing products” is mostly affected by price of imported “food products”.Based on the results of structural path analysis, the paths through which exchange rate shock are transferred to the cost of production and consequently prices of agricultural products are two separate channels. Increase in import prices of “materials and chemical products”, “crop farming products” and “food products” is transmitted to the prices of agricultural products as these products are utilized as inputs in production process of agricultural products directly or indirectly. On the other hand, an increase in import prices of “textiles, leather and their products” and “the machinery and equipment” indirectly affects production cost of agricultural products by first stimulating an increase in prices of primary factors, following increased cost of living for owners of these inputs.Conclusion: To decrease the negative impact of exchange shock on prices of food products, different policies can be adopted, depending on the sectors playing the main role in increasing the cost of production and the path through which the shock is transmitted. Generally, subsidizing feed materials, following an exchange rate shock, through allocation of preferred exchange rate or supplying these materials with a subsidized price is recommended for the products such as poultry products in which most of the feeding materials are imported. On the other hand, direct payment to the low income households’ group might be a way to mitigate the negative effects of the exchange rate shock on food security in cases that most of the increased cost of production comes from increase in the cost of primary inputs.
H. Salami; E. Taheri
Abstract
Introduction: Rapid growth in the world population would substantially exacerbate pressure on all resources particularly water resources and consequently would cause difficulties in global food security. In addition, degradation of water resources is one of the greatest environmental challenges facing ...
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Introduction: Rapid growth in the world population would substantially exacerbate pressure on all resources particularly water resources and consequently would cause difficulties in global food security. In addition, degradation of water resources is one of the greatest environmental challenges facing almost all countries around the world including Iran. In Iran, the situation is even worse as it is located in a dried and low precipitation region. Thus, before Iran reaches at an irrevocable point, it needs to revisit its development policies. In fact, what is considered as a strategic principle in the path of sustainable development is the balance between the development policies and the state of the existing country's natural resources base, specially the water resources. Thus, in order to manage optimal usage of water resources and to coordinate farm land utilization policies and water resource availability in different provinces, information on water security situation in terms of physical, social and economic factors are necessary. The present study seeks to specify the status of water security in provinces of Iran using water poverty index.Materials and Methods: Given that water security is a multidimensional concept and it is not possible to use one variable to represent its different dimensions, the indicator method is typically used to evaluate this concept. In the present study, the Poverty Index is utilized to measure water security in different provinces of Iran. This index consists of five main water related components including: Resources Accessibility, Capacity, Consumption, and Environment. These components in turns are determined by various variables such as the volume of groundwater resources and annual surface water per person, the variation of rainfall in a 10-year period, number of household having access to public water pipeline, percentage of population having access to urban wastewater collection and disposal services, percentage of population covered by the social security services, literacy rates in the population over the age of 6, rate of participation, GDP at constant prices, employment rate in non-agricultural activities, annual water usages, percentage of irrigated land, amount of fertilizer and pesticides distributed annually, and percentage of protected areas under the management of the Environmental Protection Agency. These variables are first standardized using minimum-maximum method Then, an index for each of the five components are computed. Next, an index of water poverty is calculated for each province by aggregating all five components. At the end, based on the index of water poverty all provinces are classified into Water Unsafe, Lower safe, Moderate safe, Upper safe, and Full Safe provinces.Results and Discussion: Results revealed that, five provinces, including Sistan va Baluchestan, Qom, Kerman, Hormozgan and Golestan were the most insecure provinces based on the calculated water poverty index. These regions are facing a severe water crisis. Two provinces, including Tehran and Gilan, had lower safe water security. Also, five provinces, consisting of East Azerbaijan, Zanjan, Semnan, Kermanshah and Lorestan faced upper safe situation, while five provinces, including Bushehr, Chahar Mahaal va Bakhtiari, Kohgiluyeh va Boyer-Ahmad, Kurdistan and Markazi had full Safe of water security. Other provinces were ranked in moderate safe status in Iran. The correlation between Water Poverty Index (WPI) and its components indicates that all components are positively and significantly correlated with the Water Poverty Index, except for the capacity item. The magnitudes of the calculated correlation coefficients in this study were 0.459, 0.628, 0.776 and 0.518, respectively for resources accessibility, capacity, consumption, and environment components. The consumption item has the strongest relationship with the Water Poverty Index. Consequently, in order to improve water security, it is recommended that policy makers give priority to this item. Suggestion: Given that the roots of existing water poverty in different provinces were not the same, it is suggested that water policy makers and planners take into consideration the province-specific factors for setting up the planes aiming to prevent more water insecurity in Iran. From this point of view, the WPI results can be used to prioritize the provinces and understand the roots of water insecurity in each of the provinces. Providing water security or water poverty map for Iran is essential for having a clear understanding of water security situation in different regions in Iran and is recommended. Finally, information provided by WPI can be used in efficient management of water resources in different provinces and at national level.
H. Salami; M. Bastani
Abstract
Introduction: The persistence of rice imports while domestic production shows an increase over time has resulted in forming this hypothesis among rice producers in Iran that import of the rice is unjustified. This study is seeking to evaluate this hypothesis.
Materials and Methods: The relationship ...
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Introduction: The persistence of rice imports while domestic production shows an increase over time has resulted in forming this hypothesis among rice producers in Iran that import of the rice is unjustified. This study is seeking to evaluate this hypothesis.
Materials and Methods: The relationship between the import of rice and the quantities of domestic production as well as the other theoretically possible factors explaining import over period 1981-2014, including domestic/world market relative price, exchange rate, domestic income, population, tariff rate are investigated using exploratory data analysis (EDA) approach. In addition, the relationship between import and these factors is quantified using ECM econometric methodology. Furthermore, the VAR framework is utilized to specify causality between the above-mentioned variables and quantities of rice imported.
Results and Discussion: Results from EDA revealed that there is not a clear relationship between the quantities of domestically produced rice and the imported quantities, while such a relationship is shown between per capita crude oil revenue and the quantities of rice imported. In addition, the quantities of imported rice are not related to the domestic/world price ratio. Moreover, EDA shows a decreasing trend in real domestic price of rice. Results from EDA are supported by the co-integration and ECM methodology. The Granger causality between per capita crude oil revenue and the quantities of rice imported which was tested within VAR framework indicates that there is a one way causality from the first variable to the second one. Furthermore, the estimated ECM shows that the effect of per capita crude oil revenue on quantities of imported rice is higher in log relative to the short run. A one-dollar increase in per capita crude oil revenue results in 360 metric tons import of rice in the long run while the same one dollar increase will result in 290 metric tons import of rice in the short run. These results support the hypothesis that import of the rice is an unstructured import which may hurt domestic rice producers. Finally, calculation of the intra industry trade index indicates that intra-industry trade theory cannot explain the increasing trend of rice import in Iran.
Conclusions: Given that the per capita oil revenue is the main determinant of the rice imports, besides the fact that EDA shows a decreasing trend in real domestic price (terms of trade) of rice and reaching below one led to the conclusion that the unjustified import hypothesis is confirmed in Iran. Accordingly, a revise in rice import is suggested. Specifically, decoupling rice import from crude oil revenues and limiting import, using price elasticity information, to keep an increase in the price of this commodity equivalent to the CPI growth rate for domestic producers is suggested.
H. Salami; M. Nemati
Abstract
The presence of yield systematic risk in agricultural sector is one of the main reasons for facing this sector with huge damages and is one of the restricting factors in developing agricultural insurance in Iran. This study explores the presence of systematic yield risk and the extent and severity of ...
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The presence of yield systematic risk in agricultural sector is one of the main reasons for facing this sector with huge damages and is one of the restricting factors in developing agricultural insurance in Iran. This study explores the presence of systematic yield risk and the extent and severity of yield spatial dependence for apple production in Iran. To this end, the apple production regions were grouped into two climatic regions based on their thermal regimes. In the second step, systematic yield risk was explored using the first order spatial autoregressive (FAR) model in each of the two climatic regions.Finally, the effects of climatic variables on the yield of apple have been estimated using more general spatial autoregressive models. Results indicate that apple production regions can be classified into two mountainous and plain regions. Apple yields are correlated across space in each of the two regions. Frost in the first region and drought in the second region is accounted for the presence of systematic yield risk in apple production in Iran. Results from more general models revealed that one year lag of drought, the occurrence of frost in March, average of temperature in June and July, total annual precipitation, and variation of precipitation are important climate variables that affect apple yield in Iran.
O. Javanbakht; H. Salami
Abstract
This study investigates the effects of two policies of reducing profit rate and increasing supply of credits on the growth of production in the economic sectors in Iran. To achieve the goal, the ORANI-G computable general equilibrium model was modified tothe present situation of Iranian economy. The ...
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This study investigates the effects of two policies of reducing profit rate and increasing supply of credits on the growth of production in the economic sectors in Iran. To achieve the goal, the ORANI-G computable general equilibrium model was modified tothe present situation of Iranian economy. The model was also extended to accommodate the financial sector of the economy. To use the CGE model, a financial social accounting matrix based on the latest input-output table published by Statistical Center of Iran in the year 2001 was developed. Using the developed model, two scenarios were simulated. Simulation results of reducing interest rate of credits supplied to the sectors showed that the effects of this scenario on expansion of economic sectors is higher than the impact of the second scenario in the form of increasing supply of credits. This increased the real GDP growth rateby almost twice (1.2% versus 0.6%) of that in the second scenario. furthermore, the total exports experienced positive growth in the first scenario while it faced the negative growth in the second one. Additionally, a reduction in the profit rate of credits reduced prices of commodities and services, which in turns increased the inflation rate by 0.53 percent. However, increase in supply of credits led to an increase in the prices of commodities and services . This caused a rise in inflation rate by 0.04 percent. Increase in supply of credits, however, caused an increase in fixed capital formation in the economy by 1.6 times comparing to the profit rates reduction scenario. These results revealed that there is a compromise between these two policies with respect to their effects on the economy. Based on the goals and priorities of policymakers, one of the policies might be preferred to the other one.
H. Salami; A.M. Jafari; Z. Shokoohi
Abstract
While ignoring income distribution and estimating aggregate demand generally leads to aggregation bias and thus, does not reflect households’ demand properly, yet aggregation bias is rarely considered in empirical demand studies and simply is ignored in most cases. The objective of the present study ...
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While ignoring income distribution and estimating aggregate demand generally leads to aggregation bias and thus, does not reflect households’ demand properly, yet aggregation bias is rarely considered in empirical demand studies and simply is ignored in most cases. The objective of the present study is to estimate aggregation bias in households’ demand for various types of meats and to evaluate its effects on the magnitudes of price and income elasticities. Ultimately, AIDS demand function was estimated using time series data over the period 1984-2007. Results indicate that correcting the aggregation bias has considerable impacts on the estimated parameters especially on the elasticities.
JEL classification: D1, D12, C51
H. Salami; M. Kavoosi Kalashami
Abstract
AbstractSuccessful presence of Indian and Pakistani rice in Iran’s market due to having similar quality with the domestic rice, extensive advertisement, and good packaging has faced rice production in Iran with a big challenge. Assuming that the attractions of Iranian consumers toward these imported ...
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AbstractSuccessful presence of Indian and Pakistani rice in Iran’s market due to having similar quality with the domestic rice, extensive advertisement, and good packaging has faced rice production in Iran with a big challenge. Assuming that the attractions of Iranian consumers toward these imported rice varieties are a signal of changes in the preferences of the domestic consumers in favor of the imported rice and a kind of loyalty establishment towards these products, then the continuity of production of rice in Iran might be under serious question. The present study investigates this issue. It tries to test the structural break in preferences of rice consumption in Iran. To this end, the nonparametric WARP approach together with K-W statistical test are applied to time series data over 1990-2007. Results of WARP formation show a sort of structural changes in consumer preference in 1999. However, results of K-W test revealed that this change in the preferences is not a permanent structural change but is a temporary change due to a kind of nonlinear transitory shocks in the rice market in Iran. The stability of Iranian preferences towards domestic rice leads to the conclusion that the Iranian producers can use this opportunity and reestablish the position of the Iranian rice in the market by improving their competitiveness through improving the quality, advancing productivity and reducing the cost of production.
H. Salami; S. Rezaei
Abstract
AbstractIn Agriculture, there is a lag between planting decision and supplying the produced commodity to the market. This makes the marketed commodities as predetermined variables and prices as market clearing factor. Under such a condition, the inverse demand function in which price is a function of ...
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AbstractIn Agriculture, there is a lag between planting decision and supplying the produced commodity to the market. This makes the marketed commodities as predetermined variables and prices as market clearing factor. Under such a condition, the inverse demand function in which price is a function of quantity is an appropriate tool for forecasting price responses to the injected quantities to the market. In this study, a system of prices equations is estimated for three meat commodities namely; beef, lamb, and broiler, using time series data over period 1985-2006. Results of the estimated own-quantity elasticities (price flexibilities), indicate that a one percent increase in quantities of each of these meats, injected to the market, will cause, a decrease of 0.86, 0.76, and 1.03 percent, respectively, of the prices of beef, lamb, and broiler. The estimated cross-quantity elasticities revealed that beef and lambs are not good substitutes for the broiler. Thus, it is not expected to notice a considerable decline in the price of the latter commodity by injecting more beef and lambs to the market.
H. Salami; H. Rafiee
Abstract
AbstractThis study investigates the presence of financial constraint and its possible effect on the level of rice production in Gilan and Mazandaran provinces. To this end, an Indirect Production Function was estimated using 2007 crop year production data. Results support the claim that shortage of financial ...
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AbstractThis study investigates the presence of financial constraint and its possible effect on the level of rice production in Gilan and Mazandaran provinces. To this end, an Indirect Production Function was estimated using 2007 crop year production data. Results support the claim that shortage of financial resources is a limiting factor in all cities in these two provinces such that the available financial resources in Gilan and Mazandaran is 23.01 percent and 21.04 percent, respectively, less than the amount required to finance optimum level of production. This limitation has resulted in a 24.78 percent and 23.22 percent decline in production, respectively in Gilan and Mazandaran, as compared to a non-constraint situation. Given the share of these two provinces in providing the rice product needed in the country, supplying sufficient level of financial resources can play a considerable role in reducing import of this product.
H. Salami; H. Shahbazi
Abstract
AbstractIn this study the AIDADS which is a generalization of Linear Expenditure System (LES) and in contrast to the latter model allows the presence of nonlinear relationship between demand and consumption expenditure is applied to the Iranian consumption data on beef, lamb, broiler, fish, milk, apple ...
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AbstractIn this study the AIDADS which is a generalization of Linear Expenditure System (LES) and in contrast to the latter model allows the presence of nonlinear relationship between demand and consumption expenditure is applied to the Iranian consumption data on beef, lamb, broiler, fish, milk, apple and orange for period 1976-2006. Results indicate that, income elasticity, derived from both restricted and unrestricted models, has a nonlinear relationship with per capita income (expenditure). Thus, LES which is widely used in empirical studies may results in an unrealistic elasticities and inappropriate policy implication. Results based on the estimated AIDADS reveal that income elasticity for beef and lamb are less than one, for apple is equal one, and for milk, fish and chicken are more than one. Therefore, the latter group of commodities is considered to luxury, while that of the first group is necessary.