Agricultural Economics
M. Majidian; A. Dourandish
Abstract
Exporting agricultural products is considered as one of the strategies for developing non-oil exports and achieving sustainable economic growth in developing countries. Saffron, as an export commodity, holds particular significance in Iran's non-oil exports. Given Iran's position among the top four saffron-exporting ...
Read More
Exporting agricultural products is considered as one of the strategies for developing non-oil exports and achieving sustainable economic growth in developing countries. Saffron, as an export commodity, holds particular significance in Iran's non-oil exports. Given Iran's position among the top four saffron-exporting countries globally, this study aims to prioritize Iran's saffron target markets based on market competition indices and calculate its relative advantage and export stability index in the world market and Iran's export target countries. Comparison of the global market structure of the product during 2003 to 2022 revealed that despite the significant shares of Iran, Spain, England, and Nigeria in most years, the market structure has been characterized by a multi-sided monopoly, open and closed, and in some years dominated by oligopoly, indicating an increase in the number of competitors and the competitiveness of the export market for this product. Iran, with an average share of 13.6% in the saffron export market and producing over 80% of saffron, does not have a direct share in global exports, and most of Iran's saffron is exported to countries such as the UAE, Spain, China, and Oman, and then re-exported to other countries, for which strategies such as market expansion and branding need to be prioritized. The results showed that in 2022, four countries, Nigeria, Sri Lanka, Iran, and Spain, accounted for 93% of the total world exports, and Iran ranked second in terms of export volume in the saffron export market during the study period. Also, Iran had an export stability index of less than one (0.96) but the trend of this index indicates a decrease in Iran's stability. The results showed that the majority of Iran's saffron exports are concentrated in only four countries, with the composition of these countries varying over time. To enhance market stability and growth, it is crucial to expand the target export markets. Prioritization should be given to China, UAE, Spain, India, USA, Germany, France, Italy, Sweden, and Kuwait, with average priority ranks of 4.15, 6.85, 7.7, 7.95, 8.9, 12.3, 14.35, 15.25, 15.5, and 16.45 respectively. Furthermore, the results indicated that the export market for saffron is oligopolistic. Therefore, it is essential for all exporting countries to collaborate in determining the price and market share for each country. This collaborative approach can help in stabilizing the market, ensuring fair pricing, and promoting sustainable growth in the saffron industry.
F. Kashiri Kolaei; S. A. Hosseini Yekani; S. M. Mojaverian
Abstract
Introduction: Market power is an important factor affecting welfare. Existence of market power on the purchase side reduces supplier welfare. However, existence of market power on the sales side reduces supplier welfare. Some believe that the agricultural market structure is a monopoly. In fact, most ...
Read More
Introduction: Market power is an important factor affecting welfare. Existence of market power on the purchase side reduces supplier welfare. However, existence of market power on the sales side reduces supplier welfare. Some believe that the agricultural market structure is a monopoly. In fact, most of the agricultural products can be purchased by small firms and then delivered to consumers because they are perishable and need certain storage conditions. Thus, a monopoly condition is created in the market. In Iran, pistachios are amongst the agricultural products that can be important for investigating the market structure and for its effects on social welfare. This is due to the fact that the price of pistachios has fluctuated sharply because of many reasons such as the existence of major buyers such as the Rafsanjan Pistachios Producers Cooperative. Monopolistic firms determine the price that causes problems such as losing trade, creating extra profits for the seller and reducing consumer surplus. However, effective implementation of policies requires identification of market structure. In this context, in the present study for investigating the effects of Iran pistachios market structure on social welfare, the spatial equilibrium model was used which is based on maximizing net social payoff (NSP) and is able to consider the variety of market powers in suppliers and consumers.
Materials and Methods: One of the noteworthy features of the spatial equilibrium model is that it is able to examine the price equilibrium in each of the market power degrees. In this study, the conjectural variations parameter was used to consider the market power in the model. This index represents the reaction of firms to change the behavior of a particular firm. The final equations of Iran pistachios spatial equilibrium model can be seen in the following equations:
Max NSP = -
s.t - +
+
j
, , xfj,k, ti,j ≥0
Where NSP is the net social payoff, i and j respectively represent the pistachios supplier and consumer provinces and f represents the method of export of pistachios including by road, sea, air or railway. Vfjk is the yield per Kg of pistachios exports in different ways from the j-th province to the k-th country, Sfj is the pistachios exports capacity of the various ways from the j-th province, Xfjk represents the pistachios exports from the j-th province using the f-th way to the k-th country and mk is the imported pistachios of each country from Iran. Moreover, rij represents conjectural variation, and respectively represent pistachios supply and demand in the provinces j and i, and represent the total shipped pistachios from the i-th province to the j-th province and shipped pistachios for domestic consumption of j-th province, respectively. and respectively represent the demand and supply curve equations according to and . It should be noted that in the perfect competition market rij is equal to -1 while in a monopoly market it is equal to 0. In this study, the 2010 data were used for the calculation of the parameters. Also, for welfare investigating, the surplus of consumers and suppliers were calculated by the following equations:
Consumer surplus : CSj=
Producer surplus: PSi=
Results and Discussion: According to the results of this study, pistachios market structure is far from perfect competition in Iran and creating the perfect competition conditions leads to nearly a double increase in consumers’ welfare and a reduction in the suppliers’ welfare about 0.13%. In general, switching the Iran pistachios market structure has significant effects on domestic consumers but pistachios suppliers are less affected because they export more pistachios to foreign countries. Most of the changes in consumers’ welfare are made in the provinces that are mostly consumers of pistachios and have low or no pistachios production (such as Golestan, Hamedan, Ardebil, Chaharmahal and Bakhtiari, Kordestan and Markazi). In contrast, the lowest welfare changes are associated with the major pistachios supplier (such as Kerman, Yazd, Hormozgan and Sistan and Baluchestan).
Conclusion: Since pistachios are mainly exported and in fact the price of pistachios in the domestic market is higher than the price of Iranian pistachios in foreign markets, a significant increase in the price of pistachios has negative effects on domestic sales and consumers welfare. Since one of the main reasons for the high price of pistachios in Iran is related to market power and the existing monopoly, it is essential to establish certain policies to combat this monopoly. Pistachios exchange can be noted among the policies that are effective in changing the market structure. Also, creating conditions for the entry of new firms into the pistachios market is effective in reducing monopoly in it.
Keywords: Market Structure, Welfare, Spatial Equilibrium Model, Pistachios