Impact of Wheat Target Price Policy on Wheat Price Fluctuation and Total Welfare in Iran

Document Type : Research Paper

Authors

1 Associate Professor in Agricultural Economics, University of Tabriz

2 University of Tabriz

3 Ph.D candidate in Agri. Econ. University of Tabriz

4 MSC in University of Tabriz

Abstract

this study, while examining the supply and demand of Iranian wheat and changes in the guaranteed purchase price of wheat, tried to determine the effects of the guaranteed wheat purchase policy on price fluctuations and total welfare. For this purpose, a structural econometric model of Iran and the rest of the world (including only major wheat exporters) was used. The results of the 3SLS model estimation show that the two parameters of world wheat price and Iranian wheat demand in the previous year had a significant effect on Iranian wheat demand so there was a positive and significant relationship between these variables with Iranian wheat demand. Estimation of Iran's wheat supply pattern also showed that the application of a guaranteed purchase policy has a significant and positive effect on wheat supply and the level of domestic wheat price has a significant and positive effect on wheat supply. Guaranteed purchasing policy also has a significant but negative relationship with the domestic price of wheat. the results of welfare calculations also show that incorrect pricing and lack of attention to economic principles has caused that despite the increase in the guaranteed purchase price and also the increase in the guaranteed purchase price of wheat in some years, the Iranian wheat producer will lose about 10 billion rials. These calculations show that the government's entry into the wheat market with a guaranteed purchase policy has not actually benefited consumers, and with the loss of about 10 billion rials for consumers, the net welfare of society has been a total of negative 21 billion rials. This indicates that government intervention through the pricing of wheat has not been effective in improving the welfare of consumers and producers.

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References

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Agricultural Economics
Volume 17, Issue 3 - Serial Number 3
November 2023
Pages 91-112

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