The Effects of Wheat Guarantee Price on the Economic Value of Groundwater Resources; the Case Study of Orzoiye Region, Kerman

مجله اقتصاد و توسعه کشاورزی

Article 1, Volume 29, Issue 3, October 2015, Pages 217-223   

Document Type: Research Article

DOI: 10.22067/jead2.v0i0.32924

Authors

S.H. Mosavi^{* 1}; S. Shahabi²

¹Department of Agricultural Economics, Tarbiat Modares University

²Tarbit Modares University

Abstract

Introduction: Agriculture as one of main axis of development in Iran is heavily depend on irrigation water. on the other hand, water resources have been under heavy pressure due to rising demand with different uses. Hence, water resources management and optimal water allocation have become increasingly important Undoubtedly, one of the most important tools for optimal allocation of water resources, is the economic valuation of the long-term development strategy of the country. However, the main question is whether the various agricultural policies of the government are to achieve self-sufficiency in the production decisions, in line with the management of water resources?
Materials and Methods: To develop an analytical context for responding to above question, in this study, the effect of guaranteed purchase policy of wheat as one of the most supporting government policies, on the economic value of water resources in Orzoiyeh plain of Kerman province was studied. In order to achieve our goals, a dynamic mathematical programming model was used.
A number of key questions are involved with the modeling of dynamic situations. Fundamentally, one must ask whether an explicit multiple time period representation is necessary. If so, a number of other questions are relevant. First, the length of the total time period and the starting date must be determined. Second, the length of the time intervals explicitly represented within the total time period must be determined. Third, initial and final inventory conditions must be specified. Fourth, one must decide on activity life, i.e., when a particular activity is begun and how long it lasts. Fifth, the rate of time preference must be determined, i.e., one needs the discount rate at which future returns are considered when compared with current returns. Sixth and finally, one must decide whether to include uncertainty. The sections below present discussion on each of these topics.
Dynamic situations may not require multi-period dynamic models. Some dynamic questions must be explicitly modeled, allowing the solution to change over time. On the other hand, other questions may be adequately depicted by a steady state equilibrium model. In an equilibrium model the same decision is assumed to be repeatedly made in all time periods and thus a "representative" single period representation is used. Choice between these two modeling alternatives depends on a number of considerations. First, one must ask whether modeling adaptation is important. This depends upon whether the modeled entity is likely to experience growth, development/exhaustion of its resource base, and/or dynamic changes in model parameters. Second, one must be interested in the time path of adjustment and must not be content to solve a model for an optimal final state with the adjustments required to attain that state determined exogenously. Simultaneously, one must ask whether the data are present in sufficient detail to support a dynamic model. Finally, the multi-period dynamic analysis must be affordable or practical given the model size and data required. Dynamic equilibrium models may be used when one is willing to assume: a) the resource, technology and price data are constant; and b) a long-run "steady state" solution is acceptable. Disequilibrium models are used when these assumptions do not hold. Often reliance on equilibrium models is stimulated by the absence of data on parameter values over time. The decision on whether or not to assume equilibrium needs to be addressed carefully. Two common errors occur in the context of dynamic models are unnecessarily entering explicit dynamics into a model and improperly omitting them. Naturally, the proper dynamic assumption depends upon the problem. Treating dynamics as an equilibrium does not imply ignoring dynamics, but rather assumes repetitive decision making with equal initial and final inventory, a zero growth rate and a constant resource base. Most models do not contain either an infinite time horizon or conditions where all dynamic enterprises stop at the end of the horizon. Consequently, terminal conditions are important. Terminal conditions reflect the value of in-process inventory beyond the final period explicitly modeled and should either value or require a minimum level of inventory. When used, terminal values should reflect the net present value of the future income stream earned by ending the time horizon with a unit of the in-process inventory. Such conditions can insure that model activity will be reasonable up until the final year. The error created by ignoring terminal conditions can be illustrated through example.
Data required in the study for the crop year of 2011-2012, were collected by farmers in Orzoiyeh using questionnaires along with data of the Regional Water and Agriculture Organization of Kerman were collected.
Results and Discussion: results showed, that although the policy guaranteed purchase of wheat increased in agricultural gross profit ,it is not compatible with water resources management. Therefore, policymakers should enact policies to support the production, they considered the side effects on water resources in addition to encourage more production was also important to protect water resources. In order to reduce the exploitation of water resources, in line with the policy of supporting the production of water-price policies gradually, developing new technologies and water saving, promoting drought resistant varieties and the optimal irrigation strategies can be implemented.
Conclusion: Policy makers should enact policies that support the production, they considered the side effects on water resources in addition to encouraging more production was also important to protect water resources. In order to reduce the exploitation of water resources, in line with the policy of supporting the production of water-price policies gradually, developing new technologies and water saving, promotion drought resistant varieties and the optimal irrigation strategies can be implemented.

Keywords

Dynamic Mathematical Programming, Economic Value of Water; Guaranteed Price; Kerman; wheat

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