The effect of agricultural product pricing policies on the economic value of water (Case study: Sugar beet farming in the city of Nishabur)

Setting the price of water equal to its economic value has important role in the management of water demand, especially in the recent water crisis. One of the main components in determining economic value of water is the price of the product. Therefore, it is important to adopt precise supportive policies on pricing the product. Therefore, the purpose of the present study is to analysis the effect of guaranteed price policy for sugar beet on the real value of water and its optimal allocation in Neyshabur. To this end, at the first, the appropriate functional form conformed to the production technology of the sugar beet was selected based on econometric criteria and using information about 95 farmers in the year 2011 which were selected by two stage sampling method and marginal productivity of water was calculated. Then, the economic value of water was analyzed in several scenarios considering different guaranteed prices. The results show that the best functional form for the production function is Translog function and economic value of water based on 2011 price was estimated1430.5 Rails per cubic meters which has major difference with the farmers paying price. Moreover, the results indicate that imposing different guaranteed prices for sugar beet will lead to significant differences in the economic value of water. So, for improving efficiency of water use, guaranteed price of agricultural products should be determined with more caution so as to reflect the real value of water for preventing wastage of it.