The Effects of Increase in Energy Carrier Prices on Wheat Production in Fars province: Application of Indirect Production Function

In this study the effects of increase in energy carrier prices on wheat product in Fasa county of Fars province was investigated. Data were collected from 201 irrigated wheat producers in 2014-15 applying multistage random cluster sampling. In order to calculate the reduction of wheat production due to the increase in energy prices, output elasticity with respect to input prices was calculated by estimating translog cost function and using relationship between the share of input and indirect production function. The results indicated that a 100 percent increase in the price of gas oil and electricity, wheat production reduces by 4.38 and 23.12 percent per hectare, respectively. The increase in electricity prices compared to gas oil has more significant effects on reducing the production of wheat. Therefore, it is suggested this policy be applied to the electricity with more caution and more precise planning. On the other hand, considering the significant role of wheat in the country economy, the production of this product should be supported by proper mechanisms. With increasing returns to scale of wheat production in Fars province, the government can grant credits to provide conditions for farmers to adopt technology change for optimizing consumption of energy in order to reduce costs and keep producing of wheat provide. Finally, with regard to the strategic nature of wheat and the large number of producers, it is suggested that the government support them at micro level to reduce the risk of wheat producers.