The Effects of Agricultural Governance Variables on Iran’s Livestock and Meat Market

Governance is the way rules, norms and actions are structured, sustained, regulated and held accountable in a society. Works by the World Bank and other multilateral development banks on good governance addresses economic institutions and public sector management, including transparency and accountability, regulatory reform, and public sector skills and leadership. Governance has political, economic, and administrative dimensions. It is particularly relevant to agriculture. For agriculture, political governance is the process of decision-making to formulate agricultural policy whereas economic governance emphasizes decision-making processes that affect economic activities and their relationships with the agricultural economy. Administrative governance deals with the implementation of policy. In most developing countries, the government tries to improve the agriculture and guarantee livelihoods via consultation with farmers’ organizations, NGOs, civil society, development economists, the private sector, and coordinate between the legal, economic and social systems, and institutions of governance (Stead 2015). Good governance for agriculture encourages better services by “bringing government closer to farmers”. Iran faces challenges in all of the World Bank's defined governance indicators (transparency and accountability, political stability, violence, government effectiveness, regulatory quality, rule of law, and corruption control). They used an indicator of governance from the World Bank which varies from -2.5 (the weakest) to 2.5 (the strongest). All governance indicators were negative for Iran, suggesting much room for improvement. Better governance would reduce internal and external barriers of development and improve the management of domestic resources by creating a more transparent regulatory structure. These changes could lead to faster growth in Iran’s agricultural sector. Meat plays a significant role in providing protein and calories for the Iranian population. Fluctuations in meat supply and demand affect people's food consumption patterns. Meat prices have been particularly volatile in recent years. The government is obliged to support increased production of animal protein (livestock and poultry) and they can accomplish this by improving agricultural (livestock) governance. Therefore, we investigate the role of governance in improving agricultural and livestock farming performance in this research.

After selecting the agricultural governance variables, we investigate the impact of agricultural governance variables on Iran’s livestock and meat market. An Equilibrium Displacement Model (EDM) is used to evaluate the effects of agricultural governance variables on producers and consumers of meat. The EDM model determines the effects of agricultural governance variables on price and quantity of livestock products by shifting the supply and demand functions before and after the implementation of agricultural governance variables with different scenarios. This is the first study to measure the impact of agricultural governance on vertical and horizontal meat markets by using an EDM. In order to assess the impact of agricultural governance on the livestock and meat markets, we consider the horizontal markets among cattle, chicken, and sheep, as well as vertical markets within each species, including the farm and retail markets. The specification of an EDM includes the percentage change in the price and quantity of each species (beef, chicken and mutton) in retail markets and farm markets.

The results of percentage change in the price (EP) and quantity (EQ) for the retail and farm level meat market after applying the agricultural governance variables of the Fifth Development Program are shown in Table (4) for 2018. After increasing agricultural governance in the meat market, the percentage change in price (EP) for beef, chicken and mutton are negative at the retail and farm level, and the percentage change of quantity (EQ) are positive at the retail and farm level. These results show the positive effect of implementing agricultural governance. Also, the results showed that annual investment growth at 2.23% has a larger effect on quantities at the farm level for chicken, beef and mutton. Growth in  cooperative expenditures (and production inputs) of 0.11% per year has a larger effect on retail prices for chicken; while the 0.21% annual growth of employment has smaller effects on retail prices for chicken. In addition, the annual investment growth variable has the largest effect among governance variables on the total surplus of meat producers.

According to the research findings, the investment variable has the largest impact on price. By increasing investment in the livestock sector, it is possible to use not only modern technology and equipment on livestock farms, but also to employ experts and skilled labor in the production process. Employing university graduates in the areas of farm management, nutrition, livestock and poultry production, animal health, and other technical areas could bring huge profits to producers. In addition, cooperatives play an important role in the marketing. When cooperatives enter the supply chain, there are improvements in input supply, assembly, processing, and product distribution.