Prioritizing the Investments in Agriculture Sector of Fars Province in Iran Based on Capital Returns

Financial and credit institutions including agricultural banks encounter limited resources. So, to keep their financial ability to support agricultural production sustainably as well as to allocate the financial resources optimally, they should prioritize the activities based on their capital returns. In this regard, this study aimed at analyzing the capital returns of the selected agricultural products in Fars province of Iran. For this purpose, an individual production function comprising both physical and human capitals was estimated for all selected products including agronomical, horticultural and livestock products using panel data of 2005-2014. The findings showed that for all activities, the physical capital had the most contribution to production; however, this contribution varied among the products significantly. Comparatively, the capital returns for horticulture and livestock activities tended to be higher. The returns ranged from 0.45 to 0.8 for agronomical products while the corresponding ranges were 0.5-0.9 and higher than 0.7 for livestock and horticultural products, respectively. In addition to the physical and human capitals, as an innovative and control variable, De Martonne climatic index was used in estimated equations. This allowed an assessment of the geographical implications, indicating that regions with higher precipitation, possibly northern and western regions, had better condition to grow output, deserving to be taken into consideration in allocating the credit resources. Based on the capital returns, among the livestock products, red meat might be prioritized while among the horticultural products, citrus, walnuts, peach, apple, pistachios and apricot would be preferred over others. As for agronomical activities, investment priority belongs to machineries.