Determining Theoretical Equation of Wheat Price Support in Iran

Applying financial accounting, Ministry of Agriculture (Jihad Keshavarzie) determines the price support schedule (PSS) of each strategic agricultural product like wheat for per unit of land under cultivation in a year, then, to be approved, announces it to Economic Council (EC). In this paper, based on statistics presented in financial accounting report, theoretical equation of wheat PSS is simulated whether considering subsides of chemical fertilizer and pesticide or not. Major parameters included in equation of wheat price support such as rate of profit, inflation, insurance charge, bank interest and rent of land are considered as government recourses for policy making. Wheat price support, consistent with government future policy would be predicted by any change happens in these parameters. The most variable of the above – mentioned equation is sum of basic costs in production. Costs here consist of machine performance, workers wages, transportation and basic inputs of agriculture such as seed, water, pesticide and chemical fertilizers. So, optimum combination of each one and the importance of their participation in this process play an important role in determining wheat effective price. Using an effective price support in a correct way will not only make farmers living conditions better off, but also, will cause an increase in wheat production which in turn reduce imports and help government save foreign currency, strengthen independence, secure non- vulnerability in international relations and achieve economic independence in providing strategic agricultural products like wheat.