INTERNATIONALJOURNALOFAPPLIEDENGINEERINGRESEARCH,DINDIGUL Volume1,No 4,2011 Copyright2010AllrightsreservedIntegratedPublishingAssociation REVIEWARTICLE ISSN09764259

Econometricmodelingandsensitivityanalysisofcostsofinputsfor sunflowerproductioninIran
S.H.MousaviAvval,S.Rafiee,A.Jafari,A.Mohammadi DepartmentofAgriculturalMachineryEngineering,FacultyofAgriculturalEngineeringand Technology,UniversityofTehran,Karaj,Iran mohammadia@ut.ac.ir ABSTRACT Themainobjectivesofthepresentstudyweretoestimatetherelationshipbetweeninputcosts andtheyieldvalueofsunflowerproductionandtoanalyzethesensitivityofinputsonyield. Forthesepurposes,aneconomicalanalysiswasconductedin95randomlyselectedsunflower farms in Golestan province, the main center of oilseed production in Iran. The results revealedthatland,humanlaborandmachineryinputshadthehighestsharefromtotalcostof production.Also,thebenefittocostratioandproductivitywerecalculatedas1.13and1.98 1 kg$ ,respectively.Theresultsofeconometricmodeldevelopmentshowedthathuman labor, machinery, chemicals, chemical fertilizer and water for irrigation were the most important inputs, significantly contributed to yield while, the use of farmyard manure, seed and land inputswasinconsistentwithoutput.Moreover,thesensitivityanalysisrevealedthatwaterfor irrigation, machinery and chemical fertilizer input costs had the highest marginal physical productivity and consequently the strong influence on the output variable so that, an additionalutilizeof1$ofeachofthecostoftheseinputswouldresultinincreaseinyieldby 0.62,0.28and0.12kg,respectively. Keywords:EconomicalanalysisEconometricmodelSunflowerproductionIran 1. Introduction The economical and energy analysis as well as environmental analysis are important necessities in agricultural production (Mobtaker et al., 2010). At the present time, the productivity and profitability of agricultural production depend upon energy consumption. Crop production management systems need to be designed to help farmers maintain economic profitability while conserving external energy resources and farming in an environmentallyresponsiblemanner(Gndogmus,2006).Effectiveenergyuseinagriculture is one of the conditions for sustainable agricultural production, since it provides financial savings, fossil fuels preservation and air pollution reduction (Rafiee et al., 2010 Mousavi Avvaletal.,2011). Currently,someresearchershavebeencarryingoutoneconomicalanalysisfordifferentcrop productions Erdal et al. (2007) made an economical analysis for sugar beet production in 1 Turkey. They indicated that total production costwas3569.83$ha ,andgrossproduction 1 valuewas4183.30$ha .Thehighestenergycostitemswerelabor,landrenting,depreciation and fertilizers. In another study, input and output cost was analyzed in two types of dry apricotproductionfarminTurkey.Resultsfromthisstudyshowedthattheprofitcostratios 1 1 ofthefarmswere1.11and1.19.Netreturnscalculatedwere414.51$ha and495.59$ha in the farms investigated (Esengunet al., 2007). Yilmaz et al. (2005) calculated input and output costs for cotton production in Turkey. Cost analysis showed that net return per

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kilogramofseedcottonwasinsufficienttocovercostsofproductionintheresearcharea.In thisstudy,theprofitcostratiosandproductivitywas0.86,and1.59respectively. Establishing the functional forms between the inputs and output for agricultural crops are very useful in terms of determining elasticity of different inputs on yield (Turhan et al., 2008).Developmentofamodelconsistsofseverallogicalstepsoneofthemisthesensitivity analysis to ascertain how a given model depends on its input factors (Hamby, 1994). Sensitivity analysis quantifies the sensitivity of a model's state variables to the parameters defining the model. It refers to changes in theresponse of each of thestatevariableswhich resultfromsmallchangesintheparametervalues(ChalabiandBailey,1991).Thesensitivity analysisofinputcostsonthecropproductionisessentialbecauseitrevealedwhatchangesin inputcostscausegreaterimpactsontheoutput.Furthermore,itisofspecialimportancefor the policymakers to frame suitable policies for improving the economical productivity of agriculturalproductions(Lamoureuxetal.,2006). Inrecentyears,manyresearchershavedevelopedeconometricmodelsbetweenenergyinputs andoutputfordifferentagriculturalcrops(Hatirlietal.,2006Rafieeetal.,2010).Moreover, in several studies the econometric models between input costs and output have been developedMohammadietal.(2008)studiedaneconomicalanalysisbetweeninputcostsand outputforpotatoproductioninIran.Mobtakeretal.(2010)madeaneconomicalanalysisof alfalfa production in Iran. They also estimated an econometric model between the costs of variousinputsandoutputandappliedthemarginalphysicalproductivity(MPP)techniqueto analyzethesensitivityofinputparameterson output. Basedontheliterature,therewasnostudyoneconometricmodeldevelopmentforsunflower productioninIrantherefore,inthisstudy,anattemptwasmadetodevelopaneconometric model between input costs and output of sunflower grain and to analyze the sensitivity of various inputs on output. Before the model development, an economical analysis of sunflowerproductioninGolestanprovinceofIranwasalsoinvestigated. 2. Materialsandmethods 2.1 Selectionofcasestudyregionanddatacollection Datausedinthisstudywereobtainedfrom95sunflowerfarmsfromGolestanprovince,Iran. A survey approach was used tocollectquantitativeinformationondifferentinputsusedfor the production of sunflower as well as output and socioeconomic structure of farms. For sampling,thesimplerandomsamplingmethodwasused(Kizilaslan,2009): N( t)2 s n = (1) (N- 1d2 + ( t) ) s 2 where n is the required sample size, N is the number of sunflower producers in target population (Golestan province of Iran), s is the standard deviation, t is the t value at 95% confidencelimit(1.96),anddistheacceptableerror.Thepermissibleerrorinthesamplesize wasdefinedtobe5%for95%confidence.

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2.2 Economicalanalysisofsunflowerproduction

Thecostsofinputsusedintheproductionofsunflowerwerespecifiedinordertocalculate thetotalproductioncostsinthestudy.Theinputsmaybeintheformofchemicals,chemical fertilizers,farmyardmanure,seed,waterforirrigation,human labor,machinepowerandland rent. Theoutputwasgrainsunflowervalue.Forcalculatingthetotalcostofproduction,the inputswerecalculatedperhectareandmultipliedbytheircosts.Moreover,someeconomical indicatorssuchastotalproductionvalue,netreturn,benefittocostratioandproductivityof sunflowerproductionwerecalculatedusingthefollowingEqs.(Canakcietal.,2005Erdalet al.,2007)
Totalproductionvalue= Sunflowergrainyield(kgha 1 1 )* Sunflowersaleprice($kg ) 1 Netreturn=Totalproductionvalue($ha ) Total 1 productioncosts($ha ) 1 BenefittoCostratio=Totalproductionvalue($ha )/ 1 Totalproductioncosts($ha ) 1 Productivity=Sunflowergrainyield(kgha )/Total 1 productioncosts($ha )

(2) (3) (4) (5)

2.3 Econometricmodeldevelopment Followingthecalculationofinputcosts,therelationbetween thecostsofdifferentinputsand yield value was investigated using a prior mathematical function relation. In specifying a fit function relation,theCobbDouglassproductionfunctionwasselected.TheCobbDouglass function has been used by several authors to investigate the relationship between various inputsandoutputofagriculturalcrops(Singhetal.,2004Hatirlietal.,2006Rafieeetal., 2010) it is a power function can be expressed inamathematicalformasfollows(Singhet al.,2004):
k

Y = Xij j eui i 0
j= 1
k

(i= 12, n j = 12 ...,k) , ..., , ,

(6)

Usingalinearpresentation,thefunctiontobeestimatedcouldbewrittenas:

ln Yi = 0 +

j= 1

ln(X ij ) + ui

(7)

th th th where:Yi, denotestheyieldofthei farmer,Xij, isthej inputusedbythei farmerforthe th cultivationofcrop,0,isaconstantterm,j,representtheregressioncoefficientsofj input, whichisestimatedfromthemodelandui,istheerrorterm.

Assumingthatwhentheinputcostsarezero,thecropproductionisalsozero,Eq.(7)reduces to(Singhetal.,2002Hatirlietal.,2006MohammadiandOmid,2010):

ln Yi = j ln( X ij ) + ui
j= 1

(8)

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In this functional form the parameters to be estimated, i, represent the elasticity of output withrespecttoeachinputiwhichimpliesthepercentchangeinoutputaugmentationfroma th 1%increaseinthe i inputcost. Assuming that yield is a function of input costs, for investigating the impact of each input coston sunfloweryield,theEq.(8)canbeexpandedinthefollowingform

ln i = lnX + lnX2 + lnX3 + lnX4 + lnX5 Y 1 1 2 3 4 5 + lnX + lnX7 + lnX8 + u 6 7 8 i

(9)

whereXi (i=1,2,,8)standforinputcostsofhumanlabor(X1),machinery(X2),chemicals (X3),chemicalfertilizers(X4),Farmyardmanure(X5),seed(X6),waterforirrigation(X7)and landrent(X8)in$perhectareunit. 2.4 Sensitivityanalysis Inthelastpartofthisstudy,thesensitivityofinputcostsonoutputwasanalyzedtodetermine how the output(sunflowerseed)maybeaffectedbythechangeineachenergyinputusage. For this purpose, the marginal physical productivity (MPP) method, based on the response coefficients of the inputs was utilized. The MPP of a factor implies the changein the total output with a unit change in the factor input, assuming all other factors are fixed at their geometricmeanlevel.ApositivevalueofMPPofanyinputvariableidentifiesthatthetotal output is increasing with an increase in input so, one should not stopincreasing the useof variableinputssolongasthefixedresourceisnotfullyutilized.AnegativevalueofMPPof any variable input indicates that every additional unit of input starts to diminish the total outputofpreviousunitstherefore,itisbettertokeepthevariableresourceinsurplusrather thanutilizingitasafixedresource. The MPP of the various inputs was calculated using the j of the various input costs as follows(Singhetal.,2004Rafieeetal.,2010):

MPP xj =

GM(Y) j GM(X j )

(10)

th whereMPPxj isthemarginalphysicalproductivityofj input,j, theregressioncoefficientof th th j input, GM(Y),geometric mean of yield, and GM (Xj), thegeometricmeanofj inputon perhectarebasis.

BasicinformationonthecostsofinputsandoutputwereenteredintoExcelsspreadsheetand simulatedusingSPSS17.0softwareprograms. 3. Resultsanddiscussions 3.1 Economicalanalysisofsunflowerproduction In this study economic analysis ofsunflowerproductionwascarriedoutbytakingthecosts of various inputs into consideration. The results obtained from economic analysis are presentedinTable1.Basedontheevaluationofcollecteddata,averagesunfloweryieldand 762

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1 1 accordingly total production value were calculated as 1626.51 kg ha and 927.11 $ ha , 1 respectively while, the total cost of production was 822.57 $ ha . From total cost of production, the share of land rent was the highest (52.88%), followed by human labor (21.10%) and machinery costs (16.42%), respectively. Applying a better machinery managementandemployingtheconservationtillagemethodsmaybethepathwaystoreduce the input costs for sunflower production in the region. The costs of seed and water for 1 irrigationwerefoundtobe29.07and19.15$ha ,respectively.Also,theshareofchemicals costwasfoundtobethelowest(0.95%).

Table1:EconomicalanalysisofsunflowerproductioninGolestan,Iran Item(Unit) 1 Yield(kgha ) 1 Saleprice($kg ) 1 Totalproductionvalue($ha ) Humanlabor Machinery Chemicals Chemicalfertilizer Farmyardmanure Seed Waterforirrigation Landrent 1 Totalcostofproduction($ha ) 1 Netreturn($ha ) Benefittocostratio 1 Productivity(kg$ ) Quantity Percentage(%) 1626.51 0.57 927.11 173.58 21.10 135.04 16.42 7.85 0.95 7.95 0.97 14.92 1.81 29.07 3.53 19.15 2.33 435.00 52.88 822.57 100 104.54 1.13 1.98

Based on the study results,thenet returnandbenefittocostratioforsunflowerproduction 1 were calculated as 104.54 $ ha and 1.13, respectively, implying that gross return of 1 sunflower production was about 13%(104.54 $ ha ) higher thantotalcostsofproduction therefore, sunflower production is a profitable agricultural enterprise in the region. Similar studieshavebeenreportedthebenefittocostratiofordifferentcropssuchas1.17forsugar beet (Erdal et al., 2007), 1.10 for soybean, 2.03 for wheat, 1.98 for mustard and 2.30 for chickpea(Mandaletal.,2002),1.88for potato(Mohammadietal.,2008) and2.09forcanola production(Unakitanetal.,2010).Theeconomicalproductivityof sunflowerproductionwas obtainedbydividingsunflowergrainyieldbytotalproductioncostsitwasfoundtobe1.98 1 kg$ . 3.2 Econometricmodeldevelopmentandsensitivityanalysisofinputcosts TheresultsofeconomicmodelestimationofsunflowerproductionareshowinTable2.For the data used in this study presence of autocorrelation in the residuals from the regression analysiswastestedusingtheDurbinWatsonstatisticaltest(Hatirlietal.,2006Rafieeetal., 2010).ThetestresultrevealedthatDurbinWatsonvaluewasas1.56forEq.(9)indicating 2 thattherewasnoautocorrelationatthe5%significancelevelintheestimatedmodel.TheR

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(coefficient ofdetermination)wasas0.95forthislinearregressionmodel.Thisimpliesthat alltheexplanatoryvariablesincludedintheregressionequationhadcontributedtotheyield by95%. The estimated regression coefficients for the model1 (Eq. (9)) are presentedin the second column of Table 2. The results revealed that, humanlabor, machinery, chemicals, chemical fertilizerandwaterforirrigationwerethemostimportantinputs,significantlycontributedto yieldwhile,theuseoffarmyardmanure,seedandlandinputswasinconsistentwithoutput. Also, all of the statistically significant inputs showed the positive relationships with output. Moreover, chemical fertilizer input cost had the highest elasticity on output (6.22). The second and third important input costs were machinery and chemicals with the elasticity values of 4.05 and 4.03, respectively. Based on the obtained results, increasing 1% in the inputcostsfromchemicalfertilizer,machineryandchemicalswouldledto6.22%,4.05%and 4.03%, increase insunflower seed yield, respectively. Mobtaker et al. (2010)developed an econometricmodelforbarleycostsofproduction.Theyreportedthathumanlabor,nitrogen, machinery and water for irrigation input costs were the important expenditure significantly contributed to yield and water for irrigation input cost had the highest elasticity while the impactsofchemicals,farmyardmanureandseedinputcostswereinconsistentwithoutput. Table2: Econometricmodelestimationofinputcostsforsunflowerproduction.
Endogenousvariable:yield Exogenousvariables Model1: Coefficient tratio MPP

lnYi = 1ln 1+a2ln 2+a3ln 3+a4ln 4+a5ln 5+a6ln 6+a7ln 7+a8ln 8+e a X X X X X X X X i
Humanlabor Machinery Chemicals Chemicalfertilizer Farmyardmanure seed Waterforirrigation Land DurbinWatson 2 R
** *

0.67 4.05 4.03 6.22 0.70 3.67 2.54 2.00 1.56 0.95

* 1.88 ** 3.72 * 1.66 ** 2.93 0.52 1.15 ** 5.36 1.17

0.02 0.28 0.07 0.12 0.01 0.05 0.62 0.03

Indicatessignificanceat1%level. Indicatessignificanceat10%level.

The sensitivity of input costswas analyzed using the marginal physical productivity method and partial regression coefficients on output level. The results are presented in the last columnofTable2.Asitisseen,themajorMPPvaluewasdrownforthecostofwaterfor irrigation(0.62),followedbythecostofmachinery(0.28)andchemicalfertilizer(0.12).This indicates that with an additional utilize of 1 $ of each of the cost of water for irrigation, machineryandchemicalfertilizerwouldresultinincreaseinyieldby0.62and0.28and0.12 kg,respectively.Sotheseparametershadthehighestsensitivitycoefficientandconsequently the strong influence on the output variable. The sensitivity analysis of input costs identifies which factors should be identified and measured most carefully to assess the state of the environmental system, and which environmental factors should be managed preferentially

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(Drechsler, 1998). On the other hand, the MPP of the costs of farmyard manure and seed inputs showed negative sign. This indicates that additional units of these inputs are contributingnegativelytoproduction,i.e.lessproductionwithmoreinput. 4. Conclusions In this study, the economical analysis ofsunflower production in Golestan province of Iran was investigated and an econometric model between input costs and the yield value of sunflower was developed using the CobbDouglass production function. For this purpose, datawerecollectedfrom95randomlyselectedfarmsintheregion.Theresultsshowedthat 1 totalproductioncostandtotalproductionvaluewere822.57and927.11$ha ,respectively, and the sharesof land, humanlaborandmachineryinputswerethehighestfromtotalinput costs.Moreover,theresultsofeconometricmodeldevelopmentrevealedthat,humanlabor, machinery, chemical s, chemical fertilizer and water for irrigation were the most important inputs, significantly contributed to yield and showed the positive relationships with output. Moreover,chemicalfertilizerinputcosthadthehighestelasticityonoutput. Acknowledgement ThefinancialsupportprovidedbytheUniversityofTehran,Iran,isgratefullyacknowledged. References 1. Canakci, M., Topakci, M., Akinci, I., and Ozmerzi, A. 2005, Energy use pattern of some field cropsand vegetable production: Case study for Antalya Region, Turkey, EnergyConversionandManagement, 46,pp 655666. 2. Chalabi,Z.S.,andBailey,B.J.1991,Sensitivityanalysisofanonsteadystatemodel of the greenhouse microclimate, Agricultural and Forest Meteorology, 56, pp 111 127. 3. Drechsler,M.1998,Sensitivityanalysisofcomplexmodels,BiologicalConservation, 86,401412. 4. Erdal,G.,Esengn,K.,Erdal,H.,andGndz,O.2007,Energyuseandeconomical analysisofsugarbeetproductioninTokatprovinceofTurkey,Energy, 32, pp3541. 5. Esengun, K., Gndz, O., and Erdal, G. 2007, Inputoutput energy analysis in dry apricotproductionofTurkey,EnergyConversionandManagement, 48, pp592598. 6. Gndogmus, E. 2006, Energy use on organic farming: A comparative analysis on organic versusconventionalapricotproductiononsmall holdings inTurkey,Energy ConversionandManagement, 47, pp33513359. 7. Hamby, D. M. 1994, A review of techniques for parameter sensitivity analysis of environmentalmodels,EnvironmentalMonitoringandAssessment, 32, pp135154. 8. Hatirli,S.A.,Ozkan,B.,andFert,C.2006,Energyinputsandcropyieldrelationship ingreenhousetomatoproduction,RenewableEnergy, 31, pp427438. 765

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