Analyzing the Effects of Energy Carriers, Price Surging on the Cost of Wheat Production in FARS province: Application of the Almost Ideal Supply System

In this research, wheat inputs demands were estimated for 201 producers in Fars applying the Almost Ideal Supply System on cross sectional data of 2014-15 to analyze the effects of energy carriers, price rising on the cost of wheat in the Fasa region in Fars province. The results indicated that own-price elasticities of compensated demand are negative for all inputs. Based on the absolute values of the own-price elasticities, demands for chemical pesticides and other inputs are realized to be inelastic. The cross elasticities coefficients revealed complementary relationships between labor and machinery and gas oil and machinery, and the substitutionary relationship between labor and fertilizers and machinery and fertilizers. Based on the calculated cost elasticities, use of irrigation water and fertilizers are deeply dependent to the level of spending on wheat production. Applying Shepherd's lemma on various scenarios of targeted subsidies plan, showed that production costs particularly for the vulnerable farmers increase by surging the prices of electricity and gas oils. Therefore, it is suggested that price increase should be gradual in order to keep farmers not to reduce production of wheat in the region.