Investigating the Consequences of Exchange Costs on the Behavior of Producers of Agricultural Products in Hamadan Province

Document Type : Research Paper

Authors

1 Department of Agricultural Economic, Faculty of Agriculture, University of Zabol, Zabol, Iran

2 Department of Agricultural Economic, Faculty of Agriculture, University of Zabol, Zabol, Iran.

Abstract

The exchange cost of agricultural business units is an influential factor in the final price of the product, the net prices received by farmers and their participation pattern in the market. The current survey research was conducted with the aim of the effect of transaction costs on the behavior and participation of producers in the potato market in Hamadan province. The statistical population of this study is the producers of agricultural products in Hamadan province in the crop year of 2020-2021. The required sample was obtained using multi-stage simple random sampling. In this way, the sample size was determined to be 65 potato growers in Hamadan province. The necessary statistical information was collected through a questionnaire. The results showed that improving the access roads to the market and increasing the membership of farmers in agricultural unions have a negative effect on the possibility of farmers participating as sellers, and increasing the distance has a positive effect. In the presence of exchange cost, only 13.84% of farmers have participated in the market as buyers, and reducing the amount of exchange cost can increase farmers' market participation.

Keywords

Main Subjects

Extended Abstract

Objectives

The agricultural sector is one of the major sectors of Iran's economy, which faces many limitations and obstacles, and one of the most important challenges is the risk caused by pests, diseases, frost and drought during the production of agricultural products. Some agricultural producers offer their products for sale, many of them do not participate in the market and either sell their products to intermediaries or remain self-sufficient. Costs associated with market transactions explain why producers have different relationships with the market. These types of costs are called exchange costs. In the divisions, economic costs are divided into two groups: production costs and exchange costs. Therefore, the aim of the current study is to investigate the exchange costs on the behavior and participation of producers in the potato market in Hamadan province.

 

Methods

The purpose of this study is to evaluate the effects of exchange cost on the behavior of producers in the agricultural sector of Hamadan province. The present research was conducted in the form of a library, document and survey, and cross-sectional data from the period of 1400 was used. Goetz (1992) assumed that failure to participate in the market of a particular product is caused by high fixed exchange costs. In addition, he believed that the factors affecting the amount of buying or selling are the same factors that influence the decision to participate or not participate in the market (as a buyer or seller). If there is no fixed cost of exchange, the farmer equates the shadow price with the market price. Despite the fixed transaction costs, there will be a number of producers who do not participate in the market and remain self-sufficient.The statistical population of this study is the producers of agricultural products in Hamedan province in the crop year of 2020-2021. The required sample was obtained using multi-stage simple random sampling. The steps to perform this method are as follows: In the first stage, a number of cities in Hamedan province were randomly selected. The selected cities are Bahar, Saleh Abad, Faminin and Rozen. In the second stage, taking into account that the purpose of the study was potato product producers, first some areas of each city where the cultivation of each product is dominant were selected, and in the last stage, the farmers producing the product were randomly selected and the desired information was collected was brought. In this way, the sample size was determined to be 65 potato growers in Hamadan province.

 

Results

With an increase of 1 unit in the income variable, the probability of farmer participation as a product seller increases by 0.13 percent. So that with the increase in the welfare level among the farmers, their market participation decreases relatively. Membership in unions, compared to non-membership, reduces the probability of participation of farmers as product sellers by 0.48%. This situation is also true for the ownership of the van and it is true with the 0.88% decrease in the participation of the farmer as a product seller. With the improvement of the roads, the probability of farmers participating as product sellers decreases by 0.91%. With an increase of 1 unit in the distance from the market, the probability of participation of the farmer as a product seller increases by 0.73 percent.

 

Discussion

The results of this survey indicate that among the studied farmers, only 13.84% of potato growers participate as product buyers in the local market. The existence of appropriate infrastructures and the clarification of the prices of products and applied inputs have a significant effect on reducing the exchange cost of agricultural products. In the case of products like potatoes, the role of government policies is very important; So that with the liberalization of the export of products, the type of participation of farmers as buyers or sellers can change. Therefore, the government can prevent the creation of rents by imposing a suitable tariff and play a significant role in persuading farmers as the main sellers.

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Iranian Journal of Agricultural Economics and Development Research
Volume 54, Issue 2
July 2023
Pages 505-518

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