Harvesting Energy’s Worth: An Economic Assessment of Energy at Wheat Farms

Hamed Rafiee¹Omid Karami^2*Atabak Kazempour Kahriz¹Reza Shakeri Bostanabad¹Alireza Kermani¹

• ¹Department of Agricultural Economics, University of Tehran, Karaj, Iran
• ²Purdue University, West Lafayette, United States

This study aims to quantify the energy required for irrigated and dryland wheat production in five large wheat-producer provinces in Iran, estimating the economic value of each unit of energy input. Using energy equivalent coefficients, total energy inputs in the form of renewable and non-renewable were estimated for the period of 2001–2019. Then, to obtain the Value of Marginal Product (VMP) of the inputs, the production functions of irrigated and dryland wheat for each province were estimated. The findings show that the average marginal product and the economic value of renewable energy in the production of dryland wheat is greater than the marginal product of these inputs in the production of irrigated wheat across all provinces. Conversely, the average VMP of non-renewable energy in irrigated wheat production is greater than the corresponding amount in dryland wheat production, with the exception of Kermanshah. Renewable energy in dryland wheat has an equal economic value of 0.18 USD/ha with non-renewable energy in irrigated wheat production. Moreover, the VMP of energy contributes to about half of the price of wheat. Finally, the economic value of energy in wheat production became lower after the implementation of the Targeted Subsidies Reform Act. However, raising the energy price simply led to a shrinking of farmers’ profit margins; no improvements were achieved in the economic value of energy.