A Study On rice market distortions in Iran
2004
Noori, Kiyomars
Rice is the dominant staple food crop in developing countries. Almost 90% of rice is produced and consumed in Asia and 96% in developing countries. The growth in rice consumption has started slowing down because of urbanization, increases in per capita income leading to diversification of the diet, high levels of rice consumption already reached in many countries, and progress in reducing population growth. The growth in rice supply has also slowed down because of the yield approaching economic optimum for the irrigated ecosystem, decline in relative profitability of rice cultivation, increasing concerns regarding environmental protection, and limited progress in developing improved technologies. Rice is a strategic agricultural product in Iran. There are many important distortions in supply, demand and import of rice. The main purpose of this study has been to analyze the distortions in rice market. In this study, important distortions and problems in rice production, supply, demand and import has been studied. For measuring the distortions, the adjusted protection rate (APR) has been applied. The APR measures the total policy, which combines “direct” effect of sectoral price and trade policies and the “indirect” effect of economy-wide policies, which affect the exchange rate. The results show that distortions have positive effects on domestic supply of rice, because the distortions create greater difference between domestic price and border price that is attractive for producers. The estimated demand function indicates that the distortions have negative effects on per capita consumption of rice, although subsidized rice distribution reduces the impact of the distortions on per capita consumption of rice. The distortions also have negative effects on the import of rice.
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