Evaluating Cost Structure and Economies of Scale of Beef Cattle Fattening Farms in Mashhad City

Document Type : Original Research

Authors
P. Alizadeh 1
H. Mohammadi 1
N. Shahnoushi 1
S. Saghaian 2
A. Pooya 3
1 Department of Agricultural Economics, Faculty of Agriculture, Ferdowsi University of Mashhad, Islamic Republic of Iran.
2 Department of Agricultural Economics, University of Kentucky, Kentucky, U. S. A.
3 Department of Management, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Islamic Republic of Iran.
Abstract
In recent years, the high cost of raising livestock and, consequently, the sharp increase in the price of red meat in Iran have reduced its demand, and people consume chicken meat as a substitute for it. This has reduced the production incentives and, with the bankruptcy of some beef cattle farms, the welfare of producers and consumers of this product face serious danger. To overcome this problem, understanding cost structure and reducing consumer price by reducing production costs seems necessary. Therefore, the aim of this research was to evaluate cost structure and economies of scale of beef cattle farms in Mashhad. For this purpose, the short-run Translog cost function along with input cost share equations were estimated using the iterated seemingly unrelated regression method. The data were collected in 2017 from beef cattle producers by interview using structured questionnaires. The result showed that there were increasing returns to scale for all farms. In addition, the demands for all inputs were perfectly inelastic. On the other hand, there was weak complementary and substitute relationship between inputs. According to the results of this research, the most important factor of beef production in the selected farms was feed, whose demand was inelastic and the possibility of substituting it with other inputs was very weak. Therefore, the adoption of policies by the government, including subsidies for feeding cattle and increasing the import of this input, can reduce the production cost and prevent beef prices from rising.

Keywords

Subjects

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Journal of Agricultural Science and Technology
Volume 21, Issue 7
November and December 2019
Pages 1753-1766