The Effect of Climate Change and Price Risk on the Sustainable Production of Selected Irrigated Crops in East Azarbaijan Province

Background and Objectives: Along with the non-economic factors affecting the sustainable production of agricultural products, economic factors play a crucial role. Among the important economic factors, we can mention the prices of inputs, international market conditions, market demand, consumer preferences, relative prices of agricultural products, government policies, access to credit and infrastructure, and technology. The impact of these economic factors on the sustainable production of the product is manifested in the form of the growth and development of that product, which is particularly evident in the supply response of agricultural products to price and non-price factors. The present study aims to investigate the effect of climate change and price risk on sustainable production and the supply response of major irrigated crops in East Azerbaijan province, including wheat, barley, potato, and onion.
 
Materials and Methods: To achieve the goal, the expected prices, price risk, and yield risk of these products were first measured. Then, the Nominal Protection Rate (NPR) index of these products was estimated, considering the real exchange rate. To ensure the estimation of the supply response functions through a Seemingly Unrelated Regression Equations (SURE) model, the Breusch-Pagan test was used. Ultimately, the supply response functions of these crops were estimated using the SURE method, and the response elasticities were calculated.
 
Results: The results of estimating the supply response functions showed that the relative expected price of the product and competing products, the average and fluctuations of rainfall and temperature, the ratio of price risk to the yield risk, and the NPR have a significant effect on the acreage of the products. Calculating the elasticity of the supply response to the NPR (0.08) showed that the government's support policy has been effective in the sustainable production of wheat. The results of the calculation of the supply response elasticities of irrigated barley showed that the increase in the barley price (0.22) compared to the price of competing products has a greater effect on sustainable production and the allocation of the acreage to the irrigated barley. The supply response function of potatoes indicates that, among the price and non-price factors, potato growers show the most response to changes in rainfall fluctuations and maximum temperature, i.e., climate variables, regarding the sustainable production of the product. Additionally, the results of the estimation of the onion supply response function show that the farmers react more to the relative expected price of onion in the first place and to weather variables in the second place.
 
Conclusion: The findings showed that sustainable production and the cultivated area of selected products are most influenced by expected prices, price risk, and yield risk along with the fluctuations of weather variables, so it is recommended that the government, along with implementing price stabilization policies and providing yield risk management tools (including agricultural products insurance), should focus on investment and the development of temperature and drought-resistant cultivars through revising the agricultural research policy and allocating funds to reduce the negative effects of climate change and increase the sustainable production of products.