Production costs of Soft Wheat in Italy
This paper investigates production costs of soft wheat by applying the FACEPA cost of production model to the Italian data (RICA) for 2005-2009. Estimates are obtained by carrying out a SUR, allowing for correlated errors between the set of equations and for imposing constraints to coefficients The main aim of this study is to provide a robust analysis of the cost, per hectare and per quintal, of soft wheat in order to analytically support a negotiation bargain on the contractual price for soft wheat within the industrial bread marketing chain. Since RICA, unlike EU FADN, reports some costs related to specific production processes (i.e. related to specific farm outputs), this study reports results of an alternative estimation strategy: the GECOM is carried out by taking into account only those costs that are not ascribed for the specific farm output, but are related to the whole production process. Estimates, per hectare and per quintal, related to such input costs are combined with those costs that are directly observed by farmers, so that we obtain a “hybrid” estimation. This method is carried out in order to confirm results obtained with the “complete” estimation. Outcomes of both methods are reported for Italy and for macro-regions. Costs related to machinery and buildings upkeep represent the most important costs, although a remarkable decline is observed from 2005 onwards. Expenditure in land rent and taxes on land and buildings shows a similar trend, but with smaller values. As a whole, there was a shift expenditure patterns: in 2005-2007 fixed costs prevailed, while in 2008-2009 variable costs became predominant. Anyway, estimates reveal that there are important differences, at geographical level, in production costs.
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