Studying the production structure of poultry units in Masjed Soleyman town

Introduction: The poultry industry supplying the main part of country's food and protein needs, is considered as an important subsector of agricultural sector. Therefore, in order to increase the production efficiency of this sub-sector and accordingly the efficiency of agricultural sector, it is necessary to determine the affecting factors of its production and defining the optimum combination of inputs and scale economies in this industry. Considerable distribution of poultry units in terms of capacity and size in different parts of the country raises the question whether technically the scale of production does not affect the cost of producing per unit of product? In other words, is the structure of production in the poultry subsector constant return to scale or it is ignored, and the expansion of production units is based on the other factors? Answering these questions will lead to produce in optimum scale and reduce the costs of production by using the optimum amount of inputs. Reviewing the literature shows that studying the production structure of firms has attracted the attention of researchers all over the world, like Ansari and Salami (2007), Ghaderzadeh et al (2012), Dashti et al (2018), Taru (2010) and Gezahegn et al (2016). It is osbvious that reducing production costs, the price of product will also decline. According to the law of demand, by decreasing the price of the product, its demand increases and leads to the growth of production in the enterprises. It is clear that with the growth of production and consequently the growth of demand for inputs in an economic sub-sector such as poultry, agricultural growth and ultimately economic growth of the whole country will also be provided. So, in this study, the structure of production and the optimum size of broiler chickens breeding units in Masjed Soleyman town were investigated
Material and methods: In this study the production structure of poultry units in Masjed Soleyman town was investigated by estimating the translog cost function using seemingly unrelated regression estimator method. According to statistics provided by the Agricultural Jihad Management of Masjed Soleyman, the number of broiler breeding units in Masjed Soleiman town was 55 units, of which 45 were active and 10 were inactive. So, required data were gathered by setting up a questionnaire and personally interviewing with the managers of all active poultry units. The return to scale and therefore, the economics of a particular industry is shown in the form of its long-run average cost curve. By examining the cost structure of production in an industry, one can see how returns are scaled. If an industry of a given size or level of production had the lowest cost per unit of production and firms smaller or larger than the first group would incur higher production costs per unit of product, the industry would have an average cost curve. The long run will be U-shaped. The existence of a curve in this form means that firms of the second tier can reduce the cost of production per unit of product and increase their competitive ability in the market by changing the size or scale of production and bringing the size of the unit to the size of the first tier. Since in the present study, the estimation of the translog cost function is based on SURE, in which the cost function and the share function of the inputs were estimated as a system of equations, must have cost share functions. According to Sheffard's principle, by deriving the translog cost function from the input price, the cost share functions were obtained. Finally, the parameter of estimated translog cost function were used to obtain scale elasticity, inputs substitution and price elasticities to define the poultry units’ production structure.
Results and discussion:  The results showed that the own price elasticities of demand for all inputs are negative and their small amount implies that the demand for inputs is less elastic and more demand changes for price changes is not possible. Among the inputs, feed input demand has the least sensitivity to price changes. Cross price elasticities revealed substitution relationship between most production inputs except between the input of feed with chicken and labor force. Regarding the results of this study, the poultry industry in this town is experiencing increasing return to scale, and the optimum size of the units is obtained by maintaining 28,000 pieces of chickens, while the present average capacity is 20,000 pieces. Therefore, these units can benefit from scale economies by proportionate increasing of production inputs and production scale to increase their production at lower costs. In other words, studied units would experience the minimum average costs by 28000 pieces of chickens. This results are consistent with the results of Ansari and Salami (2007), Eshraghi et al (2015).
Conclusion: Since most poultry farms produce below optimal capacity; so, one way in reducing costs is to increase poultry units production capacity and to approach the optimum production rate. As such, it is recommended to adopt measures that will increase the capacity of the production units and help to make the production process more economical. As observed, there is a weak substitution relationship between some inputs. On this basis, it can be concluded that if the price of some inputs is increased, the producer will have to accept this price increase and the possibility of substituting these inputs for each other and the reaction of the poultry owners to this price increase is limited. Therefore, it is suggested that, in order to encourage the producer to increase production, by applying appropriate policies prevent the price fluctuations, especially the increase of input prices, and find technically solutions to allow substitution between inputs in the poultry feeding sector. So that, by increasing the prices of some inputs, due to the impossibility of substitution between inputs, production would not be limited. Since poultry industry inputs such as medicines, vaccines and so on are affected by price fluctuations, this causes instability in the market price of poultry and the poultry operates under uncertainty and with high financial risk. So, determining guaranteed price by the government as a financial technique can be fruitful in optimal allocation, stable planning for more poultry production, and increased productivity.