ESTIMATION OF PROFIT FUNCTION OF WHEAT CROP IN DHI QAR PROVINCE

238  ESTIMATION OF PROFIT FUNCTION OF WHEAT CROP IN DHI QAR PROVINCE D. S. Barbaz A. S. Shukur A. N. Abdullah Lecturer Lecturer Researcher Dept. of Agric. Economics /Coll. of Agric. /University of Baghdad dhurghambarbaz@gmail.com ABSTRACT This research aims to study the most important factors affecting profit function. Cross sectional data were used in the light of a random sample of 130 farmers in Dhi Qar province. The results showed that the proportion of costs of production inputs amounted to 73% of the total production costs. Also, profit function showed that the amount of output has a significant impact on profit compared to other independent variables since value of the parameter of the quantity of production amounted to about 308879 and was significant at the level of 1% according to t-test. The coefficient determination of about 93% for the equation estimated with OLS. However, heteroscedasticity was obvious according to the White Test. So the model was estimated using robust regression method to avoid this problem, but that led to a decrease in R 2 to about 69%. The research recommended the need to increase the rates of production growth and productivity through an organized agricultural economic policy that links the policy of supporting input requirements, both in terms of reducing prices or providing quantity and quality, especially fertilizers and seeds in conjunction with the policy of supporting prices of output. Also, research recommended encouraging farmers to expand wheat crop cultivation in the province of Dhi Qar by increasing the cultivated areas. Key word: method robust least squares, revenue, economic efficiency.


INTRODUCTION
The development of agricultural production in general and the development of human food in particular is a major concern of agricultural economic policy planners, especially in developing countries (17). Among them is Iraq, which suffers from the problem of food shortage, as the gap between its agricultural production and its needs is increasing over time. The reason of this problem lies in the growing population at rates that do not keep pace with the rate of increase in agricultural production and this resulted in a food deficit (3)(4). Therefore, studies on the economics of agricultural production need to be addressed through the optimal use of economic resources and achieving high rates of agricultural production and productivity because these studies illustrate the nature of the relationship between economic variables in agriculture (2). Agricultural production also plays an important role in the economies of any country. It is linked to the lives of its inhabitants first and a source of economic activity second (5), especially cereal crops, which constitute 80% of the total plant foods (1). Wheat is the most important cereal crop, which occupies a distinguished economic position in most countries of the world. Its importance in the world food by 40%, in addition to providing the world with 55% of the total carbohydrates and 20% of the food calories consumed (9). It accounts for 17% of the world export volume (13), and the main wheat producing countries are China, India, USA, Russia, France and Pakistan (16). Wheat area constitutes about 17% of the world's cultivated area, world statistics indicate that the cultivated area and production of this crop amounted to 217 million hectares and 671.5 million tons respectively in the world. Asia is ranked first in the world and produces approximately 311.4 million tons, followed by Africa, Europe and the Americas with production of about 24.7, 19.6, 10.8 million tons respectively (10). In the Arab world, production and cultivated area amounted to about 26 million tons and 11.24 million hectares in respectively. The Republic of Egypt ranks first in the Arab world in terms of production and productivity 8.7 million tons and 6.6 tons / hectare respectively. Iraq produced 3 million tons of wheat, with a cultivated area of 1.7 million hectares and a yield of 1.7 tons / ha (6). Despite its economic and nutritional importance, wheat production is still below the required level of selfsufficiency (8). Therefore, the problem of research is that despite the existence of arable land in the province of Dhi Qar, but the areas planted with wheat crop in the province is still low, this leads to low production of wheat crop, which may be attributed to production problems facing the cultivation of the crop, including farmers away from the concept optimization, both in terms of production and resources used, which reflected on the economic efficiency in crop production, especially since wheat fields are considered useless to cultivate in small areas, due to their low financial return (7). Therefore, the aim of the research was to estimate the profit function of wheat crop in Dhi Qar governorate, and to determine the most important variables of it, which cause not to expand the cultivated areas in the province. The importance of the research is that it is one of the important economic studies that dealt with the most important factors affecting the profit function of the wheat crop and measuring the economic, technical, price and profitability efficiency, which can be a basic basis through which the farmers can determine the amount of production that can be produced and that maximize their farm profits according to market changes. Therefore, the hypothesis of the research is based on the fact that the farmers of the sample did not reach the optimization in terms of both production and resources used, which led to low economic efficiency in the production of wheat crop.

MATERIALS AND METHODS
The study was based on a questionnaire for a sample of wheat farmers in Dhi Qar province for the agricultural season 2017-2018. A total of 130 questionnaires were distributed to a random sample of farmers in Dhi Qar governorate, where the statistical data were collected through personal interviews of the farmers of the sample, which included different information on production, costs, and the cultivated areas and was loaded and analyzed using the computer program SPSS,Eviews11.

Theoretical framework
Wheat profit function: The profit function model was estimated based on the economic theory that profit is equal to total revenue minus total costs (15) as follows: TR = TR -TC ..(1) TR = ∑P1* Q1+∑P2 * Q2 TC = ∑Vi * Xi Π=∑P1*Q1+∑P2*Q2-∑Vi*Xi…(2) where: Π : profit, TR: total or total revenue includes (primary and secondary revenue), TC: total costs, P1: output price, Q1: The output quantity, P2: price of by-product, Q2: The amount of by-product, Vi: input price, Xi: supplier quantity. Through equation 1 and 2 we get the profit function as in the following formula: Π = F (P, C, Q) , Based on the above, the profit function model (14) can be described as follows: Π = B 0 + B 1 P-B 2 C + B 3 Q + Ui where: Π: Profit. P: output price of wheat (ID), C: average production costs (ID/ton), Q: The output quantity of wheat (tons), B 0 : intercept, Bi: represents regression coefficients Ui: The random variable

RESULTS AND DISCUSSION
Descriptive analysis of the structure of the costs and revenue of wheat production. Production costs are an important and fundamental issue in economic studies, because the production decisions depend largely on the level of production costs, as the volume of production is always linked to production costs, as the importance of studying the costs of production because it is a key factor in determining the net income (12). Therefore, this aspect will be highlighted in the study. Table 1 shows that the variable costs constitute 73% of the total production costs, while the fixed costs represent 27% of the total production costs. Fixed cost items came in first place with 14%.   Table 3 shows variables that are in line with the logic of economic theory. The output price and output quantity parameters are positive with profit indicating the positive relationship. The mean of the average production costs parameter is negative with profit. The statistical analysis confirmed that all the parameters were significant at the 0.01 level according to t-test. The model is highly significant, which reflects the importance of the variables included in the function on the one hand and the realism of the function on the other. The value of the coefficient of determination was 0.93 in the function, which reflects the quality of alignment of the regression line, showing that 93% of the changes in profit are due to wheat price, quantity of output and average production costs. To show how the estimation is efficient, econometric tests applied. There was no Autocorrelation between residuals as DW value was 2.03, which is greater than du of 1.764 and smaller than du-4 of 2.234 at 0.05. The model's correlation coefficients are greater than the simple correlation coefficient between the variables. We conclude that the model is free from the problem of collinearity . The white test used the error square is a variable of the independent variables against independent variables and their squares and interference limits (11). It was found that there is a problem of instability of variance in the model estimated by the White test in Table 4.
Therefore, the new model was estimated using method robust least squares and the new model was estimated without problems of the second degree. Increasing the average cost by one unit will reduce the profit by 25 units, while the output parameter is about 308,879, which shows the significant effect of the production quantity on profit. Increasing output by one unit would raise profits to 30 8,879 ID at constant price and average cost at average. The value of the coefficient of determination in the new model is about 69%, which reflects the quality of alignment of the regression line, as it is clear that 69% of the changes in profit are attributable to the price of wheat, quantity of output and average production costs. The validity of the model was tested using the Ramsey reset test, which is one of the most important tests of the validity of the model. The calculated value of F is about 1.5 with a significant level (0.21), which is greater than 5% table 7.

Conclusions and recommendations
Conclusions: The study proved through the descriptive analysis of the production cost structure that government support for production inputs, which include seeds, fertilizers and pesticides, is no longer sufficient as the cost of production inputs amounted to 73% of the total production costs, as well as the nature of some fertilizers that were not technically feasible. The profit function shows that the quantity of output has a significant impact on profit compared to other variables represented by price and average production costs. Recommendations: Increasing production and productivity growth rates through an organized agricultural economic policy that links the policy of subsidizing production inputs in terms of reducing prices or providing quantity and quality, especially fertilizers and seeds, in conjunction with the policy of supporting prices of output. Encouraging farmers to expand wheat cultivation by increasing the cultivated areas because it is economically feasible, especially those optimal areas that were reached by the study that achieves economic efficiency in the optimal use of available resources, which reflects on improving the efficiency of wheat crop production on the one hand and reducing the average cost of production on the other hand. The need to develop and provide modern means and techniques that will raise the level of productivity and reduce costs to ensure the exploitation of productive resources optimization of economic efficiency. Focusing on the extension side in order to play its role in the transfer of information and the results of scientific research to farmers for adoption and raise their administrative capabilities and then raise the productive level in farm work, which is to achieve economic efficiency.