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The Econometrics of Investment in Date Production in Saudi Arabia

Author(s): Abdulaziz Alshuaibi

Journal: The International Journal of Applied Economics and Finance
ISSN 1991-0886

Volume: 5;
Issue: 3;
Start page: 177;
Date: 2011;
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Keywords: government subsidies | farmer?s profit | marketing | price fluctuation | domestic consumption | cost of production | date variety | Net revenue

Date palm is an important fruit crop in the Kingdom of Saudi Arabia and bears a lot on the national economy. Therefore, the government is paying special attention to date production through price support of low grade variety and providing subsidies to the most important production variables. The main objective of this study was to optimize the net present value of revenue to build a structural function of planting new date trees to explain and measure the investment decision. Because of inadequate information in this area, only the past investment period was considered to determine the effect of past decision on new decision of investment. The government policies, which directed to low grade varieties probably, led to inefficiency as the domestic consumption of dates is very high and growing high quality will lead to higher revenue to farmers with almost the same cost of production. To deal with investment in date palm production locally, Saudi Arabia needs to estimate a very high discount rate to observe any value related or based on the discount rate. The Durbin Watson parameter is significant for both the varieties (Khalas and Ruzaiz) at 95% confidence interval (LSD0.05). The past investment appeared very significant for its effect on planting new date trees due to the fact that farmers who planted new trees in the past is continuously carrying with date industry and investing in future. Overall, the investment in tree plantation like date palm is not an easy decision by the farmers, because it needs couple of years spending without revenue. The farmers in the date growing areas were hesitant in providing information about the date variety, number of trees per hectare, tree age, fertilizers, pesticides, land ownership, intercropping, cost of production, total yield, quantity sold and price received. The study suggested further investigations on growing high quality date palms, date production and marketing aspects to harvest maximum profit by the farmers as well as support by the government for facilitating proper market and subsidies to date growers.

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