The Components of Production Cost in Sunflower and its

International Conference on Applied Economics – ICOAE 2009
The Components of Production Cost in Sunflower and its Relationships
with Input Prices
Arif SEMERCI256, Yalcin KAYA257
Abstract
Sunflower area and production are decreasing in recent years in Turkey. The research covered the changes on inputs and product
prices at real base in sunflower and its cost of production in Trakya Region. Total income was found as 1178 US$/ha, total production
cost 1138 US$/ha, gross profit 444 US$/ha and net profit was calculated as 39 US$/ha in the research. Although the domestic
production cost per MT sunflower seed was calculated as 650.29 US$, the import cost was found as 487.5 US$. Therefore, the import
of sunflower seed seems attractive for sunflower oil industry in Turkey. Although inputs such as fertilizer 267%, fuel 105%, seed
14% exhibited in sunflower production, sunflower seed decreased 4.12% in 1999-2008. Research results indicated that subsidizing
policy was not efficient to increase oil seed production and oil crops. Based on this situation, the vegetable oil deficit expects to
continue in future in Turkey.
Q110 - Agriculture: Aggregate Supply and Demand Analysis; Prices
Key Words: Sunflower, Input, Production Cost.
1. Introduction
Sunflower is one of the important oil crops in the world and ranked in 5th in oil production in the world, but it is the
most popular one in Turkey. Sunflower is one of the main crops with in the rotation system in Trakya Region which is
in European part of Turkey and has over 70% of Turkish sunflower production (Semerci et al., 2007). Turkish oil crop
and vegetable oil production are not enough to supply for domestic inquiry. Therefore, Turkey imports oil seed to meet
these domestic needs and exist in top oilseed importing countries in the world. Turkish oil crops import was 2.02 billion
$ in 2008 and it was 1.11% of Turkish total import (Trakya Birlik, 2009).
In the research, the world and Turkey sunflower production data were given and the components of the production
costs were examined in detail in Trakya Region which was the main sunflower area in Turkey. The variation of the
production prices, inputs costs were investigated in real base between 1999-2008 years. On the other hand, the
subsidizing policies were investigated in last ten years (1999-2007) to determine the effect on sunflower planting area
comparing with non subsidizing period (1988-1998). Additionally, the relationships between sale prices and planting
area were examined and the suggestions were given based on these results in the research.
2. Sunflower Production in Turkey and the Word
Oil crops production reached about 250 million ha in 2007 (FAOSTAT, 2008). Soybean existed in first rank
as 95 million ha area and cotton seed (about 10%), rapeseed (10%), peanut (9.33%), sunflower (8.78%) and palm seed
(5.54%) followed it respectively. Sunflower planting area changed 17.7 – 24.1 million ha and sunflower production
was 20.3 – 31.2 million MT in the world in 1998-2007 (FAO Database, 2009). The world Sunflower planting area was
22.002.657 ha and sunflower production was 26.958.205 MT in 2007 and Turkish sunflower planting area and
production rate was 2.27% and 3.82% of the world respectively. Based on seed yield data, Turkey was (2061.6 kg ha -1)
2nd rank after France in top ten sunflower producers in the world. In the seed yields of the top three countries, Russian
Federation‘s was 1130.0 kg ha-1, Ukraine‘s 1223.5 kg ha-1 and Argentina‘s was 1434.4 kg ha-1 respectively.
Turkish total oil crops planting area was 631.543 ha and sunflower had 88% of these areas (554.678 ha) in
2007 (TSI Database, 2009). Sunflower production was 854.407 MT in 2007 and oil type sunflower shared 87.91% of
area and 90.12% of total production in Turkey. Because of being main crops in the rotation system and having most of
the area and production, three provinces of Trakya Region were chosen as research area (Table 1).
256
Dr. Arif Semerci, Trakya Agricultural Research Institute, PO Box: 16, 22100 Edirne, TURKEY, Phone: +90 284 2358182, Fax
:+90 284 2358210, e-mail: arifsemerci69@gmail.com
257
Dr Yalcin KAYA, Trakya Agricultural Research Institute, PO Box: 16 Istanbul Yolu 22100 Edirne, Turkey;
Office Phone +90 284 235 8182 email: yalcinkaya22@gmail.com
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Table 1: Oil type sunflower production and planting area in the research area (2007)
Province
Planting Area (ha)
Rate (%) Production (ton)
Rate (%)
Edirne
98.360
20,26
161.044
20,91
Kirklareli
65.520
13,50
118.465
15,39
Tekirdag
132.560
27,31
161.023
20,91
Turkey
485.442
100,00
770.000
100,00
Edirne, Kirklareli and Tekirdag provinces cover 80% Trakya Region and the total amount of these provinces shared
61.07% of planting area and 57.21% of sunflower production in Turkey.
3. Material and Method
To determine sunflower production cost in Trakya region in the research, the input prices were obtained from
Kirklareli Soil and Water Resources Research Institute data and the yearly production cost tables collecting from
surveys of producing sunflower farms (KATSKAE, 2009). The seed prices were based on the buying prices of Trakya
Birlik which is the biggest farmer cooperative and buy 37.34% of domestic sunflower production in Turkey plus
considering on premiums given by Turkish Ministry of Agriculture and Rural Affairs (MARA) to subsidize sunflower
production. To determine input and product prices at real base, Wholesale Price Index (WPI) was used as considered
1994=100 (TSI Database, 2009).
The correlation analysis was performed to determine of the effect of subsidizing policy on sunflower planting area
and production in the research utilizing SPSS statistical program (Green, 2002). Therefore, sunflower production period
was divided in two parts in Turkey as considered 1988-1998 called period named 0 (dummy variable was 0) and 19992007 period named 1(dummy variable was 1). However, the relationship between sunflower seed prices (including
subsidizing) and sunflower planting area were investigated also in the research. The values examined in the research
were calculated in below (Erkus and Demirci, 2007):
Total gross production value (TGPV): Yield (kg ha-1 ) * Product sale price (including subsidize)
Net Profit
: TGPV – Production Cost (Variable Expenses + Constant Expenses)
Gross Profit
: TGPV – Variable Expenses
Variable Expenses: Soil preparation + Planting + Fertilizing + Harvest + Transportation + Seed + Fertilizer +
Chemicals
Constant (fixed) Expenses: Land Rent + Other costs + capital interest + Administrative Expenses
Other Expenses : Total costs * 0.05
Capital Interest: (Total costs + Other Expenses + Land rent)*(Production period interest rate, 0.07)
Administrative Expenses: (Total costs + Other Expenses + Land rent)* 0.03
4. Production Costs in Sunflower
The average precipitation during the sunflower vegetation period was 592.6 - 632.6 mm in 1980-1999 and 626.6
mm in 2000-2006 in Trakya Region (TSMS, 2007). These amounts allow non irrigated sunflower production in the
region and in the most of areas in the region, sunflower produce mainly dry conditions. However, the main reason of
not irrigating was that sunflower could not compete with other crops in irrigated conditions such as corn, sugar beet,
rice, etc. Therefore, irrigation did not consider as production cost of sunflower in the region.
The total cost of sunflower production was found as 1138 US $ per ha in the research (Table 2). Soil preparation
and land rent consisted of 46.49% of total production cost. Additionally, seed, fertilizer and herbicide consisted of
20.3% of total costs (Figure 1). However, Total gross production value (TGPV) were found as 1178 US$ / ha, the
variable expenses was 734.0 US$ / ha and the constant expenses was 404.29 US$ per ha. On the other hand, most
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595
important goal in the production was profit so that gross profit was calculated as 444.0 US $ per ha and net profit was
determined as 39.0 US $ per ha.
The import cost of sunflower seed originated from Bulgaria to any crushing factory in Trakya region was calculated
as 487.5 US$ per MT at the end of 2008 (Trakya Birlik, 2009). However, domestic production cost in Trakya Region
was found as (1138 US$ / 1.75 MT) 650.29 US $ per MT. These values showed that domestic production costs were
higher than import costs. On the other hand, higher cost of domestic production accelerated naturally import inquires in
Turkey.
Table 2: Oil type Sunflower cost in Trakya region in 2008 (US $ / ha)
Production Cost
US $ per ha
Soil Preparation
265
Hoeing, Fertilizing, etc.
139
Harvesting
98
Seed
66
Fertilizer
158
Pesticide, herbicide, etc.
7
Other expenses
37
Land Rate
264
Capital Interest
72
Administrative expense
31
Total
1138
Figure 1: The components of sunflower production costs in 2008
(9)
(6)
2,73%
6,36%
(1)
23,32%
(2)
23,22%
(1)Soil Preparation
(4)Hoeing,
Fertilizing, etc.
(5)Harvesting
(7)Seed
(3)Fertilizer
(4) (10)Pesticide,
12,22% herbicide, etc.
(8)Other costs
(8)
3,22%
(10)
0,61%
(3)
13,92%
(7)
5,80%
(5)
8,59%
(2)Land Rate
(6)Capital Interest
In another research in same region, sunflower production cost was shared by land rent 20.62%, soil preparation
30.80%, input use 7.19%, hoeing, fertilizing, etc. and harvesting 22.12% (Safak, 1981). However, sunflower cost
factors were determined as land rent 31.18%, soil preparation 29.50%, input use 7.19%, hoeing and fertilizing, etc.
31.18%, threshing and harvesting 8.35% in other research (TEAE, 2001).
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5. The variations on Input and Product Prices
The prices ignored from inflation increase were used to compare and determine the augmenting of input and
product prices based on WPI in the research. Based on these results, pesticide used in sunflower production was
decreased as 37.5% in 1999-2008 (Table 3). At the same period, fertilizer was increased at 267%, seed 14%, fuel at
105% rate. However, while sunflower product price lost 4.12% rate in 2008, sunflower product prices were behind
1999‘s one in spite of huge increase of input use at 14-267% rate (TSI Database, 2009).
Table 3: The variation on input and product prices (US $) at real base.
Years
Pesticide
Fertilizer
Seed
Fuel
Sunflower Price
1999
1.60
0.09
3.00
0.20
14.57
2000
1.78
0.15
2.84
0.28
13.05
2001
1.84
0.18
2.04
0.25
16.41
2002
1.80
0.17
2.45
0.29
14.57
2003
1.43
0.16
3.14
0.30
12.95
2004
1.37
0.17
3.12
0.32
12.59
2005
1.17
0.19
3.06
0.32
12.26
2006
0.90
0.16
3.04
0.38
11.91
2007
0.93
0.20
3.40
0.36
15.84
2008
0.96
0.33
3.43
0.41
13.97
The highest increase in inputs was observed in fuel and fertilizer prices (Table 3). However, sunflower product
price was only 2 years over 1999‘s one but it was lower than 1999‘s in seven years in these ten years period between
1999 and 2008. In another research performed in the region, product price was decreased gradually related with
increasing fuel cost and the variation up on fertilizer price influenced over product base prices (Aksoy and
Gaytancioglu, 1994). However, when sunflower product price decreased, farmers preferred attractively (or forced) to
plant wheat which was other main crop in the rotation system of the region.
6. The Relationship between Subsidizing Policy, and Sunflower Planting Areas and Production
The subsidizing amounts of oil crops in 2008 were given Table 4. The relationship between the variable on
subsidizing and sunflower planted areas was significant and negative way (-0.533) based on correlation analysis
performed in 1988-2007 (Table 5). These results implied that subsidizing policy did not solve to decrease sunflower
planting areas applying since 1999. This situation also explained that average planting area was 627 773 ha in 19881998 but in 1999-2007 it was 555 342 ha.
There was a significant relationship between sunflower product price (t) and following year‘s planted area (t+1) (Table
6). It was normal for agricultural economic approach but many farmers look ahead considering given prices for this
product to decide to plant next year‘ product. Although the relationships (0.741) was found as significant, calculated
lower determination coefficient (R² =0.5476) in the research implied that some other determining factors were also
other than product price.
Table 4: Oil Crops Subsidizes Applied in Turkey in 2008
Crop
Normal Seed ($ per MT)
Certified Seed ($ per MT)
Sunflower
114
114
Canola
125
125
Safflower
125
125
Soybean
125
149
Cotton seed
163
195
International Conference on Applied Economics – ICOAE 2009
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Table 5: The Relationship between Planning Area and Production in Subsidized and non Subsidized Years
Planted Area
Correlations
dummy
Pearson Correlation
-0.533*
Significance level (two-tailed)
0.016
N
20
(*) Correlation is significant at the 0.05 level (2-tailed).
Table 6: The Relationship between Sunflower Product Price and Following Year‟s Planted Area
Sunflower price
Sunflower Planted
Pearson Correlation
0.741*
Area
Significance level (two-tailed)
0.036
N
8
(*). Correlation is significant at the 0.05 level.
7. Oil seed and Vegetable Oil Import of Turkey
Turkey imports vegetable oil almost 50% of need due to not enough domestic production in recent years. Based on
2008 data, Turkey imported 1 085 729 MT paying 1 447 477 712 US $ and 1 931 495 MT oil seeds paying 802 291
973 US $ (Figure 2 and 3). These amounts consisted of 1.11% of total Turkish total import (TSI Database, 2009).
Figure 2: Turkish oil seeds import in 2008 ($)
Rapese
ed
Cottons
eed
148,132,204
6,259,842
Soyabe
an
Sunflow
er
647,899,927
365,145,129
To meet domestic demand, 411 791 MT sunflower oil and 456 096 MT sunflower seed were imported in 2008.
However, Turkey applies custom taxes for sunflower imports especially during the harvest season and following
months to protect domestic production and industry. Based import regime regulations as CIF value, the 27% tax rate
based 750 US $ per MT for sunflower seed, 36% tax rate based 1650 US $ per MT for sunflower crude oil and the 50%
tax rate based 2000 US $ per MT for sunflower refined oil were applied.
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Figure 3: Vegetable oil import of Turkey in 2008 ($)
Cotton Oil
Rape Oil
3,051,398
15,433,180
461,909,804
Palm Oil
136,688,700
Coconut…
Corn Oil
18,321,558
139,162,079
25,738,464
647,172,529
8. Results and Discussion
Sunflower is the main oil crop in Turkey in spite of that soybean is first in the world. Although Turkey exists
top ten sunflower producers country in the world, has more than 25 million ha arable land and has very suitable
climate, it cannot produce enough seed for domestic consumption. Therefore, oil seed import reached 2.2 billion US $
and Turkey exists among top 3-4 oil seed importer countries in the world. Based on this research results, it seemed that
import was more attractive than domestic product for industry in spite of higher custom tax.
When it looked last 20 years data that Turkish sunflower production was over one million MT (1 250 000)
only in 1989 (770 000 ha planting area) then planting areas started to decrease until recent years. The subsidizing
policy did not stop these decreases applied since 1999. One ha of the sunflower production cost (average yield 1750 kg
per ha) was 1138 US$, the average TGPV was 1.178 US$, gross profit 444 US$ and net profit was calculated only 39
US$ in the research. Based on this amount profit sunflower could not compete other crops both dry and irrigated
conditions.
Another reason was the more increase of input prices (14-267%) even though the decrease (4.12%) in
sunflower product prices. Sunflower product price was mainly less than 1999‘s price in last ten years period. This is
one of the main reasons that farmers preferred to plant other than sunflower in the region. To solve these decrease in
the plated areas, government applied subsidizing from 1999 to present. However, research result which was negative
relationships between subsidizing or not period and planted areas indicated that this policy was not effective to decrease
on areas. On the other hand, the result of negative relationship between product prices and planting areas pointed out
other factors also effecting to increase sunflower planting areas.
The research also indicated that domestic production was expensive 33.47% than importing of products.
Therefore, Oil seed industry preferred import instead of domestic production due to this attractive cost, also higher oil
content and fewer impurities of imported seeds.
9. Conclusions and Suggestions
To reduce the deficit of vegetable oil of Turkey, subsidizing policy on oil seeds especially on sunflower
should be considered again. Producers should buy essentials inputs more reasonable prices. Turkish government apply
some supports on fertilizer (36 $ per ha) and fuel (36 $ per ha) based on cultivated crops but these subsidizations are
not enough. For example, fuel could be priced at two types as agricultural or other use then producers could buy fuel at
cheaper prices based their cultivated land amount.
International Conference on Applied Economics – ICOAE 2009
To price sunflower product, world prices should be considered and competitive production should be
promoted. Subsidizing policy should be considered again and increase to compete with main sunflower countries.
Sunflower product price should be higher than inputs which used in sunflower crops.
On the other hand, irrigation is another factor to increase yield in sunflower. When sunflower irrigate, higher
yield could be obtained and sunflower could be more profitable. Therefore, another solution is to reduce oil seed deficit
of country getting more production same areas. Other oil crops such as canola, soybean, safflower, etc. also should
promote to plant to meet domestic oil seed demand.
As result, to reduce oil seed deficit and to meet domestic demands of Turkey, other essential problems of the
agriculture should be solved immediately. If these precautions get on time and enough quantity, this problem will be
solved possibly in mid terms.
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