The economics of wheat production in the rice-wheat system in Nepal

Wheat is grown in over 0.5 million ha as a part of the rice-wheat system in Nepal. Despite its importance, the productivity of wheat in Nepal remains low. The economics of wheat production in a typical rice-wheat area of Nepal is examined using a linear programming model. In order to assess the effect of irrigation and marketing infrastructure on the economics of wheat production and elasticity of wheat supply, representative models for four locations with differential access to the infrastructure were developed. Wheat production was found to be economically more profitable in locations with better access to irrigation and marketing infrastructure. The price elasticity of supply of wheat, derived by parametric variation of the wheat price in the linear programming model, was found to be dependent on the level of infrastructure development. Farmers in areas with access to irrigation and markets are found to be much more responsive to changes in wheat prices than farmers without access to such infrastructure. The effectiveness of price policies in increasing wheat production thus appears to be conditional on the level of infrastructure development.