Price Incentives For The Production Of High Yielding Mexican Varities Of Wheat: A Rejoinder

In his comments on my paper [1] Mr. Sarfraz Khan Qureshi tried to show that: (a) farmers faced with a choice between cultivating two types of wheat, i.e. local and Mexican varieties, would be guided by the net profitability (revenue) per unit of land; and (b) a varietal shift from local wheat at low prices to Mexican varieties at high prices is possible at some ‘break-even’ price, provided land is a fixed factor and Mexican varieties of wheat require less land but more nonland factors (costs) per unit of output than the local wheat [2]. Mr. Qureshi argued that the necessary assumption supporting my analysis of varietal shifts at ‘break-even prices’ was not satisfied as land was not believed to be the binding constraint during the wheat growing season. Moreover he felt that the cultivation of Mexican varieties of wheat has not been established to require more non-land factors (costs) per unit of output than local wheat. Mr. Qureshi goes on to say that empirical evidence available from other surveys does not show that non-land costs per unit of output are relatively higher for Mexican varieties of wheat. So the price of wheat (and the ‘break-even’ price analysis) is irrelevant to the choice of the process of production. Farmers would always produce Mexican varieties of wheat, thus invalidating my analysis and suggested policy on the pricing of wheat.