This paper examines crop planning decision in sustainable agriculture---that is, how to allocate farmland among multiple crops in each growing season when the crops have rotation benefits across growing seasons. We consider a farmer who periodically allocates the farmland between two crops in the presence of revenue uncertainty where revenue is stochastically larger and farming cost is lower when a crop is grown on rotated farmland (where the other crop was grown in the previous season). We characterize the optimal dynamic farmland allocation policy and perform sensitivity analysis to investigate how revenue uncertainty of each crop affects the farmer's optimal allocation decision and profitability. Using a calibration based on a farmer growing corn and soybean in Iowa we show that growing only one crop over the entire planning horizon, as employed in industrial agriculture, leads to a considerable profit loss---that is, making crop planning based on principles of sustainable agriculture has substantial value. We propose a simple heuristic allocation policy which we characterize in closed form. Using our model calibration we show that (i) the proposed policy not only outperforms the commonly suggested heuristic policies in the literature, but also provides a near-optimal performance; (ii) compared to the optimal policy, the proposed policy has a higher allocation of crops to rotated farmland, and thus it is potentially more environmentally friendly.
Farm Planning, Crop Rotation, Sustainability, Agriculture, Commodity, Uncertainty, Dynamic Programming, Corn, Soybean, Fallow
Agribusiness | Operations and Supply Chain Management
BOYABATLI, Onur; NASIRY, Javad; and ZHOU, Yangfang Helen.
Crop Planning in Sustainable Agriculture: Dynamic Farmland Allocation in the Presence of Crop Rotation Benefits. (2017). 1-34. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4935
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