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Corn, Soybeans or Fallow: Dynamic Farmland Allocation under Uncertainty

Author

Listed:
  • Onur, Boyabatli
  • Nasiry, Javad
  • Zhou, Yangfang (Helen)

Abstract

This chapter develops a theoretical basis for understanding the trade-offs facing a farmer for allocating his farmland among several crops over multiple growing seasons. Specifically, we focus on the farmland allocation among two cash crops (corn and soybeans) and letting the farmland lay fallow to rejuvenate the soil and increase the revenue for the crop grown on this farmland in the subsequent seasons. In each growing period, the farmer chooses the allocation in the presence of revenue uncertainty for each cash crop, and crop rotation benefits across periods, where revenue is stochastically larger and farming cost is lower when a cash crop is grown on a rotated farmland (where the same crop was not grown in the previous period). We solve for the optimal dynamic allocation policy.

Suggested Citation

  • Onur, Boyabatli & Nasiry, Javad & Zhou, Yangfang (Helen), 2019. "Corn, Soybeans or Fallow: Dynamic Farmland Allocation under Uncertainty," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 12(2-3), pages 280-297, March.
    • Handle: RePEc:now:fnttom:0200000083
    DOI: 10.1561/0200000083
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    References listed on IDEAS

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    3. Brian Tomlin, 2003. "Capacity Investments in Supply Chains: Sharing the Gain Rather Than Sharing the Pain," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 317-333, November.
    4. Terry A. Taylor & Erica L. Plambeck, 2007. "Simple Relational Contracts to Motivate Capacity Investment: Price Only vs. Price and Quantity," Manufacturing & Service Operations Management, INFORMS, vol. 9(1), pages 94-113, January.
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    Cited by:

    1. Jahantab, Mahboubeh & Abbasi, Babak & Le Bodic, Pierre, 2023. "Farmland allocation in the conversion from conventional to organic farming," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1103-1119.

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    More about this item

    Keywords

    Risk management; Hedging; Operational risk; Supply chain finance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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