Improved program planning with formal models? The case of high risk crop farming in Northeast Germany
In this paper we explore whether the incorporation of systematic time series analyses and mathematical optimization procedures in the practical planning process has the potential to improve production program decisions. The cases of four German cash crop farms are investigated over six planning periods. In order to avoid solutions that simply exceed the farmer’s risk tolerance, the apparently accepted variance of the observed program’s total gross margin is used as an upper bound in the optimization. For each of the 24 planning occasions, the formal model is used to generate optimized alternative programs. The total gross margins that could have been realized if the formally optimized programs had been implemented are then compared to those that were actually realized. We find that the farmers could have increased their total gross margins significantly if—instead of using simple routines and rules of thumb—they had used adequate methods of statistical analysis combined with the formal optimization model. Copyright Springer-Verlag 2007
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Volume (Year): 15 (2007)
Issue (Month): 2 (June)
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- Rulon D. Pope, 2003. "Agricultural Risk Analysis: Adequacy of Models, Data, and Issues," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1249-1256.
- Darren Hudson & Keith Coble & Jayson Lusk, 2005. "Consistency of risk premium measures," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 41-49, 07.
- Hardaker, J. Brian & Pandey, Sushil & Patten, Louise H., 1991. "Farm Planning under Uncertainty: A Review of Alternative Programming Models," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 59(01), April.
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