Corn, Soybeans or Fallow: Dynamic Farmland Allocation under Uncertainty

Boyabatli Onur, Javad Nasiry and Zhou, Yangfang (Helen)

Foundations and Trends(R) in Technology, Information and Operations Management, 2019, vol. 12, issue 2-3, 280-297

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.

Keywords: Risk management; Hedging; Operational risk; Supply chain finance (search for similar items in EconPapers)
JEL-codes: G32 M11 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000083

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