“Crop Planning in Sustainable Agriculture: Dynamic Farmland Allocation in the Presence of Crop Rotation Benefits” by Dr. Onur BOYABATLI
Dr. Onur BOYABATLI
Associate Professor of Operations Management
Lee Kong Chian School of Business
Singapore Management University
This paper examines crop planning decision in sustainable agriculture, i.e., 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 chooses the farmland allocation between two crops in the presence of revenue uncertainty where revenue is stochastically larger and farming cost is lower when a crop is planted in a rotated farmland (where the other crop was planted in the previous period). We characterize the optimal dynamic farmland allocation policy. Using a calibration based on a typical farmer growing corn and soybean in Iowa we provide rules of thumb for the effect of revenue uncertainty. In particular, we show that the farmer always benefits from a higher corn revenue volatility but benefits from a higher soybean revenue volatility only when this volatility is high; otherwise a lower soybean volatility is beneficial. We also show that planting only one of the crops 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 sustainable heuristic allocation policy and characterize the periodic allocation decision with this policy in closed form. Using our model calibration we show that the proposed policy not only outperforms the commonly suggested heuristic policies in the literature, but also provides a near-optimal performance.