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A Strategic Agricultural Production Model with Risk and Return Considerations

Published online by Cambridge University Press:  15 September 2016

Rhonda L. Aull-Hyde  and
Solomon Tadesse
Rhonda L. Aull-Hyde
Affiliation:
Department of Food and Resource Economics/Operations Research, University of Delaware
Solomon Tadesse
Affiliation:
Department of Finance, University of Maryland
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Abstract

Decision support systems are generally geared to short-term tactical decision making. As an alternative, this paper develops a mathematical programming model to evaluate long-term strategic alternatives in the context of farm-level agricultural production where a broiler farm considers long-term implications of diversification into commercial aquaculture. The model considers a ten-year strategic planning horizon, incorporates financial risk and return considerations, and accommodates capacity variations. Results indicate that a diversification strategy significantly increases farm profitability over a strategic planning horizon while simultaneously maintaining financial risk below a predetermined tolerance level and return on investment above a predetermined level.

Type
Articles
Information
Agricultural and Resource Economics Review , Volume 23 , Issue 1 , April 1994 , pp. 37 - 46
Copyright
Copyright © 1994 Northeastern Agricultural and Resource Economics Association 

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