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Improved program planning with formal models? The case of high risk crop farming in Northeast Germany

  • Oliver MußhoffEmail author
  • Norbert Hirschauer
Original Paper

Abstract

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.

Keywords

Production program planning Optimization Risk Time series analysis 

JEL Classification

C1 C61 M11 Q12 

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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Institute of Agricultural and Nutritional SciencesMartin-Luther-Universität Halle-WittenbergHalleGermany
  2. 2.Department of Agricultural Economics and Social SciencesHumboldt-Universität zu BerlinBerlinGermany

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