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Abstract

This paper presents a dynamic crop rotation model that shows how crop yield and price volatility could impact crop mix and acreage response under crop rotation considerations. Specifically, a discrete Markov decision model is utilized to optimize producers’ crop rotation decision within a finite horizon. By maximizing net present value of expected current and future profits, a modified Bellman equation helps develop optimum planting decisions. This model is capable of simulating crop rotations with different lengths and structures. Specifically, the corn-soybeans rotations were simulated using the crop rotation model.

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