Outline

Objectives:

This unit introduces the LP production function and shows how the
choice of production methods can be modeled. Examples are given on
how to implement farm-specific problems in LP.

Contents:
Farm Level Modeling
LP production function

Choice of techniques

Choice of technologies

Farm specific features

Yield response

Seasonality

Crop rotations
Farm-Specific Features in LP #1
Buying/selling

Main reference:

Hazell/Norton (1986): Mathematical Programming for Economic Analysis
in Agriculture, Chapter 2 and 3.

Complexity of Farm Planning Farm-Specific LP Problems

Different crops and livestock products,
Crop choice, seasonality, crop rotation,
choice among various techniques and joint products, intercropping
technologies (Hazell/Norton, 1986: chapter 3)

Varieties, planting dates, fertilizer treatment,
Buying, selling, credit, cash (H/N: ch. 3)
mechanization

Investment (H/N: ch. 4)

Quality of land and labor, seasonality of
farming activities
Interdependencies in production, leisure

Hiring-in and out of labor, land and capital and consumption (H/N: ch. 4)

Investment

1
 Leontief Production Function Returns To Scale

Firm produces
375 g boxes of
cereal

Two inputs:
cereal and
cardboard boxes

Isoquants for
375 g boxes of
cereal

Figure reproduced from Sullivan (2004): www.siue.edu/BUSINESS/econfin/courses/econ301/LectureNotes/production.ppt Figure reproduced from Sullivan (2004): www.siue.edu/BUSINESS/econfin/courses/econ301/LectureNotes/production.ppt

LP - Assumptions LP Production Function

1. Optimization max or min
Constant resource requirements per unit
2. Fixedness at least one factor limiting
of activity (linear ray through origin)
3. Finiteness finite number of activities &
constraints K, Units of
capital per Activity 1

4. Determinism all coefficients are known year

constants
5. Continuity divisibility of resources & activities Activity 2
6. Homogeneity identical units of any resource
7. Additivity no interaction between activities
8. Proportionality constant gross margin and
constant input-output-relations

L, Work hours per year

Based on Hazell/Norton, Ch.2 Figure reproduced from Hazell/Norton (1986, ch. 3)

2
 Choice of Production Methods #1 Choice of Production Methods #2

Choices of techniques amount of Yield

[kg/hectare]

variable input or combination of factors Irrigated corn

in producing a unit of crop or animal Y2

product

“Moving along production function”
Y1 Rainfed corn

Choices of technologies major shift in Y0
production methods

Switching to different production function

N0 N1
Nitrogen [kg/hectare]

Based on Hazell/Norton, Ch.3 Figure reproduced from Hazell/Norton (1986, ch. 3)

Ad: Choices of Techniques Factor Substitution #1

Two types of technique choices can
Example: weeding of corn by hand or
be distinguished with mule-drawn hoe?

Mules and labor are partial substitutes

Factor substitution

Assumption: no effect on corn yield

e.g. various levels of mechanization

Input/output response relations

e.g. rate of fertilizer use on crop

Based on Hazell/Norton, Ch.3 Based on Hazell/Norton, Ch.3

3
 Factor Substitution #2 Factor Substitution #3

Vector diagram for corn
Introduction of additional [months/hectare]

Labor
X1
weeding activities Labor
(months/hectare] x1 x2 weeding techniques X2

Slope of ray is the ratio
At most two of the activities
of per hectare will be included in optimal X3
requirements for labor 3.0

A
solution
to mules E

E = linear combination of X4

A = 1.0 ha of X1 2.0 X1 and X3 A

B = 1.0 ha of X2
B = linear combination of E

C
B X1 and X2 B

C = 0.5 ha of X1 1.0

Points on AC are inferior to

D = 0.5 ha of X2 D any combination of of X1 C
D

E = 0.5 ha of X1 and X2 and X2

Slope of AB is MRST of 0 1.0 2.0 3.0

Linear approximation of
mules for labor Mules (months/hectare]
curved isoquants 0 Mules [months/hectare]

Figure reproduced from Hazell/Norton (1986, ch. 3) Figure reproduced from Hazell/Norton (1986, ch. 3)

Input/Output Response Relations #1 Input/Output Response Relations #2

Yield

Example: yield [kg/hectare]
Nonlinear relation can Yield
be incorporated [kg/hectare]

response of corn Y0
D
B
through piecewise
to weeding labor linear approximation F D
C C

Optimal solution will E

Optimal solution ½ (A+Y)0 never contain
B

may contain
E
combinations of A
nonadjacent activities
either X1 or X2 or A
Convex yield response
any linear functions requires 0 L2 L3

combination
0 ½ L0 L0
mixed-integer Weeding labor [months/hectare]
Weeding labor [months/hectare]
programming (MIP)

Figure reproduced from Hazell/Norton (1986, ch. 3) Figure reproduced from Hazell/Norton (1986, ch. 3)

4
 Quality Differences In Quality Differences In
Resources #1 Resources #2

Example: irrigated and rainfed land
Example: labor skills; gender-

Capture each resource quality as
different resource with its own set of specific labor use
activity requirements and RHS
Incorporate two labor resource

Introduce specific crop activities constraints
(irrigated and rainfed), with differences
in yields and other resource requirements

Incorporate transfer activity

Based on Hazell/Norton, Ch.3 Based on Hazell/Norton, Ch.3

Seasonality #1 Seasonality #2

Monthly Labor Requirement by Crop (see table)

Within cropping season, cultural
16.5 months of labor available per year
operations have to be performed in set
1.375 months of labor available per month
sequences

Result: distinct patterns in resource use
(peak and idle periods)

If seasonal patterns are ignored in LP,
solution might be unrealistic by requiring
more resources in some periods than are
available

Example from Hazell/Norton (1986, 43)

Based on Hazell/Norton, Ch.3 Based on Hazell/Norton, Ch.3

5
 Seasonality #3 Crop Rotations #1

Disaggregate labor to months by adding
Crop rotation: sequence of cropping activities on
same plot, for pest and disease control and for
more rows soil fertility

Approach #1: plant entire farm with single crop each
year (not commonly practiced)

Approach #2: divide farm in equal parts, rotate crops
within each part so that total acreage of each crop is

Based on Hazell/Norton, Ch.3

constant each year

LP well suited for approach #2, provides
cropping pattern for single year

For approach #1, interpret LP solution as average
cropping pattern over many years

Include options for reducing seasonal

bottlenecks (e.g. various planting dates) Based on Hazell/Norton, Ch.3

Crop Rotations #2 Crop Rotations #3

Example: Rotation in which peanuts, if
Examples
grown, must be alternated with corn

Grain in 4 of 5 years (80%)

Inclusion of balance row

LE constraint: corn area can exceed peanuts
Wheat only every second year (50%)
area, not all corn has to be alternated with
Winter grain every second year (50%)
peanuts

EE constraint: corn in peanuts in equal
Rape seed every 4 years (25%)
amounts
Corn in 2 of 3 years (66%)

Two options for representation in LP

Special thanks to Prof. Zeddies et al. for the use of their material
Based on Hazell/Norton, Ch.3

6
 Option #1 Option #2

Enter crop rotations limits on RHS
Introduce crop rotation activity

Special thanks to Prof. Zeddies et al. for the use of their material Special thanks to Prof. Zeddies et al. for the use of their material

Buying/Selling Options #1 Buying/Selling Options #2

Hiring-in of resources can be
Hiring of temporary workers on
incorporated through buying monthly basis must be implemented as
activities buying activities for each month

If land, in addition, is rented on a

Negative entry in objective function
yearly basis, it would have to be
-1 entry in relevant resource row
Based on Hazell/Norton, Ch.3

Based on Hazell/Norton, Ch.3

implemented as follows

(reverse in case of selling activities)

7
 Buying/Selling Options #3 Assignment for Tomorrow

Example: purchase of fertilizers 1. Review Hazell/Norton,
Introduce buying activities for various


fertilizers chapter 2 and 3
http://www.ifpri.org/pubs/otherpubs/mathprog/mathprog02.pdf

Correct crop gross margins, cost of fertilizers http://www.ifpri.org/pubs/otherpubs/mathprog/mathprog03.pdf
may not be netted out

Introduce balance rows (zero entry on RHS) 2. Work on Farm LP models
Same principle applies to feeding of livestock
#1 to #5 (LP Exercise)

Based on Hazell/Norton, Ch.3

3. Prepare Hazell/Norton,
chapter 4
http://www.ifpri.org/pubs/otherpubs/mathprog/mathprog04.pdf