CP 104 Module 3
CP 104 Module 3
CP 104 Module 3
Module
in
CROP PROT 104
College of CAFES
BSA
2
ECONOMIC CONCEPTS
Topic
VIMBEE A. ERESUELA
Instructor 1
TABLE OF CONTENTS
Page
Cover page 1
Title Page 2
Table of Contents 3
Instruction to the Users 4
Introduction 5
Chapter
INTRODUCTION
classroom teaching and learning delivery. The instructor will facilitate and explain the
module to the students to achieve its expected learning outcomes, activities and to
This module will help you to understand The Economic Concept of Integrated Pest
Management.
CHAPTER 3
Economic Concept
Overview
Module 3 covers the topic about Economic Concept of Integrated Pest Management:
Discussion
Introduction
The engine that drives private enterprise is profit. Whether it be to eke out a
subsistence or to earn a cash income, a farmer is motivated by return on investment.
Therefore, whatever tactics we use in integrated pest management, the benefits must outweigh
the costs.
One of the goals of integrated pest management programs is to translate ecological
considerations into economic ones for individual farmers. To get farmers to accept the concept
of IPM we have to convince them that it pays, We, have to develop pest control technologies
that are cost-effective, We, have to influence public policy to create an economic environment
in which the benefits of IPM outweigh the costs.
A grower takes a particular pest control action to prevent an anticipated crop loss.
Generally, one cannot recoup losses that have already occurred, and pest control measures are
not usually taken for vengeance! Prevention implies a certain predictive capability, and most
often the prediction is based solely on the experience of the farmers–they know that if they see
a particular pest and do not do something about it, they will soon suffer a loss. Unfortunately,
growers’ predictive capabilities are often limited–they may overreact, or they may fail to react
in time or with sufficient force.
To predict a crop loss, a reference yield is necessary. (Yield is used in the broad sense
here to include both amount harvested and quality–perhaps yield in dollars.) What can one
reasonably expect the yield to be in the absence of constraints?
The difference between the attainable yield and the theoretical yield is an
unpreventable loss, whereas the difference between the actual yield and the attainable yield is
a preventable loss. One can usually determine attainable yield experimentally. We must grow
the crop free of constraints (e.g., pests). We attempt to push the actual yield up to the
attainable yield (preventable loss). Making the actual yield the same as the attainable yield is
not always economically rational. Ideally the actual yield should be the same as the economic
yield.
It is useful to conceptualize crop loss as either direct or indirect. Direct loss occurs
when the saleable commodity itself is affected by the pest. The loss can be one of quality,
quantity, or both. Apple scab is an example of a direct pest that reduces the quality of the
marketed product, and the bean weevil is an example of a direct pest that reduces both
quantity and quality of dry beans and peas in storage. Direct loss is generally proportional to
the pest population density at low densities and approaches an upper limit (often 100%) as
the pest population increases.
Figure 1. Direct Loss. The proportion of the loss increases linearly with pest density
at first. Then it asymptotically approaches one.
Indirect loss occurs when the pest attacks plant parts other than the marketable
product but reduces the yield and/or quality of the product. An indirect pest may have one or
more of the following effects on the plant:
Crop loss–that is, the quantitative nature of the yield response to pest population
density–can vary widely from one crop species to another and from pest to pest within the
same crop. At very low pest population densities, there is often no measurable yield loss, but
when the pest density gets high enough, the yield begins to decline steeply. At very high pest
densities, the yield may drop to zero, or it may level out at a low level.
Sometimes low levels of pest damage can slightly enhance yield. This can occur, for
example, in crops where the lower leaves are heavily shaded by the top of the canopy, and a
slight pruning of the upper leaves by a foliage feeder allows greater light penetration into the
lower canopy.
Figure 2. Indirect Loss. The response to pest density can follow one of several
different patterns, depending on the crop and the pest.
Multiple pests can interact synergistically to reduce yields, or they can interfere with
one another so that the yields with both pests present can actually be higher than would be
obtained with either pest alone at the same density.
The crop loss or yield functions can change at different stages of crop development,
and the final yield (quality and quantity) at harvest can be affected both by brief episodes of
pest damage and by the cumulative effects over the season. The crop loss and yield functions
can also be affected by factors in the physical environment (temperature, rainfall, cultural
practices, etc.).
Pest-resistant cultivars
The crop loss or yield functions also vary with cultivars that have different levels of
pest resistance. It is not uncommon to find primitive cultivars or landraces that may not be
as high yielding as so-called "improved" cultivars if pest populations are kept low, but which
can outproduce an improved cultivar when the pest pressure is high.
Figure 3. The effect of pest resistance. The yield response to pest population density may be
different for different cultivars.
Crop loss and yield functions can be used to evaluate the effects of pest control
measures that abruptly change pest populations (pesticides, sanitation measures, etc.) One
first must have a model that predicts the pest population dynamics with and without the
control measure.
Figure 4. Pest population dynamics. The increase in pest population density may be abruptly
reduced by a control action, such as the application of a pesticide. Loss should be evaluated
at the point shown because________________________________.
Using this prediction of the controlled and uncontrolled pest population densities
combined with the yield response functions, we can then estimate the yield loss that would be
prevented by the control action.
Figure 5. Evaluating the impact of a control action. The predicted yield in the
presence of a high pest population (uncontrolled) is subtracted from the predicted yield
when the pest is controlled. Doing so gives an estimate of the loss prevented by the control
action.
Taken together, all the possible interactions of pest population dynamics, crop
development, environmental variables, and management options to predict crop loss or yield
is complex. However, this problem can be broken into its components, which are relatively
straightforward quantitative relationships. The set of equations generated by this approach
can then be solved numerically in an appropriately designed computer simulation. With a
model that simulates pest and crop development with reasonable fidelity, "field experiments"
can be run on the computer and used as an analytical tool to develop management models.
For this discussion we will assume that the goal of the farmer is to maximize profit, but
in fact growers have many other–often conflicting–goals. (We will deal with these later.)
Profit = TR - TC (1)
A pest control measure makes economic sense only if the profit when the pest is
controlled (Profit C is greater than the profit when the pest is not controlled ("uncontrolled,"
shown as Profit U): that is, when
or when
NOTE: The above inequality applies only to the case when there are two alternatives,
controlling the pest or not controlling the pest. The general case with in management
alternatives is
While profits are based on total costs and total revenues, it is not necessary to do a
complete budget analysis in order to evaluate a particular management decision. Many of the
costs remain fixed regardless of the management option selected, so we do what is called a
partial budget analysis.
In the inequality 4, above, the difference between all the costs when the pest is
controlled and all the costs when the pest is uncontrolled is called the partial cost–the cost of
the pest control, CC.
CC is more than simply the direct cost of the pest control measure (e.g., the cost of a
pesticide plus its application costs). CC must include, for example, the additional costs of
harvesting and handling the crop if the yields are higher when the pest is controlled than when
it is not.
The difference between the total revenue when the pest is controlled and that when the
pest is uncontrolled is called the partial revenue. In other words, it is the change in revenue
attributable to the pest control, RC.
The total revenue is the product of the price and the yield.
TR = P · Y (8)
If crop quality is unaffected by the pest control, the partial revenue is simply the crop
price times the difference in yield.
But if the pest control affects crop quality as well as yield, the price with pest control
will likely be different from that without it, and the partial revenue will be the product of price
and yield when the pest is controlled minus the product of price and yield when it is not.
RC = PC · YC - PU · YU (10)
If the harvested product is graded into different quality classes and there are different
prices for the different quality classes, it may be necessary to consider the yield distribution at
various quality levels. If n is the total number of quality classes, and i designates the quality
class, then
P · Y = Pi · Yi (11)
For example:
P·Y = 6970
The pest control measure makes economic sense if the partial revenue is greater than
the partial cost:
RC > CC (12)
Note: both of the terms in this inequality can be negative (e.g., consider the case where
the new control measure is a pest resistant cultivar with a slightly lower yield, but which
requires less pesticide)
Imagine the new pest control measure is not a discrete event (such as plowing under a
crop residue) but is instead a treatment that can be applied at varying intensities (such as the
dose of a pesticide). We then have to decide the following: a) whether to apply the treatment
to make a greater profit than if we applied no treatment; and b) at what level to apply the
treatment to maximize profit. Consider the cost of the pest control measure (the partial cost)
and the revenue attributable to control of the pest (the partial revenue) as functions of the level
of input (e.g., a pesticide dose).
Figure 1. Production function. The partial cost (CC) generally increases linearly with
intensity of pest control effort. The partial revenue (RC) increases, but at a diminishing
rate, and may ultimately begin to decline.
Most often cost and revenue are measured in monetary units (such as dollars) but they
can be measured in any other commensurable units, such as yield equivalents or hours of
labor. The cost of control CC, is usually directly proportional to the level of pest control input,
making the cost function linear. The shape of the revenue function, RC, may vary from one
case to another, but in general as pest control input increases, the revenue also increases,
because of the greater yields resulting from pest control.
At some level of input, the increment in revenue for each increment in input begins to
decline (diminishing returns). The revenue can reach a peak and then begin to decline (e.g., if
input is a pesticide that is phytotoxic). If this is the case, the cost of control can again exceed
the increased revenue resulting from control. The level of input that maximizes profit occurs
at the point where the RC curve is at its maximum distance above the CC curve.
(Mathematically this also happens to be the point where the tangent to the revenue curve is
parallel to the cost line.)
To calculate the partial cost and the partial revenue of pest control, we first need
detailed crop loss and yield functions in response to pest population. This kind of information
usually comes from considerable field research. Lack of this kind of data continues to limit the
development of IPM programs that are based on economic decision-making criteria.
Once we have the crop loss functions, the rest is straightforward accounting, which
the farmer or an agricultural consultant can do with pencil and paper (but with many
variables and options, the calculations can be tedious).
The crop loss and yield models discussed until now have been deterministic; that is,
there has been one, and only one, value for the dependent variable (e.g., revenue)
corresponding to a given independent variable (e.g., pest density). In reality, there is
considerable variability in the response to a given set of inputs. We cannot account for some
of this variability, and we simply attribute it to randomness. These responses, however, are
not totally random; they vary within predictable ranges according to a quantifiable probability
distribution.
Much of this variation results from day-to-day and season-to-season changes in the
weather, which affects pest and crop development. Long-term weather records for a particular
locality can be useful in quantifying the apparent randomness attributable to weather. In one
approach, we can run crop and pest simulation models repeatedly with historical weather data
and observe the frequency distribution of responses. Alternatively, we can assign probability
distributions to particular weather events based on long-term weather records and create a
stochastic weather simulator. Simulated weather data can then be used to drive the crop-pest
models.
Another important "random" variable is the price that will be paid for the crop at
harvest. It is a variable whose value is usually not known at the time a pest control decision is
made. Historical marketing data and current market analysis can be used to assign a
probability distribution to future prices, and then a probability distribution of revenue can be
created from the distributions for price and yield. Price and yield do not vary completely
independently. For example, if a wide geographical area is affected by weather that has a
marked effect on yields, such as a widespread frost, the yields of large numbers of producers
might be reduced and the prices might be driven up.
0 1 2 3 4
Total Revenue ($/ha) Probabilities
> 300 0.0 0.01 0.11 0.37 0.65
251-300 0.0 0.08 0.40 0.45 0.29
201-250 0.01 0.32 0.38 0.13 0.05
151-200 0.06 0.44 0.09 0.04 0.01
101-150 0.27 0.12 0.02 0.01 0.0
51-100 0.48 0.03 0.0 0.0 0.0
1-50 0.16 0.0 0.0 0.0 0.0
<1 0.02 0.0 0.0 0.0 0.0
Expected total
86.50 191.50 249.50 281.50 304.00
revenue
Pest control cost 0.0 40.00 80.00 120.00 160.00
Total cost* 100.00 140.00 180.00 220.00 260.00
Expected profit -13.50 51.50 69.50 61.50 44.00
* Assumes total fixed costs of $100/ha
In this table we have a distribution of probabilities of a given level of revenue for each
of several levels of input. You may notice that this is simply a version of the production
function, in which the revenue scale, which is actually continuous, has been made discrete by
breaking it into intervals. Instead of a single value for revenue at each level of input, we have
a probability distribution, and if you trace the median value in each of these distributions, you
can see the revenue curve. Note that the probabilities within each column sum to one (1.0).
The expected total revenue for each pesticide dose is the average one would obtain
from a large number of replications with varying weather and prices. It is computed by
multiplying the mid-point of each revenue interval by its corresponding probability and then
summing the products for each column. The pest control cost for this example is simply the
cost/kg of pesticide times the dose. To maximize profits, the farmer would simply look at the
expected profit (the bottom line) and decide to apply the 2 kg rate with an expected profit of
$69.50.
But let's play a different kind of game with these figures. Let's look at the odds of the
outcomes with different levels of input. Applying no spray, one would have a 34% chance of at
least breaking even (you get this by adding all of the percentages above $100, the "break even"
mark, in the "0" column: 0.0 + 0.0 + 0.01 + 0.06 + 0.27). You’d have about a 5% chance of a
profit greater than the expected profit ($69.50). (Confused? Click here to see these concepts
demonstrated in the table.)
Applying the 1 kg dose, one would have an 85% chance of breaking even (0.01 + 0.08
+ 0.32 + 0.44) and about a 30% chance of a profit over $69.50. Applying 3 kg instead of 2 kg
("for insurance") does not significantly improve the odds of breaking even (about 90% in both
cases).
This kind of analysis provides growers with "betting odds" on a particular outcome of
a decision and gives them more information on which to base a decision than they would have
with conventional extension information. Farmers are the world's largest group of high stakes
gamblers. Unlike most other gamblers, farmers generally cannot compute their odds.
Probability distribution of revenues are particularly important for subsistence farmers, whose
farming strategy is basically to minimize the risk of catastrophic losses.
Economic threshold
➢ Intuitively we can get a feel for some kind of threshold pest population
o If the pest population (and the resulting damage) is low enough, it does
not pay to take control measures
o As the pest population continues to rise, it reaches a point where the
resulting damage would justify taking control measures
EIL = C/(VIDK)
where:
EIL = economic injury level
C = cost of insect control
V = value of a unit of the crop
I = injury units per insect
D = damage (proportion of yield lost) per injury unit
K = proportionate reduction in injury
OPTIMIZATION
Optimization is a systematic procedure for finding the "best" solution (or solutions!)
to a complex problem. It is necessary to state the objective explicitly, that is, to maximize
something or to minimize something (e.g., to maximize yields, to maximize profits, to
minimize effort, or to minimize costs). Generally, we optimize only one objective at a time. For
example, one can maximize profits or minimize costs, but not do both simultaneously. The
solution is the combination of decision variables that optimizes the objective.
There are many different approaches to optimization, and we will touch on only three
here: repeated simulation, linear programming, and dynamic programming.
Repeated Simulation
By repeated execution of a computer simulation model with different values for the
input variables, we can explore the effects of different values of those variables on the final
objective.
For example, suppose we have three partially resistant cultivars that require different
levels of fungicide application to control a fungal disease. In this example, the more resistant
varieties have either a lower quality or lower yield than the most susceptible one. Execute the
simulation with a range of sprays (1—6) per season for each of the cultivars. Using the marginal
analysis procedure, determine the profit for each set of input values.
Figure 1. Repeated simulation as a means of optimization. Each data point in this example
represents the output from one execution of the simulator.
In this example, Cultivar C is the most susceptible and Cultivar A the least susceptible.
Therefore, in the absence of fungicides, Cultivar A would yield the maximum profit. There are
two optimum solutions if our objective is maximum profit: 3 sprays on Cultivar B and 4 sprays
on Cultivar C.
The simulation approach is usually faster and cheaper than doing the optimization
empirically in the field, but it's limited by how many runs of the simulation are feasible. In this
example, the simulation had to be executed 20 times–not an unreasonable number for most
simulators. But suppose that we had 5 cultivars, 4 different fungicides, 3 spray schedules, and
7 levels of fungicide, and that we wanted to look at the mean and variance of the profit using
the past 10 seasons of weather data. The number of runs required would be
5 x 4 x 3 x 7 x 10 = 4200 runs
If each run cost $.50 on the supercomputer, the cost would be $2100. If each run took
1 minute on a microcomputer, it would take about 3 days of continuous computing.
Linear programming
➢ Allocate weed control costs between herbicide application and hand weeding to
maximize profit
➢ In this example (for simplicity) we will make the yield and price constant and set the
total revenue at $250/acre
➢ Therefore, maximizing profit in this example means minimizing cost
➢ Cost constraint: if x is the cost of hand weeding and y is the cost of herbicide
application, then
X + Y <= 250
o To achieve the yield that gives us the above total revenue ($250), we must
invest at least $300/acre in hand weeding
o The amount of hand weeding required can be reduced by $2 for every $1 spent
on the herbicide
o Therefore, if x is the cost of hand weeding and y is the cost of herbicide
application, the constraint is given by
X + 2Y >= 300
The optimal region of feasible solutions occurs where the constraint regions overlap.
The optimum solution (given that the objective is to minimize cost) occurs where a line
parallel to the cost constraint line (equal costs) is as far away from the cost constraint line as
possible, while remaining within the optimal region. In this example it would be $100 invested
in the herbicide and $100 invested in hand weeding.
Computer software exists for a wide range of linear programming applications. Linear
programming can handle a large number of allocation variables (it is not limited to 2
dimensions as we are on a 2-dimensional graph), and it can handle huge numbers of constraint
functions. The models must be linear, or they at least must be able to be approximated by
linear functions. These models are not dynamic (that is, they cannot allocate variables through
time), but they can approximate a dynamic solution by repeating the analysis at intervals
through time. Linear programming cannot handle stochastic models, but probability
distributions can be created by repeating the analysis with different constraints that vary
according to known probability distributions.
Dynamic programming
Very commonly a pest manager has to make a series of decisions at different points in
time throughout the season. One optimization technique that is particularly useful for solving
sequential decision problems is called "dynamic programming."
As is illustrated in the following example, the optimum sequence of decisions is not simply
a matter of making the optimum decision at every decision point. Very often the optimum
sequence is counter-intuitive. To simplify the example, we will make just two decisions, with
an interval of time between them, and examine the results of those decisions at some interval
of time after they are made.
➢ Further suppose that the total revenue accumulated during a time period is equal to
$200 minus $1 times the pest population at the beginning of the time period. (Each
insect does $1 worth of damage.)
➢ Also suppose that the insect populations increase 3-fold during each time period.
If we start with a pest population of 72, the accumulated profits during the first
period are as follows:
➢ No insecticide: 72 x 3 = 216
➢ Low dose: (2/3)72 x 3 = 144
➢ High dose: (1/4)72 x 3 = 54
Assume a decision about treatment (no insecticide; low dose; high dose) can be made at
the outset and after period 1. The profits accumulated during time period 2 and the final insect
populations are shown in the accompanying figure.
Figure 3. A simple sequential decision example with 2 decision points. Click on the image to see the
net benefits for two different pathways. Making the optimum choice at each decision point yields a
lower net benefit than taking the most costly option the first time and doing nothing the second.
Making the optimum decision at each decision point would dictate using the low dose
of insecticide at each decision point for a total profit of $132 + 84 = $216. However, the
optimum sequence would be to use the high dose for the first spray and nothing for the second:
$82 + 146 = $228.
This example simply illustrates the need for a systematic optimization procedure. The
number of possible decision combinations increases with the power of the number of decision
points. For our trivial example, N = 32 = 9. If we had 5 control alternatives and 7 decision
points, N = 57 = 78125.
The dynamic programming algorithm does not analyze all possible combinations but
selects possible sets of decisions according to certain rules. The dynamic programming
technique can handle nonlinear models, stochastic models, and a large, but limited, number
of decision variables. It can be used where the system can be adequately modeled with a
relatively modest number of variables.
D. Activities/Exercises
Let’s do this…
E. Evaluation/Post-test
Directions: Read carefully and answer the following questions. Answer on separate
sheet of paper. This is a graded exam. This test will evaluate how much your effort to
learn this topic.
1. It occurs when the pest attacks plant parts other than the marketable product but
reduces the yield and/or quality of the product.
a. Direct loss b. indirect loss c. actual yield d. economic yield
2. The difference between the total revenue when the pest is controlled and that when the
pest is uncontrolled is called
a. partial budget b. Partial revenue c. total cost d. partial cost
3. The difference between the attainable yield and the theoretical yield is a/an
a. unpreventable loss c. reference yield
b. crop loss d. preventive loss
4. The difference between the actual yield and the attainable yield is a/an
a. unpreventable loss c. reference yield
b. crop loss d. preventive loss
5. The quantitative nature of the yield response to pest population density.
a. unpreventable loss c. reference yield
b. crop loss d. preventive loss
6. The crop loss or yield functions also vary with _____ that have different levels of pest
resistance.
a. plants b. cultivars c. species d. all of the above
7. It is a systematic procedure for finding the "best" solutions to a complex problem.
a. repeated simulation c. optimization
b. linear programming d. calculation
8. It is used to solve problems of allocation
a. repeated simulation c. optimization
b. linear programming d. calculation
9. which of the following is not belong to the effects of indirect pest on the plant?
a. Reduction of photosynthetic area
b. Diversion of photosynthate
c. Reduction in photosynthetic rate
d. All of the above
10. It is the difference between total cost and total revenue
a. Balance b. profit c. economic d. yield
References
Diane G. Alston (2011). The Integrated Pest Management (IPM) Concept. Utah State
University Extension and Utah Plant Pest Diagnostic Laboratory. Fact Sheet. P 1-2.
https://niphm.gov.in/Recruitments/ASO-Pathology.pdf
Ray F. Smith, J. Lawrence Apple, and Dale G. Bottrell. The Origins of Integrated Pest
Management Concepts for Agricultural Crops
G.B. Orlob (1973) Ancient and medieval plant pathology, Pflanzenschutz-Nachrichten 26:
65-294.,Cornell IPM CSS 4440/ ENTOM 4440 course materials.
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