Agricultural Supply Chain Management Research: Operations and Analytics in Planting, Selling, and Government Interventions (Springer Series in Supply Chain Management, 12)

This book focuses on three essential elements of agricultural supply chains: Planting and Growing, Processing and Selling, and Government Interventions. For decades, most agricultural economists applied macro-economic theory in decisions pertaining to the optimization of food production and distribution. However, few researchers used micro-economic theory to examine how individual farmers respond to market information, incentive pricing mechanisms and different market structures in the trade of agricultural goods. Examining challenges in agricultural supply chain operations through the lens of micro-economic theory is imperative because it can enable policymakers and social enterprises to develop and design market information provision policy, incentive contracts and market structures for improving farmer and consumer welfare. In each chapter, contributing authors motivate their research questions by providing the context and articulating the importance of their questions. They present their analysis to examine the respective research questions and explain their results. At the end of each chapter, they provide a short list of future research questions. Preface Acknowledgments Contents Contributors Part I Planting and Growing 1 Dynamic Crop Allocation in the Presence of Two-Season Crop Rotation Benefits 1.1 Introduction 1.2 Model 1.3 Optimal Allocation Policy 1.4 Heuristics 1.4.1 Proposed Policy: One-Period Lookahead 1.4.2 Benchmarks 1.5 Numerical Study 1.5.1 Calibration 1.5.2 Simulation Setup 1.5.3 Results 1.6 Future Research References 2 Agricultural Production Planning Under Yield-Dependent Cost and Price 2.1 Introduction 2.2 Literature Review 2.3 The Model and Analysis 2.4 Empirical Analysis 2.5 Conclusions References 3 Mechanisms for Effective Sharing of Agricultural Water Between Head-Reach and Tail-End Farms 3.1 Introduction 3.2 A Surface-Water Allocation Problem for a Farming Community 3.2.1 The Centralized Problem 3.2.2 A Naive Decentralized Mechanism 3.3 Improved Decentralized Pricing Mechanisms for Water Distribution 3.3.1 A Single-Lane, Single-Crop System 3.3.1.1 Socially Optimal Schemes 3.3.2 Reward and Premium Charts for the Entire Farming Community 3.4 A Special Case: Risk-Neutral Farmers 3.5 Concluding Remarks References 4 Portfolio Management Issues in the Commercial Seed Industry: A Modeling Framework and Industry Implementation 4.1 Introduction to the Commercial Seed Market 4.1.1 Chapter Focus 4.2 Portfolio Management with Sequential Production 4.2.1 Four Contextual Features of Seed Corn Market 4.2.2 Sequential Production 4.3 Mathematical Development 4.3.1 Problem Formulation 4.3.2 Solution 4.3.3 Mathematical Properties of Solution 4.4 Implementation and Benefits 4.4.1 Implementation 4.4.2 Benefits 4.5 Conclusion References Part II Processing and Selling 5 Procurement Management in Agricultural CommodityProcessing 5.1 Introduction 5.2 Literature Review 5.3 The Role of Demand Correlation in Agricultural Processing with Fixed Proportions Technology 5.3.1 Model Description and Assumptions 5.3.2 The Optimal Strategy 5.3.3 Analysis 5.4 The Impact of Spot Price Uncertainty on Contract Selection in Agricultural Processing 5.4.1 Model Description and Additional Assumptions 5.4.2 The Optimal Strategy 5.4.3 Analysis 5.5 Conclusion and Future Research References 6 The Influence of Yield-Dependent Trading Costs on Pricing and Production Planning Under Supply Uncertainty 6.1 Introduction 6.2 Literature Review 6.3 The Model 6.4 Model Analysis 6.4.1 The Case of No Trading of the Fruit 6.4.2 Incorporating the Trading Option 6.4.3 The Impact of Yield-Dependent Trading Costs 6.4.3.1 The Impact on Expected Profit 6.4.3.2 The Impact on Pricing and Production Decisions 6.4.3.3 The Impact of Less Than Perfect Correlation Between Trading Costs and Yield 6.5 Value of Fruit Futures 6.6 Conclusions References 7 Capacity Management in Agricultural Commodity Processing 7.1 Introduction 7.2 Literature Review 7.3 Model Description 7.4 Characterization of the Optimal Strategy 7.4.1 Periodic Input Processing and Output Inventory Decisions 7.4.2 Capacity Investment Decisions 7.5 Performance of Heuristic Capacity Investment Policies 7.6 Conclusion References 8 A Prescriptive Model for Selling Wine Futures to Mitigate Quality Uncertainty 8.1 Introduction 8.1.1 The Impact of Barrel Scores on Wine Futures Decisions 8.2 Literature Review 8.2.1 Pricing and Quantity Decisions Under Uncertainty 8.2.2 Advance Selling Mechanisms 8.2.3 Wine Tasting and Wine Analytics 8.3 The Model 8.3.1 Quality Indicator 8.3.2 Consumer Utilities and the Demand for Wine Futures 8.3.3 Winemaker's Optimization Problem 8.4 Analysis 8.4.1 The Impact of Consumers' and Winemaker's Risk Preference 8.4.2 The Impact of Barrel Score 8.4.3 The Impact of Consumer Heterogeneity 8.5 Numerical Illustrations 8.6 Summary References 9 Wine Analytics: Futures or Bottles? 9.1 Introduction 9.2 Literature Review 9.3 The Model and Its Analysis 9.3.1 Empirical Foundation for the Model 9.3.1.1 Models 1A and 1B: Futures Price Evolution 9.3.1.2 Models 2A and 2B: Bottle Price Evolution 9.3.1.3 Functional Forms for the Analytical Model 9.3.2 The Model 9.3.3 Analysis 9.4 Financial Benefits from Our Proposed Model 9.5 Conclusions References Part III Government Interventions 10 Implications of Farmer Information Provision Policies: Heterogeneous Farmers and Market Selection 10.1 Introduction 10.2 Literature Review 10.3 Model Description 10.4 Analysis: Farmer's Market Selection and Farmer's Profit 10.4.1 Farmer's Threshold Market Selection Rule Under Provision Policy δ 10.4.2 Farmer's Profit Function Under Provision Policy δ 10.4.3 Farmers' Expected Total Profit Under Provision Policy δ 10.5 Analysis: Comparisons of Provision Policies 10.5.1 Benchmark Provision Policies 10.5.2 Partial Intensity Policy (Fρ) 10.5.3 General Policy (Kρ) 10.5.3.1 Numerical Examples 10.5.3.2 Perceived Unfairness and Nominal Fees 10.6 Conclusion References 11 Agricultural Market Information: Economic Value and Provision Policy 11.1 Introduction 11.2 Economic Value of Agricultural Market Information 11.2.1 Impact of Information on Farmer's Welfare 11.2.1.1 Impact of Private Signal on Farmer's Welfare 11.2.1.2 Impact of Public Signal on Farmer's Welfare 11.2.1.3 Impact of Signal Precision on Price Variation 11.2.2 Non-identical Private Signal Precisions 11.3 Optimal Information Provision Policy 11.3.1 Farmers' Equilibrium Analysis 11.3.2 Central Planner's Optimal Information Provision Policy 11.4 Conclusion References 12 Knowledge Sharing Among Smallholders in DevelopingEconomies 12.1 Introduction 12.2 Related Literature 12.3 Model Preliminaries 12.3.1 Base Case: Farmer's Effort Decision When There Is No Knowledge Sharing 12.4 Knowledge Sharing and Learning 12.4.1 Learning Process 12.4.2 A Coordinated System: Sharing Decisions Made by a Coordinator 12.4.3 A Decentralized System: Sharing Decisions Made by Individual Farmers 12.4.3.1 A Farmer's Best Response Function in a Decentralized System 12.4.3.2 Pure-Strategy Nash Equilibrium 12.4.3.3 Motivations for Sharing/Non-sharing in a Decentralized System 12.4.4 The Efficiency of Voluntary Sharing 12.5 Income Inequality and Reward Mechanisms 12.5.1 Impact of Increasing Knowledge Sharing on Income Inequality 12.5.2 Reward Mechanisms 12.5.2.1 Two Ineffective Mechanisms 12.5.2.2 A Quota-Based Reward Mechanism 12.6 Improving the Learning Effectiveness Factor h 12.7 Extensions 12.7.1 When Farmer's Knowledge Follows a General Distribution 12.7.2 When Each Farmer's High-Quality and Low-Quality Outputs Are Stochastic 12.7.2.1 The Productive Factor β Follows the Binomial Distribution 12.7.2.2 Farmer k's High-Quality Output Is βk x + εk 12.7.3 When a Farmer's Output Capacity Is Not Fixed and the Markets Are Not Separate 12.8 Concluding Remarks References 13 Policy Interventions for an Agriculture-Based Malaria Medicine Supply Chain 13.1 Introduction 13.2 Related Literature 13.3 Model 13.3.1 Overview 13.3.2 Equilibrium Condition 13.3.3 Two Models of Price-Dependent Demand 13.3.4 Performance Measures 13.4 Analysis 13.5 Summary of Implications for Policy Makers 13.6 Conclusions References 14 The Impact of Crop Minimum Support Price on Crop Production and Farmer Welfare 14.1 Introduction 14.2 Literature Review 14.3 Model Preliminaries 14.4 A Model of the Credit-Based MSP Scheme 14.4.1 Farmers' Crop Selection and Production Decisions 14.4.2 Impact of MSPs on Farmers' Production Decisions 14.4.3 Impact of MSPs on Farmers' Profits and Surplus 14.5 Conclusions References 15 Input- vs. Output-Based Farm Subsidies in Developing Economies: Farmer Welfare and Income Inequality 15.1 Introduction 15.2 Literature Review 15.3 Model Preliminaries 15.3.1 Farmers' Planning Problem 15.3.2 Output-Based and Input-Based Subsidy Schemes 15.3.3 The Government's Subsidy Scheme 15.4 Equilibrium Analysis 15.4.1 Input-Based Subsidy Scheme 15.4.1.1 The Farmers' Planting Decisions 15.4.1.2 The Government's Input-Based Subsidy Level Decision 15.4.2 Output-Based Subsidy Scheme 15.4.2.1 The Farmer's Planting Decision 15.4.2.2 The Government's Output-Based Subsidy Level Decision 15.5 Input-Based versus Output-Based Subsidy Schemes 15.6 Discussion 15.6.1 The Impact of Subsidy Schemes on the Aggregate Level Performance 15.6.2 A Combined Subsidy Scheme 15.6.2.1 The Farmers' Planting Decisions 15.6.2.2 The Government's Subsidy Level Decision 15.6.3 When the Yield Rate Is Uncertain 15.7 Conclusion References This book focuses on three essential elements of agricultural supply chains: Planting and Growing, Processing and Selling, and Government Interventions. For decades, most agricultural economists applied macro-economic theory in decisions pertaining to the optimization of food production and distribution. However, examining challenges in agricultural supply chain operations through the lens of micro-economic theory by considering how individual farmers and food processors respond to changes in market conditions is imperative because it can enable policymakers and social enterprises to develop and design market information provision policy, incentive contracts and market structures for improving farmer, processor, and consumer welfare. In each chapter, contributing authors motivate their research questions by providing the context and articulating the importance of their questions. They present their analysis to examine the respective research questions and explain their results. At the end of each chapter, they provide a short list of future research questions. "The authors of this book showed us how, through the use of information technology, appropriate government intervention, public-private sector partnerships, and the application of digital smartness, innovations can occur and great potentials can be realized." Hau Lee, Thoma Professor of Operations, Information & Technology, Stanford Graduate School of Business, Stanford University "Food security, supply and sustainability is and will be a defining global issue in the decades to come... It is essential reading for policy makers, practitioners and scholars interested in understanding and tackling the critical challenge of ensuring a sustainable food supply." Brian Tomlin, Josephine Buchanan Professor, Tuck School of Business, Dartmouth College "A perfect example of how academic research benefits the private sector... The wine industry will benefit from this insightful use of data for the entire supply chain." Steven Becker, Executive Vice President and Treasurer, Southern Glazer's Wine & Spirits "This book is an invaluable reference for global policy makers, developmental organizations, and industry leaders seeking to transform the food system to be more sustainable, nutritious and equitable." Emily Ma, Head, Food for Good, Google