Farm Specific LP Equations FM LaTex

FARM SYSTEM MODELING
Solutions (Mathematical formulations):

Farm-Specific Linear Programming Models
Francisco A. Mendoza, Ivan Lee & Johannes Mossinger
Exercises for Farm-Specific Linear Programming

Models:
1 Original Linear Program
The original exercise of Farm-Specific linear programs can be expressed math-
ematically in the following system of equations
Land constraints: The amount of hectares (Ha) utilized for growing maize
and beans can not exceed the total amount of land available.
GrowHa GrowHa
1XM aize + 1XBean 10 [Hectares] (1)
Labor constraints: The amount of labor utilized for growing maize and
beans can not exceed the total amount of labor available. One hectare of maize
requires 28 person-days for producing a yield of 2 tons. Likewise, beans require
36 person-days for yielding 0.8 tons.
GrowHa GrowHa
28XM aize + 36XBean 660 [Person days] (2)
Fertilizer constraint: The process of growing maize and beans requires the
application of fertilizer. In this regard, the farmer can buy as much fertilizer
as he/she wants at a given price. One kg of fertilizer has a price of 2 monetary
units. For producing a yield of 2 tons, a hectare of maize requires 50 kg of
fertilizer, a hectare of beans requires 20 kg for obtaining a yield of 0.8 tons. The
total amount of fertilizer used can not exceed the amount bought.
GrowHa
50XM aize
GrowHa
+ 20XBean XFBuyKg
ertilizer [Kg]
or, rearranged:
GrowHa
50XM aize
GrowHa
+ 20XBean XFBuyKg
ertilizer 0 [Kg] (3)
1
Yield-selling maize balance constraint: The farmer has the possibility
to sell the corn he/she produced. In this regard, the total amount of grain (tons)
the farmer sells can not exceed the total amount produced. Growing one hectare
of maize produces 2 tons of grain, producing X number of hectares results in
GrowHa
the total level of production (2 XM aize ).
SellT ons GrowHa

1XM aizeY ield 2XM aize [Tons]
or, rearranged:
SellT ons GrowHa
1XM aizeY ield 2XM aize 0 [Tons] (4)
Yield-selling bean balance constraint: The farmer has the possibility
to sell the bean produced. In this regard, the total amount of grain (tons) the
farmer sells can not exceed the total amount produced. Growing one hectare of
bean produces 0.8 tons of grain, producing X hectares results in the total level
GrowHa
of production (0.8 XBean ).
SellT ons GrowHa
1XBeanY ield 0.8XBean [Tons]
or, rearranged:
SellT ons GrowHa
1XBeanY ield 0.8XBean 0 [Tons] (5)
Objective function: The decision of producing maize and beans imply
different costs for the farmer; producing one hectare of maize and beans costs
35 and 22 monetary units respectively. Here, the relevant costs of production can
be included; however, the price of fertilizer is not accounted in such a production
cost of the crops. As indicated above, fertilizer costs 2 monetary units per kg.
Additionally, selling maize or beans suggests a revenue for the farmer, maize
can be sold for 200 monetary units per ton and beans for 1,000 monetary units
per ton. The farmer seeks to maximize its economic result, which is expressed
in the following objective function:
Max! XRevenue XCost (6)
SellT ons SellT ons

Max! (1, 000XBeanY ield + 200XM aizeY ield )
(7)
GrowHa
(35XM aize
GrowHa
+ 22XBean + 2XFBuyKg
ertilizer ) [Monetary units]
SellT ons SellT ons

(8)
GrowHa
35XM aize
GrowHa
22XBean 2XFBuyKg
ertilizer [Monetary units]
2 Pesticides
One ha of maize requires 25 kg of pesticide, 1 ha of bean requires 18 kg. Like
fertilizer, pesticide needs to be purchased and the price is 1 monetary unit per
kg. In the original LP, the cost of applying pesticide was already included in
the per hectare production cost of maize and bean. Implement pesticide as a
separate input. Dont forget to update your objective function values!
2
Pesticide constraints: Similar to the decision of buying fertilizer, the
original linear program can be adapted for buying pesticide. This requires a
new constraint; the total amount of kilograms of pesticide used for maize and
GrowHa GrowHa
bean production (25XM aize + 18XBean ) cannot exceed the total amount of
pesticide that the farmer decides to buy. The following equations express these
relations:
25XM GrowHa
aize
GrowHa
+ 18XBean XPBuyKg
esticide [Kg]
or, rearranged:
GrowHa
25XM aize
GrowHa
+ 18XBean XPBuyKg
esticide 0 [Kg]
Updating objective function values: The original cost of production of

both crops contains the value paid for pesticide; some of the 35 Euros that the
farmer pays for producing maize corresponds to costs of pesticide, the same is
valid for beans production. If a hectare of maize requires 25 kg of pesticide and
each kg of pesticide costs 1 Euro, then the 25 Euros correspond to pesticide costs,
leaving 10 additional Euros for other costs. For beans, 18 Euros correspond to
pesticide costs, leaving 4 Euros for additional costs. Given that now the decision
of buying pesticide is explicit in the linear program, the remaining costs for
maize and bean production are 10 and 4 respectively.
SellT ons SellT ons
GrowHa
(10XM aize
GrowHa
+ 4XBean + 2XFBuyKg BuyKg
ertilizer + 1XP esticide ) [Monetary units]
(9)
3 Crops rotation
Beans can only be grown on the same plot only every second year, while maize
can be grown continuously (see Hazell and Norton 1986, Chapter 3, section 3.8).
Defining a land transfer and connecting to rotation condition:

Given that rotation schemes affect directly the land use decisions, an auxil-
iary variable called land transfer can be introduced to sum up the land
actually used by the farmer. Here, the value taken by the land transfer activity
can not exceed the total number of hectares at the farmers disposal.
Once the land transfer activity is defined and connected to the land endow-
ment, it can serve as the limiting factor for maize and bean hectare usage; given
that it represents the land endowment, the number of hectares used for maize
GrowHa GrowHa
and bean production (1XM aize + 1XBean ) are not allowed to exceed the
value of the land transfer variable.
3
Finally, such a land transfer can also be used for defining the crop rotation
condition. Since any amount of area used for beans production is only allowed
to be used every second year, the number of hectares used for bean production
can not exceed the 50 % of the land transfer variable. Mathematically these
mentioned conditions are as folllowing.
Connecting the land transfer activity:
T ransf er
XLand 10 [Ha] (10)
Restricting the area use of beans and maize:
GrowHa GrowHa T ransf er
1XM aize + 1XBean XLand [Ha]
or, rearranged:
1XM aize + 1XBean XLand 0 [Ha] (11)
Guarantee the average rotation dynamic:
GrowHa T ransf er
XBean 0.5XLand [Ha]
or, rearranged:
GrowHa T ransf er
XBean 0.5XLand 0 [Ha] (12)
Updating objective function values: Land transfers do not impact the
objective value function, since they serve only as auxiliary variables to represent
specific parameters. Therefore, transfers take objective value coefficients of zero.
SellT ons SellT ons
GrowHa
(10XM aize
GrowHa
ertilizer + 1XP esticide )+ (13)
T ransf er
0XLand [Monetary units]
4 Labor periods
In reality, the cropping season can be divided into distinct stages with different
levels of input use at each stage. Imagine we divide the year into three stages
of land preparation, weeding/pest control, and harvesting. The table indicates
how many months the period of the year has, in which you have to perform
the work and how many person-days per hectare you have to work within that
period (given per period not per month).
Distribute the labor needs for both crops over these three periods in the
table. Assume that the amount of labor available in each month is 55 person
days (that is, 660 person days per year):
Stage in the Number of Labor use maize Labor use bean

cropping cycle months [person days/ha] [person days/ha]
Land preparation 1 6 6
Weeding
9 15 20
pest control
Harvesting 2 7 10
Total 12 28 36
4
Defining a labor transfer: For the formulation of the system of equations,
the use of an additional auxiliary variable comes in handy. The labor transfer
can later be used for the definition of specific constraints for each labor period.
The value that is allowed to be taken by the labor transfer cannot exceed the
total amount of time available for the farm household; given that it has been
assumed that the farm household can make use each month of 55 person days
per hectare, then in a given year the total endowment of labor force is 660.
T ransf er
XLabor 660 [Person days] (14)
Land preparation: In order to perform land preparation activities the

farmer has one month (which corresponds to a total resource endowment of 55
person days per hectare). Since equation 14 connects the labor transfer decision
variable to the actual labor resource endowment it can be used for definition of
labor limits at each period.
GrowHa
The amount of labor per hectare used for land preparation purposes (6XM aize +
GrowHa
6XBean ) can not exceed the total amount of labor capacity that the farmer
has. This capacity is 55 person days per ha and represents 1/12 of the total
labor endowment: [ (155)
660 ] = 0.08333.
If it is in the interest of the farmer to produce a lot of maize and beans,

GrowHa GrowHa
the term 6XM aize + 6XBean (LHS) will increase up to the point where
T ransf er
the RHS limits its value. This limit will be defined as 0.08333 XLabor . If
the LHS value increases (meaning that more hectares of bean and maize are
produced), then the RHS will have to also increase in order to avoid violation of
the inequality condition. But the size that the RHS can achieve is determined
T ransf er
by the labor transfer variable(XLabor ), the weight of 1 month over the total
labor capacity and equation 14. Mathematically this relation looks like:
GrowHa GrowHa 1 T ransf er

6XM aize + 6XBean X [Persons days]
12 Labor
or, rearranged:

6XM aize + 6XBean X 0 [Persons days] (15)
12 Labor
Weeding and pest control: Similar as in equation 15, weeding and pest
control conditions can be established taking into account that these activities
are performed in a time frame of 9 months. The important thing to realize here
is that the point of time can be freely chosen within these 9 months according
to the assumptions made in the exercise description. Mathematically these
conditions are as follow:
12 Labor
or, rearranged:

12 Labor
5
Harvesting: Just as in weeding and pest control conditions, the harvesting
constraints can be established in a similar way, but taking into consideration
that now harvesting activities require 2 months. Mathematically these condi-
tions are as follow:
12 Labor
or, rearranged:

12 Labor
Updating objective function values: Since labor transfer does not have
an impact in the objective function then the updated objective function would
look as follows:
SellT ons SellT ons
GrowHa
(10XM aize
GrowHa
T ransf er T ransf er
0XLand + 0XLabor [Monetary units]
5 Gender
Among some ethnicities, there are cultural taboos that restrict certain kinds
of labor to either male or female household members. Males are usually more
involved in heavy manual labor, like land preparation, while females tend to
take care of the crop during its growth stage. To capture this, separate the
existing labor entry into two entries, one for male and one for female labor.
Land preparation is only done by males, weeding & pest control is only done
by females, while harvesting is done by both males and females. The initial
endowment is 15 person days of female labor per month, and 40 person days of
male labor per month.
Male and female labor transfers: In equation 14 only one labor transfer
has been needed, since no distinction between female and make work was pointed
out. However, now the labor work shows this distinction. By working the whole
year, female members of the farm household have 180 person days per hectare
capacity (15*12), male members have in turn 480 person days per hectare (40*12
or 660-180). These values can be used for definition of two different labor
transfers for each sex.
Female labor transfer:
XFT emaleLabor
ransf er
180 [Person days] (19)
Male labor transfer:

T ransf er
XM aleLabor 480 [Person days] (20)
Land preparation using male labor: The amount of labor required for
land preparation can not be greater than the total labor capacity provided by
male members of the farm household.
GrowHa GrowHa (1 40) T ransf er

6XM aize + 6XBean [ ]XM aleLabor [Persons days]
480
6
or, rearranged:

6XM aize + 6XBean [ ]XM aleLabor 0 [Persons days] (21)
480
Weeding and pest control using female labor: The amount of labor
required for weeding and pest control can not be greater than the total labor
capacity provided by female members of the farm household.

15XM aize + 20XBean [ ]XF emaleLabor [Persons days]
180
or, rearranged:

15XM aize + 20XBean [ ]XF emaleLabor 0 [Persons days] (22)
180
Harvesting: The amount of labor required for harvesting activities can not
be greater than the total labor capacity provided by male and female members
of the farm household.
GrowHa GrowHa
7XM aize + 10XBean
(2 40) T ransf er (2 15) T ransf er
[ ]XM aleLabor + [ ]XF emaleLabor [Persons days]
480 180
or, rearranged:
GrowHa GrowHa
7XM aize + 10XBean
(2 40) T ransf er (2 15) T ransf er (23)
[ ]XM aleLabor [ ]XF emaleLabor 0 [Persons days]
480 180
Updating objective function values: Since labor transfers created here
also do not have an impact in the objective function then the updated objective
function would look as following.
SellT ons SellT ons
GrowHa
(10XM aize
GrowHa
0XLand + 0XM aleLabor + 0XFT emaleLabor
ransf er
[Monetary units]
7
6 Off-farm employment
Apart from crop production, income can be generated by performing employ-
ment off the farm. Assume that in our example case, off-farm labor can only be
performed by male household members during the second labor period (weed-
ing). The wage rate is 5 euros per person day. Implement this in the LP.
Off-farm employment decision: The amount of days that male members
of the farm household are allowed to work outside their own farm cannot exceed
the nine months of the weeding period, this means that from the 480 days per
year that male members could work in own farm activities, 360 (9*40) can at
maximum be employed for off-farm employment. Mathematically this is shown
as following.
Of f F arm (9 40) T ransf er

XEmployment [ ]XM aleLabor [Persons days]
480
or, rearranged:
Of f F arm (9 40) T ransf er

XEmployment [ ]XM aleLabor 0 [Persons days] (25)
480
Updating objective function values: The decision of the farmer to oc-
cupy himself (or allow other members of the farm household to occupy them-
selves) in off-farm employment carries a benefit in the form of a payment of 5
monetary units per person. This value enters directly in the objective function
value and increases the revenue of the farmer.
SellT ons SellT ons Of f F arm
Max! (1, 000XBeanY ield + 200XM aizeY ield + 5XEmployment )
GrowHa
(10XM aize
GrowHa
ertilizer + 1XP esticide )+
(26)
0XLand + 0XM aleLabor + 0XFT emaleLabor
ransf er
[Monetary units]
8
7 Intercropping
Intercropping is a common feature of agriculture, especially in Sub- Saharan
Africa. Beneficial effects might include a better utilization of nutrients, reduced
soil erosion from a better soil cover, better water maintenance in the soil, or
better protection from pests. The present farm has the option to intercrop
maize and bean, in equal proportion. 1 ha of intercropped maize/bean requires
for each crop only half the inputs of the crop when grown in sole stand. If
intercropped, the maize yield is 15% higher, but the bean yield is 5% lower as
compared to the sole stand. Implement this in the LP.
Land constraint: Given that a hectare used for intercropping also requires
the use of land, equation 11 can be extended as follows.
GrowHa GrowHa GrowHa T ransf er

1XM aize + 1XBean + 1XIntercropped XLand 0 [Ha] (27)
Labor constraints: Since a hectare used for intercropping also uses labor,
equations 21, 22 and 23 can be extended as follows.
Land preparation:
GrowHa GrowHa GrowHa (1 40) T ransf er

6XM aize +6XBean +6XIntercropped [ ]XM aleLabor 0 [Persons days]
480
(28)
Weeding and pest control:
GrowHa GrowHa 15 + 20 GrowHa

15XM aize + 20XBean + XIntercropped
2
(29)
(9 15) T ransf er
[ ]XF emaleLabor 0 [Persons days]
180
Harvesting:
GrowHa GrowHa 7 + 10 GrowHa

7XM aize + 10XBean + XIntercropped
2
(30)
(2 40) T ransf er (2 15) T ransf er
[ ]XM aleLabor [ ]XF emaleLabor 0 [Persons days]
480 180
Fertilizer and pesticide application: The original equations regarding
fertilizer and pesticide application need to be updated; growing a hectare in an
intercropped manner also utilizes resources that need to be bought.
50 + 20 GrowHa
GrowHa
50XM aize
GrowHa
+ 20XBean + XIntercropped XFBuyKg
ertilizer 0 [Kg] (31)
2
18 + 25 GrowHa
GrowHa
25XM aize
GrowHa
+ 18XBean + XIntercropped XPBuyKg
esticide 0 [Kg] (32)
2
9
Yield-selling intercropped balance: The maize and bean selling balances
need to be updated, since now a hectare intercropped maize and beans yields
additional produce that can be sold.
SellT ons GrowHa 2 GrowHa

1XM aizeY ield 2XM aize 1.15XIntercropped 0 [Tons] (33)
2
SellT ons GrowHa 0.8 GrowHa

1XBeanY ield 0.8XBean 0.95XIntercropped 0 [Tons] (34)
2
Updating objective function values: Growing a hectare in an inter-
cropped manner implies that the farmer needs to pay for inputs, just as it is
specified in the growing activity of beans and maize, a hectare of intercropped
contributes to the costs in the objective function.
10 + 4 GrowHa
GrowHa
(10XM aize
GrowHa
ertilizer + 1XP esticide + XIntercropped )+
2
T ransf er T ransf er T ransf er
0XLand + 0XM aleLabor + 0XF emaleLabor [Monetary units]
(35)
8 Cash constraints
Fertilizer and pesticides require cash. Poor farm households are often con-
strained in purchasing these inputs as they do not have enough cash. This can
be implemented in the LP by adding a separate constraint for cash. Assume
that the initial amount of available cash at the beginning of the year is 50 Euros.
Implement it in such way that fertilizer and pesticides need to be purchased at
the beginning of the year using cash.
Even though the maize, bean and intercropping activities also require re-
sources to be paid (10, 4, and 7 monetary units respectively), these are assumed
to be paid at the end of the agricultural period in which the farmer is engaged;
i.e., harvesting costs packing costs, delivery costs, etc. Such payments do not
affect the pre-season cash balance, but, instead, can be directly paid from the
revenue obtained from selling the produce. Likewise, the revenue received from
selling the crops is only available to the farmer when he or she sells the grain and
this revenue becomes available for agricultural purposes if the farmer decides to
engage in a new agricultural cycle.
Cash constraint: Buying one kg of fertilizer and pesticide requires 2 and
1 monetary units respectively. This shows that the demand for cash comes in
the form of 2XFBuyKg BuyKg
ertilizer + 1XP esticide . Given that the farmer has a cash reserve
(Supply) of 50 monetary units, then the cash constraint can take the following
form:
2XFBuyKg BuyKg
ertilizer + 1XP esticide 50 [Monetary units] (36)
10
9 Short-term credit
The cash constraint can be relieved by taking short-term credit from a bank
or money lender. This can be implemented by adding one activity to the LP.
Assume an interest rate of 60%, which can be seen as the price of short-term
credit.
Relaxing the cash constraint: While the initial cash was fixed at 50
monetary units, the farmer can now expand its supply of cash through credit.
One monetary unit that is received in credit increases the liquidity of the farmer
by 1 unit. Therefore this restriction can be viewed as following:
2XFBuyKg BuyKg Acquire

ertilizer + 1XP esticide 50 + XCredit [Monetary units]
or, rearranged:
2XFBuyKg BuyKg Acquire

ertilizer + 1XP esticide XCredit 50 [Monetary units] (37)
Updating the objective function The additional supply of cash comes
with a cost, which requires a payment in the form of an interest rate of 0.6
(60%). This is accounted for in the objective function.
GrowHa
(10XM aize
GrowHa
+ 4XBean + 2XFBuyKg BuyKg GrowHa
ertilizer + 1XP esticide + 7XIntercropped +
Acquire T ransf er T ransf er T ransf er
+0.6XCredit ) + 0XLand + 0XM aleLabor + 0XF emaleLabor [Monetary units]
(38)
10 Short-term deposit
Apart from using cash to finance inputs, cash can be deposited at a bank to
earn interests. Implement this by including one more activity while assuming a
2% interest rate on short-term deposits.
Updating the cash constraint: The decision of the farmer to deposit cash
in a bank account reduces the availability of working capital for agricultural
purposes. The cash constraint would then take the following form:
2XFBuyKg BuyKg Acquire Deposit

ertilizer + 1XP esticide 50 + XCredit XCash [Monetary units]
or, rearranged:
2XFBuyKg BuyKg Acquire Deposit

ertilizer + 1XP esticide XCredit + XCash 50 [Monetary units] (39)
11
Updating the objective function: If the farmer decides to deposit cash
in the bank, then this will generate earned interest that has to be accounted
for positively by the farmer; this suggests that the decision to put money in the
bank contributes to the revenue part of the objective value function.
SellT ons SellT ons Of f F arm Deposit
Max! (1, 000XBeanY ield + 200XM aizeY ield + 5XEmployment + 0.02XCash )
GrowHa
(10XM aize
GrowHa
+ 4XBean + 2XFBuyKg BuyKg GrowHa
ertilizer + 1XP esticide + 7XIntercropped +
Acquire T ransf er T ransf er T ransf er
+0.6XCredit ) + 0XLand + 0XM aleLabor + 0XF emaleLabor [Monetary units]
(40)
Advanced Exercises: Nonlinear yield response and

advanced use of integers:
11 Nonlinear yield response
Yield response to fertilizer: The original exercise assumed a fixed fertiliza-
tion plan that uses 50 kg of fertilizer for maize production, which results in an
expected yield of 2,000kg of maize. In reality, of course, farmers are flexible in
choosing the amount of fertilizer they use and would generally expect yields to
increase with more fertilizer use. For our example, lets assume agronomists es-
timate that expected maize yield is 400 kg if no fertilizer is used and that yields
would not increase further when more than 300 kg of fertilizer are applied. Be-
tween 0 and 300 kg of fertilizer applications the yield response function is:
M aizeyield[kg] = 400 + 35 f ertilizer[kg] 0.06 (f ertilizer[kg] )2
Give farmers in the LP the possibility to decide on the amount of fertilizer

they want to use. (Note: Only consider this for sole-stand maize production.
For intercropping with beans fertilizer amounts should not be changed.) The
function would look like this if plotted.
12
Defininig yield points: The graph shown above illustrates a non-linear
relationship between input and output, it is then the task to simulate this re-
lationship given the possibility to the farmer to decide in which point of the
production curve he or she wants to produce. In doing this, it is first necessary
to define a number of discrete levels. Here the levels chosen for fertilizer appli-
cation are: 0, 50, 150, 200, 250 and 300 Kg with corresponding yield levels of
400, 2,000, 4,300, 5,000, 5,400 and 5,500 respectively. Observing the illustration
of the production function, these three levels provide a fair positioning of the
possible levels of fertilizer that aim to represent a concave yield response func-
tion.
Such discrete levels of fertilizer application result in different decision vari-

ables, now the farmer, in his/her aim of finding optimality, might decide to
cultivate a hectare of maize not applying fertilizer, a hectare of maize ap-
plying 50 Kg of fertilizer, a hectare of maize applying 150 Kg of fertilizer,
a hectare of maize applying 200 Kg of fertilizer, a hectare of maize applying
250 Kg of fertilizer, , a hectare of maize applying 300 Kg of fertilizer or
any linear combination of the three possibilities. These decisions become the
decision variables of the mathematical program.
Land constraint: The total amount of hectares grown in any of the poten-
tial cultivation possibilities can not exceed the total amount of land.
GrowHa GrowHa GrowHa

1XM aize0KgF ertilizer + 1XM aize50KgF ertilizer + 1XM aize150KgF ertilizer
1XM aize2000KgF ertilizer + 1XM aize250KgF ertilizer + 1XM aize300KgF ertilizer +
1XBean + 1XIntercropped XLand 0 [Ha]
(41)
Land preparation made by male labor: The new cultivation possibilities
still require labor to be applied. For land preparation the updated constraint
would look like:


6XBean + 6XIntercropped [ ]XM aleLabor 0 [Persons days]
480
(42)
Weeding and pest control made by female labor: The weeding and
pest control constraint needs to be updated:

20XBean + 18XIntercropped [ ]XF emaleLabor 0 [Persons days]
180
(43)
Harvesting: The constraint for harvesting needs to be updated in a similar
13
way as the previous constraints have been updated:

10XBean + 18XIntercropped [ ]XM aleLabor
480
(2 15) T ransf er
180
(44)
Fertilizer and pesticide: Both equations on fertilizer and pesticide con-
straints need to be updated. For fertilizer:
GrowHa GrowHa
50XM aize50KgF ertilizer + 150XM aize150KgF ertilizer +
GrowHa
20XBean GrowHa
+ 35XIntercropped XFBuyKg
ertilizer 0 [Kg]
(45)

GrowHa
18XBean GrowHa
+ 25XIntercropped XPBuyKg
esticide 0 [Kg]
(46)
Yield-selling balance: Given that the farmer can choose his or her deci-
sion variables as a linear combination between two decision variables of those
introduced in this exercise, these will also contribute to the overall maize yield
that can be sold, mathematically the yield-selling balance would then take the
form:
SellT ons GrowHa GrowHa

1XM aizeY ield 0.4XM aize0KgF ertilizer 2XM aize50KgF ertilizer
GrowHa GrowHa
4.3XM aize150KgF ertilizer 5XM aize200KgF ertilizer
GrowHa GrowHa
(47)
5.4XM aize250KgF ertilizer 5.5XM aize300KgF ertilizer
GrowHa
1.15XIntercropped 0 [Tons]
Updating the objective function value: Since now there are three new
decision variables representing three different cultivation approaches for maize,
these three decision variables are included in the objective function value con-
tributing to the costs:
(10XM aizeY ield + 10XM aize0KgF ertilizer + 10XM aize50KgF ertilizer
GrowHa GrowHa
+ 10XM aize150KgF ertilizer + 10XM aize200KgF ertilizer
GrowHa GrowHa
+ 10XM aize250KgF ertilizer + 10XM aize300KgF ertilizer +
GrowHa
4XBean + 2XFBuyKg BuyKg GrowHa Acquire
ertilizer + 1XP esticide + 7XIntercropped + +0.6XCredit )+
0XLand + 0XM aleLabor + 0XF emaleLabor [Monetary units]
(48)
14
12 Use of integers: Quantity discounts
The local trader has a special offer: If farmers buy more than 10 t of fertilizer
per year, they pay only 1.6 Euro per kg, if they buy more than 5 t they pay 1.75
Euro per kg, for quantities less than 5 t they pay the usual 2 Euro/kg. Make
the LP consider this pricing scheme.
Defining new decisions variables for buying fertilizer: Now the farmer
has the possibility to buy fertilizer with different prices, this possibility suggests
that, initially, three different decision variables can be introduced in the decision
problem. The farmer decides now over the alternative of Buying fertilizer at
1.6 Euro per kg, Buying fertilizer at 1.75 Euro per kg or Buying fertilizer
at 2 Euro per kg. Of course, these decisions are made under the condition that
the farmer needs to demand a certain level of the input to receive the benefits
of the offer, these condition can be introduced in the form of dichotomous vari-
ables that take the value of 1 if a certain variable takes a specific value and zero
otherwise:
BuyF ertilizer
Y10,000KgOrM ore : Takes value of 1 if farmer buys at least 10,000 kg of fertil-
izer, zero otherwise
BuyF ertilizer
Y5,000KgOrM ore : Takes value of 1 if farmer buys at least 5,000 kg of fertilizer,
zero otherwise
A new set of restrictions is necessary. If the farmer wants to buy fertilizer

BuyF ertilizer
at a price of 1.6 Euros per kg, the dichotomous variable Y10,000KgOrM ore needs
to take the value of 1. The following condition makes sure that this is the case
only if the variable XFBuyKg
ertilizerW ithP rice1.6 is above 10,000 in order to not violate
the inequality condition.
XFBuyKg BuyF ertilizer

ertilizerW ithP rice1.6 10, 000Y10,000KgOrM ore [Kg]
or, rearranged:

ertilizerW ithP rice1.6 10, 000Y10,000KgOrM ore 0 [Kg] (49)
Decision to buy with a price of 1.75 Euros per kg:

ertilizerW ithP rice1.75 5, 000Y5,000KgOrM ore [Kg]
or, rearranged:

ertilizerW ithP rice1.75 5, 000kgY5,000KgOrM ore 0 [Kg] (50)
As it can be seen in these equations, whenever a farmer decides to buy
fertilizer at a specific price the amount to be bought must be higher than a
specific minimum quantity.
15
Updating the objective function: Finally, the objective function needs
to be updated. In this case the dichotomous variables do not have an impact
on the objective function value, since they only serve to define which of the
activities for buying fertilizer should be the one that takes values and receives
the price offer. In this regard, the objective function would look like:

(10XM aizeY ield + 10XM aize50KgF ertilizer + 10XM aize150KgF ertilizer +
GrowHa
4XBean + 2XFBuyKg BuyKg GrowHa Acquire
ertilizer + 1XP esticide + 7XIntercropped + 0.6XCredit +
1.6XFBuyKg BuyKg BuyKg

ertilizerW ithP rice1.6 + 1.75XF ertilizerW ithP rice1.75 + 2XF ertilizerW ithP rice2 )+
0XLand + 0XM aleLabor + 0XF emaleLabor +
BuyF ertilizer BuyF ertilizer
0Y10,000KgOrM ore + 0Y5,000KgOrM ore [Monetary units]
(51)
13 Pig production 1
Apart from crops, the farm raises pigs, which is only done by females. This
requires a change in gender-specific field activities: females now only do weed-
ing/pest control. The following information is available. (For the implementa-
tion of this exercise, the base model that is utilized is up to short-term deposits,
meaning that the advanced exercises are not considered when implementing pig
production. Also porkers are kept in a pigsty and do not require any land.)
Purchase price of
53
piglet
1.5 person-days (only
Labor needs female and equally dis-
tributed over the year)
Veterinary services 5 Euro (cash expenses)
Energy requirement of
feed (MJ per porker) is
Pig feed equivalent to 300 kg of
maize or 630 kg of bean
(from own production)
Weight at end of year 90 Kg
Selling price 2.83 Euro/kg
Decision to raise pigs. The farmer may now buy piglets, feed them and
then sell each one at the market at a specific price; this decision can be sum-
RaiseP igs
marized in the decision variable XN P orkers .
The activity is considered to be executed for a full year. When the pig
reaches a weight of 90 Kg it can be sold for a market value of 254.7 Euros. The
final benefit for the farmer reaches 196.7 Euros per piglet after subtracting the
costs of buying the the piglet (53 Euros/piglet) and raising the piglet (veterinary
costs 5 Euros/piglet),
16
Cash constraint: Since the farmer needs to pay for the veterinary services
and the cost of the piglet, it is here assumed that these are the costs that imply
a direct cash expenditure. Therefore the updated cash constraint would look
like:
2XFBuyKg BuyKg RaiseP igs Acquire Deposit

ertilizer +1XP esticide +58XN P orkers XCredit +XCash 50 [Monetary units]
(52)
Harvesting demand for labor: Since the porkers require female labor the
labor balances are rearranged. The harvesting constraints will now be restricted
to the labor capacity provided by male workers:
7XM aize + 10XBean + 9XIntercropped
(2 40) T ransf er (53)
[ ]XM aleLabor 0 [Persons days]
480
Labor demands: The yearly labor demand of pigs is 1.2 person-days. This
means that every month of the year, one pig that is being raised requires 0.099
person days. In the period, where the land preparation is performed by male
labor (which correspond to 1 month of the year) 0.099 labor units per pig are
required. In the period where weeding and pest control are performed 0.89 labor
units per pig are required (0.099 9 = 0.899), and finally in the period where
harvesting is undertaken (which correspond to the last two months of the year)
0.19 labor units are required (0.09*2=0.19).
The constraint for the second labor period consisting of 9 months (weeding
and pest control) needs to be updated, since now, the available female labor
needs to be distribuited among crop protection activities and animal production:
GrowHa GrowHa GrowHa RaiseP igs

15XM aize + 20XBean + 18XIntercropped + 0.899XN P orkers
(9 15) T ransf er (54)
180
Two new constraints need to be introduced. One constraint for capturing
the pig labor demands for female labor at the time in which male workers are
engaged in land preparation (first month), and a second constraint for capturing
the demands for female labor at the time in which male workers are harvesting
(last two months of the year). Mathematically, these new constraints would
look as follows:
Female labor demand of pig production during the time land preparation is
performed by male workers:
RaiseP igs (1 15) T ransf er

0.099XN P orkers [ ]XF emaleLabor [Persons days]
180
or, rearranged:

0.099XN P orkers [ ]XF emaleLabor 0 [Persons days] (55)
180
17
Female labor demand of pig production during the time that harvesting is
performed by male workers:

0.199XN P orkers [ ]XF emaleLabor [Persons days]
180
or, rearranged:

0.199XN P orkers [ ]XF emaleLabor 0 [Persons days] (56)
180
Feed/energy constraints: Pigs require feed, and this feed comes, in this
exercise, from the own production of maize and beans. This means that the
yield-selling balance equations need to be updated. The farmer needs to dis-
tribute its yield between the amounts to be sold and the amounts to be used for
feeding purposes. For these purposes, a pig feed constraint can be introduced.
If one pig is kept, it requires one unit of energy, then, either XUEnergyF
nit
romM aize
,
EnergyF romBean
XU nit or a linear combination of both, need to guarantee the pro-
vision of this unit:
RaiseP igs EnergyF romM aize

1XN P orkers XU nit + XUEnergyF
nit
romBean
[Energy]
or, rearranged:
RaiseP igs EnergyF romM aize

1XN P orkers XU nit XUEnergyF
nit
romBean
0 [Energy] (57)
But this unit of energy that the pig requires (i.e., one unit of energy coming
from maize), corresponds to some quantity of grain (for the case of maize this
corresponds to 300Kg or 0.3tons), and such an amount of grain is grain that can
not be sold. Therefore, the yield-selling constraint for beans and maize need to
be updated as following:
SellT ons EnergyF romM aize GrowHa GrowHa

1XM aizeY ield +0.3XU nit 2XM aize 1.15XIntercropped 0 [Tons]
(58)
SellT ons EnergyF romBean GrowHa GrowHa

1XBeanY ield +0.63XU nit 0.8XBean 0.38XIntercropped 0 [Tons]
(59)
Updating the objective function: Finally, the objective function is up-
RaiseP igs
dated. In this regard, the newly introduced activity XN P orkers will contribute
with 196.7 Euros to the revenue in the objective value function. The activi-
ties corresponding to energy requirements do not affect the the objective value
function and have coefficients of zero. The objective function would then look
like:
SellT ons SellT ons Of f F arm RaiseP igs

Max! (1, 000XBeanY ield + 200XM aizeY ield + 5XEmployment + 196.7XN P orkers
Deposit
0.02XCash GrowHa
) (10XM aize
GrowHa
ertilizer + 1XP esticide +
GrowHa Acquire T ransf er T ransf er
7XIntercropped + +0.6XCredit ) + 0XLand + 0XM aleLabor +
0XFT emaleLabor
ransf er
+ 0XUEnergyF
nit
romBean
+ 0XUEnergyF
nit
romM aize
[Monetary units]
(60)
18
14 Pig production 2
Instead of buying piglets for fattening, which requires a lot of cash resources,
the farm can also keep breeding sows and produce the piglets on-farm. The
replacement of breeding sows must be done by rearing. Here is the relevant
data for LP (Note: Each breeding sow requires 0.1 ha of land. Porkers and
young sows are kept in a pigsty and do not require any land):
Piglets per sow and year 7

2 years, 2 years needed to
Breeding life
rear replacement sow
Labor needs (breeding Female labor only, 50%
sow) more time than for porker
Labor needs (replacement Female labor only, 45% of
sow) time for porker
Cash expenses (breeding
15 Euro/year
sow)
Feed (breeding sow) 60% of porker
Feed (replacement sow) 35% of porker
Land restriction: The easiest way to implement the new activities of the
farmer related to new pig production activities is to first consider the decision
KeepN
to keep a (number of) breeding sow(s): XBreedingSow . Since the decision to
keep a breeding sow requires some amount of land, the land restriction would
be then updated in the following form:
GrowHa GrowHa GrowHa KeepN T ransf er

1XM aize +1XBean +1XIntercropped +0.1XBreedingSow XLand 0 [Ha]
(61)
Cash restriction: Just as land, the cash constraint needs to be updated,
this is because keeping breeding sows requires payments of 15 Euro per year.
2XFBuyKg BuyKg RaiseP igs KeepN

ertilizer + 1XP esticide + 58XN P orkers + 15XBreedingSow
Acquire Deposit
(62)
XCredit + XCash 50 [Monetary units]
Labor constraints: Keeping breading sows also requires that labor needs to
be applied for caring and raising purposes. However, the breeding sows require
50% more labor than the activity of raising pigs from the previous exercise.
Female labor requirements need to be distributed among crop protection
activities and animal production:

15XM aize + 20XBean + 18XIntercropped + 0.899XN P orkers +
(9 15) T ransf er (63)
KeepN
(1.5 0.899)XBreedingSow [ ]XF emaleLabor 0 [Persons days]
180
19
Female labor requirements for breeding sows during the time land prepara-
tion is performed by male workers (updated constraint):
RaiseP igs KeepN
0.099XN P orkers + (1.5 0.099)XBreedingSow
(1 15) T ransf er (64)
180
Female labor requirements for breeding sows during the time harvesting is
performed by male workers (updated constraint):
RaiseP igs KeepN
0.199XN P orkers + (1.5 0.199)XBreedingSow
(2 15) T ransf er (65)
180
Feed/energy constraints: The breeding sow does not require the same
amount of energy consumption as the pig kept for raising purposes, but only
60% of the amount required by pigs being raised. Therefore the updated feed-
ing/energy constraint would look like:
RaiseP igs KeepN
1XN P orkers + (0.6 1)XBreedingSow
(66)
XUEnergyF
nit
romM aize
XUEnergyF
nit
romBean
0 [Energy]
The second step in implementing the new activities for pig production in the
farm exercise is to consider a new activity that concerns the decision of rearing
RearN
a (number of) sow: XReplacementSow . This decision is important given that the
farmer needs to keep in mind that the breeding sow that he/she decided to
keep (see above implementation) has a limited productive life and it needs a
replacement. In this regard, the new activity for rearing a sow guarantees that
this replacement is available.
Cash constraint: Rearing a sow requires some cash. The farmer knows at
the beginning of his/her production activity that a sow for replacing a current
active one will only be available at the end of two years. Nevertheless, the pay-
ments and inputs that this replacement sow needs can be done at the beginning
of the current period. In this sense, if the farmer decides at the beginning of
the period to rear a sow then this decision involves the payment of 18 Euros
(9 Euros per year that is being kept before breeding) which affects the cash
constraint:
2XFBuyKg BuyKg RaiseP igs RearN

ertilizer + 1XP esticide + 58XN P orkers + 18XReplacementSow +
KeepN Acquire Deposit
(67)
15XBreedingSow XCredit + XCash 50 [Monetary units]
Labor constraints: Rearing a sow also requires labor. However, the breed-
ing sows require only 45% of the labor required for raising pigs. However, this
requirement is an annual requirement, and needs to be multiplied by 2 to ac-
count for the two years that one sow needs to be reared before becoming a
breeding sow.
20

KeepN RearN
(1.5 0.899)XBreedingSow + (0.45 0.899 2)XReplacementSow (68)
(9 15) T ransf er
180
RaiseP igs KeepN

0.099XN P orkers + (1.5 0.099)XBreedingSow +
RearN (1 15) T ransf er

(0.45 0.099 2)XReplacementSow [ ]XF emaleLabor 0 [Persons days]
180
(69)
RaiseP igs KeepN

0.199XN P orkers + (1.5 0.199)XBreedingSow +

180
(70)
Feed/energy constraints: Rearing a sow requires 35% of the amount of
energy required by pigs that are being raised. However, since the value that the
pigs need is based on one year, then the total requirement of energy of a sow
that is used for rearing purposes corresponds in 0.35*1*2=0.70. Therefore the
updated feeding/energy constraint would look like:
RaiseP igs KeepN RearN

1XN P orkers + (0.6 1)XBreedingSow + (0.35 1 2)XReplacementSow
(71)
XUEnergyF
nit
romM aize
XUEnergyF
nit
romBean
0 [Energy]
Once the basic conditions for rearing sows are met, the next step in imple-
menting the activity of rearing sows is to establish the connection between the
decision of keeping a breeding sow and the decision of rear a replacement sow.
The easiest way to consider this is as following.
Porklings constraint: The number of replacement sows that the farmer
decides to rear can not exceed the number of porklings (piglets) that are actually
produced by each sow each year (which is 7 piglets). In mathematical terms
this would look like:
RearN KeepN
1XReplacementSow 7XBreedingSow [Animals]
or, rearranged:
RearN KeepN
1XReplacementSow 7XBreedingSow 0 [Animals] (72)
21
Replacement condition: Additionally, once the activity for rearing a re-
placement sow has been introduced it is possible to establish the replacement
condition that the farmer needs to take into account in order to decide to keep
a breeding sow. Deciding to keep one productive breeding sow during the year
that the farmer makes its decisions means that only a half of a replacement sow
needs to be provided, this is because the current productive sow will still be on
production the following year (breeding life is 2 years) and only at the end of
that following year a full replacement sow will be needed to be ready in order
to replace the current productive one.
KeepN RearN
0.5XBreedingSow 1XReplacementSow [Animals]
or, rearranged:
KeepN RearN
0.5XBreedingSow 1XReplacementSow 0 [Animals] (73)
Finally, the previously presented relations are made in order for the farmer
to produce its own pigs and sell them in the same way as with the pigs that
RaiseP igs
were bought and raised (XN P orkers ). Now the farmer has the possibility to raise
his own pigs directly from the offspring of the breeding sows and consequently
sell them, or buy the piglets, raise them and also sell them. The new decision
RaiseOwnP igs
variable is then called XN P orkers .
Porklings condition: The decision of rearing own pigs coming from the
offsprings of the breeding sow means that these cannot be used as replacement
sows at the same time. Therefore the porklings restriction needs to be updated:
RearN RaiseOwnP igs KeepN

1XReplacementSow + 1XN P orkers 7XBreedingSow 0 [Animals] (74)
Cash constraint: Piglets from breeding sows and replacement sows require
cash expenses; therefore, the cash constraint is affected by the decision to rear
own pigs.
2XFBuyKg BuyKg RaiseP igs RearN

ertilizer + 1XP esticide + 58XN P orkers + 18XReplacementSow +
KeepN RaiseOwnP igs
15XBreedingSow + 5XN P orkers (75)
Acquire Deposit
XCredit + XCash 50 [Monetary units]
Labor constraints: Just as pigs bought, the pigs bred at the farm require
female labor. The following inequalities capture these requirements.

RaiseOwnP igs KeepN
+ 0.899XN P orkers + (1.5 0.899)XBreedingSow +
180
(76)
22
RaiseP igs RaiseOwnP igs KeepN
0.099XN P orkers + 0.099XN P orkers + (1.5 0.099)XBreedingSow +
180
(77)
RaiseP igs RaiseOwnP igs KeepN

0.199XN P orkers + 0.199XN P orkers + (1.5 0.199)XBreedingSow +
180
(78)
Feed/energy constraints: The pigs that have been bred and reared for
selling purposes also require energy; its requirements are similar to the require-
ments of the bought pigs.
RaiseP igs KeepN RearN

1XN P orkers + (0.6 1)XBreedingSow + (0.35 1 2)XReplacementSow +
RaiseOwnP igs
1XN P orkers 1XUEnergyF
nit
romM aize
1XUEnergyF
nit
romBean
0 [Energy]
(79)
Updating the objective function: The objective function value needs
to be updated, in this last exercise the relevant contributions to the objective
value function are: costs of the keeping breeding sows (15 Euro/year), cost of
rearing sows (18 Euro paid for the two years the pig is being reared) and the
benefit from keeping the own pig which is 249.7 (2.83*90-5=249.7).
SellT ons SellT ons Of f F arm RaiseP igs

Max! (1, 000XBeanY ield + 200XM aizeY ield + 5XEmployment + 196.7XN P orkers
Deposit RiseOwnP igs GrowHa GrowHa
0.02XCash + 249.7XN P orkers ) (10XM aize + 4XBean +
2XFBuyKg BuyKg GrowHa Acquire
ertilizer + 1XP esticide + 7XIntercropped + +0.6XCredit )+
T ransf er T ransf er T ransf er EnergyF romBean
0XLand + 0XM aleLabor + 0XF emaleLabor + 0XU nit +
0XUEnergyF
nit
romM aize
[Monetary units]
(80)
23
Multiperiod Mathematical Programming:
15 Tree crops
A farm household has 10 hectares of land and 200 person-days of labor per year.
It can grow maize and beans as annual crops. Maize requires 28 person-days/ha
of labor per year as well as 50 Euro of cash expenses at the beginning of the
year and will give a cash return of 315 Euro at the end of the year. Beans
require 36 person-days/ha of labor per year as well as 70 Euro of cash expenses
at the beginning of the year and will give a cash return of 808 Euro at the end
of the year. Given its labor shortage the farm household is not able to use all
of its land. It is considering to complement its production plan with less labor
intensive enterprises than annual crop production. One alternative is to grow
tree crops on otherwise unused land.
Eucalyptus is a fast-growing tree species with relatively low labor require-

ments. However, the gestation period is long and returns come in only after 12
years (See table below). The farm household currently has savings of 600 Euro.
For consumption expenses, it needs to withdraw at least 1000 Euro at the end
of every year from the farm business. The farm household wants to maximize
the (discounted) net cash withdrawals at a discount rate of 6%.
Year 1 (Plantation)
Annual cash costs (start of

300 Euros/ha
year)
Per hectare labor needs 35 Person-days
Cash returns (end of year) 0 Euros
Year 2 and 3
1 Euro/ha
year)
Year 4 to 11
1 Euro/ha
year)
Year 12
1 Euro/ha
year)
Cash returns (end of year) 7,500 Euros/ha
24
a) Assume the farming household has a planning horizon of 15 years after
which it does not plan to go on farming. It does not believe it is able to sell any
standing immature eucalyptus plantation at the end of its planning horizon (no
resale value).
b) Again, assume the farming household has a planning horizon of 15 years

after which it does not plan to go on farming. However, in this case it does
believe it is able to sell any standing immature eucalyptus plantation at the
end of its planning horizon for 50% of the NPV of the remaining net cash flows
generated by the plantation after closing the farm.
c) As in case a), but assume a planning horizon of 30 years. How does the
optimal plantation plan change according to the assumed planning horizon and
terminal values? Interpret the results.
Horizon of 15 years:
Land balance
t=1: In the first period (t=1), the farmer can grow maize and beans and
eucalyptus (Euc.) (XM aize,t1 , XBean,t1 and XEuc,t1 respectively). The total
amount of hectares cultivated has to be less or equal to the land endowment of
the farmer:
1XM aize,t1 + 1XBean,t1 + 1XEuc,t1 10t1 [Hectares] (81)
t=2: During the second period (t=2), the farmer can cultivate maize and
beans and eucalyptus. The cultivated area in the second period plus the amount
of hectares that are still occupied by eucalyptus of the previous year (t=1) need
to be less or at maximum equal to the land endowment of the farmer:
GrowHa GrowHa
1XM aize,t2 + 1XBean,t2 +
GrowHa GrowHa
(82)
1XEuc,t1 + 1XEuc,t2 10t2 [Hectares]
t=12: The land constraint in period 12 describes the possibility of culti-
vating maize, beans and eucalyptus, plus the hectares of eucalyptus that were
cultivated in years 1 to 11 (and are still occupied). Altogether, they can not
exceed the total amount of land available.
12
X
1XM aize,t12 + 1XBean,t12 + 1XEuc,tn 10t12 [Hectares] (83)
n=1
t=13: In the 13th period again maize, beans and eucalyptus can be culti-
vated. Additionally the constraint has tot take into account the the hectares of
eucalyptus that were cultivated in period 2 to 12 (eucalyptus planted in period
1 has already been felled) Altogether, they can not exceed the total amount of
land available.
13
X
1XM aize,t13 + 1XBean,t13 + 1XEuc,tn 10t12 [Hectares] (84)
n=2
25
Labor balance
t=1: Growing maize, beans and eucalyptus requires labor. The total amount
of labor used per hectare of each of the crops can not exceed the total availability
of labor each year:

28XM aize,t1 + 36XBean,t1 + 35XEuc,t1 200t1 [person days] (85)
t=2: During the second period, the farmer has again the possibility of grow-
ing each of the crops with the respective labor requirements (just as in period
1). Additionally the already planted eucalyptus needs care and maintenance (5
person-days per year). The following inequality reflects this relationship:
GrowHa GrowHa
28XM aize,t2 + 36XBean,t2 +
GrowHa GrowHa
(86)
5XEuc,t1 + 35XEuc,t2 10t2 [person days]
t=12: Just as stated above, in the year 12 the farmer has again the possi-
bility to plant maize, beans and eucalyptus, however, the eucalyptus planted in
years 2 to 11 still need care and their labor demands change through time. Ad-
ditionally, the eucalyptus planted in year 1 needs even more labor given that at
its twelfth year it needs to be cut and harvested. Mathematically, this condition
would look like:
28XM aize,t12 + 36XBean,t12 + 35XEuc,t12 +
9
X 11
X
GrowHa GrowHa
2 XEuc,t +5 XEuc,tn + (87)
t=2 n=10
GrowHa
10XEuc,t1 10t12 [person days]
t=13: Year 13 shows a similar dynamic as year 12. However, it is the
eucalyptus planted in the second period, which has to be felled. Additionally,
the labor has to be adapted as following:
28XM aize,t13 + 36XBean,t13 + 35XEuc,t13 +
10
X 12
X
GrowHa GrowHa
2 XEuc,t +5 XEuc,tn + (88)
t=3 n=11
GrowHa
10XEuc,t2 10t13 [person days]
26
Starting cash balance in each period
Planting maize, beans and eucalyptus requires cash: each hectare of maize
costs 50 Euros, a hectare of beans costs 70 Euros and a hectare planted with
eucalyptus is 300 Euros. Further the farmer has the possibility to transfer
money to the next period (transfer cash) for future investments. Expenses and
returns are split up over the periods to depict the liquidity limitations of a
farmer throughout the year with cash for investment needed at the beginning
of the planting season and returns after harvest. Cash returns from the current
growing period are available at the beginning of the following period (which cor-
responds to the end of the current period). For example, in the case of annual
crops, the cash return of growing maize in period 1 is available only at the end of
period 1, which is then available for periods 2 set of decisions - and, therefore,
concerns the starting cash balance of period 2. Further the farmer has to take
into account her/his household expenditures. The household expenses for the
upcoming period are subtracted/withdrawn from the money (cash) transfered
to the next period. So higher household expenditure in the upcoming period
lead to less cash available in the upcoming period, and therefore to less cultiva-
tion or low cost intensive cultivation.
t=1:
GrowHa GrowHa GrowHa DiscountedCash
50XM aize,t1 + 70XBean,t1 + 300XEuc,t1 + XW ithdrawal,t0 +
T ransf erCash
(89)
Xt1t2 600t1 [Monetary units]
t=2: Demands for cash cannot exceed the supply for cash coming from
crop returns and transfer from previous years (Note: relationship needs to be
rearranged and set to a RHS of zero)
GrowHa GrowHa GrowHa GrowHa
50XM aize,t2 + 70XBean,t2 + 300XEuc,t2 + 1XEuc,t1 +
DiscountedCash T ransf erCash T ransf erCash
XW ithdrawal,t1 + Xt2t3 Xt1t2 + (90)
GrowHa GrowHa
315XM aize,t1 + 808XBean,t1 [Monetary units]
t=3: Demands for cash can not exceed the supply for cash coming from
2
X
50XM aize,t3 + 70XBean,t3 + 300XEuc,t3 +1 XEuc,tn +
n=1
T ransf erCash T ransf erCash
(91)
DiscountedCash
XW ithdrawal,t2 + Xt3t4 Xt2t3 +
GrowHa GrowHa
27
11
X
50XM aize,t12 + 70XBean,t12 + 300XEuc,t12 + 1 XEuc,tn +
n=1
(92)
DiscountedCash
GrowHa GrowHa
crop returns (in this year including the returns from the eucalyptus planted
on year 1) and transfer from previous years (Note: relationship needs to be
12
X
50XM aize,t13 + 70XBean,t13 + 300XEuc,t13 + 1 XEuc,tn +
n=2
(93)
DiscountedCash
315XM aize,t12 + 808XBean,t12 + 7, 500XEuc,t1 [Monetary units]
Minimum cash withdrawals: Minimum cash withdrawals: To fulfill the

the consumption requirements (household expenses), the farmer needs at least
1,000 Euro.
t=n:
DiscountedCash
XW ithdrawal,tn 1, 000 [Monetary units] (94)
Objective function:
15
X 15
X 15
X
Max! 0 XM aize,tn + 0 XBean,tn +0 XEuc,tn +
t=1 n=1 n=1
(95)
15
X
n DiscountedCash
[1 (1 + 0.06) ]XW ithdrawal,tn [Monetary units]
n=0
28
Terminal Value: In exercise b) the farmer is able to sell any standing
immature eucalyptus plantation at the end of its planning horizon. The price
is calculated as 50% of the NPV of the remaining net cash flows generated by
the plantation after closing the farm.
Why do we come up with terminal values? The long gestation period
of the eucalyptus implies that the revenues are going to be obtained in the
future. The implemented model only has a planning horizon of 15 periods. If
the farmer would decide to plant eucalyptus in period 5 or afterwards, trees
would be cut in period 16 or later. Returns would be available at the initial
cash balance of period 17 or later. These are periods which are not considered
within the model.
t n Return NPV (0.5)(NPV)
5 1 7500 7074.47 3537.23
6 2 7500 6673.02 3336.51
7 3 7500 6294.31 3147.15
8 4 7500 5937.02 2968.51
9 5 7500 5599.97 2799.98
10 6 7500 5281.99 2640.99
11 7 7500 4982.01 2491.00
12 8 7500 4699.01 2349.50
13 9 7500 4432.02 2216.01
14 10 7500 4180.15 2090.07
15 11 7500 3942.54 1971.27
The table above shows the return of the tree crop from the period 5 onwards.
The number of periods that are still needed for an eucalyptus tree to be fully
mature for its cut is represented in the column n. Let us assume that we
plant an eucalyptus tree in the fifth period. This requires a cut in period 16
and cash returns accounted in the initial cash balance of period 17. However at
the end of period 15 (when the farmer decides to exit agriculture according to
this exercise) there is still one additional period for obtaining the full economic
potential of being cut. In this situation, the farmer believes she/he is able to sell
any standing immature eucalyptus plantation at the end of its planning horizon
for 50% of the NPV of the remaining net cash flows generated by the plantation
after closing the farm. The NPV of the remaining net cash flow generated by
the plantation after closing the farm corresponds to the third column of the
above table.
29
Finally, these terminal values are introduced directly in a cash balance for
the end of period 15 that collects all the terminal values and the remaining cash
of the farmer (the cash that could have been transfered to year 16):
End of year cash balance in period 15. Note: inequality needs to
be rearranged and set a RHS equal to zero:
DiscountedCash T ransf erCash GrowHa GrowHa

XW ithdrawal,t15 Xt15t16 + 315XM aize,t1 + 808XBean,t1 +
15
GrowHa
X
GrowHa
(96)
7, 500XEuc,t4 + [T.V aluen ] XEuc,tn
n=5
30

Farm Specific LP Equations FM LaTex

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Farm Specific LP Equations FM LaTex

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FARM SYSTEM MODELING

Solutions (Mathematical formulations):

Exercises for Farm-Specific Linear Programming

SellT ons GrowHa

Max! XRevenue XCost (6)

SellT ons SellT ons

SellT ons SellT ons

Updating objective function values: The original cost of production of

Defining a land transfer and connecting to rotation condition:

Stage in the Number of Labor use maize Labor use bean

Land preparation: In order to perform land preparation activities the

If it is in the interest of the farmer to produce a lot of maize and beans,

GrowHa GrowHa 1 T ransf er

GrowHa GrowHa 1 T ransf er

GrowHa GrowHa 9 T ransf er

GrowHa GrowHa 2 T ransf er

Male labor transfer:

GrowHa GrowHa (1 40) T ransf er

GrowHa GrowHa (1 40) T ransf er

GrowHa GrowHa (9 15) T ransf er

GrowHa GrowHa (9 15) T ransf er

Of f F arm (9 40) T ransf er

Of f F arm (9 40) T ransf er

GrowHa GrowHa GrowHa T ransf er

GrowHa GrowHa GrowHa (1 40) T ransf er

GrowHa GrowHa 15 + 20 GrowHa

GrowHa GrowHa 7 + 10 GrowHa

SellT ons GrowHa 2 GrowHa

SellT ons GrowHa 0.8 GrowHa

2XFBuyKg BuyKg Acquire

2XFBuyKg BuyKg Acquire

2XFBuyKg BuyKg Acquire Deposit

2XFBuyKg BuyKg Acquire Deposit

Advanced Exercises: Nonlinear yield response and

M aizeyield[kg] = 400 + 35 f ertilizer[kg] 0.06 (f ertilizer[kg] )2

Give farmers in the LP the possibility to decide on the amount of fertilizer

Such discrete levels of fertilizer application result in different decision vari-

GrowHa GrowHa GrowHa

GrowHa GrowHa GrowHa

GrowHa GrowHa (1 40) T ransf er

GrowHa GrowHa (9 15) T ransf er

GrowHa GrowHa (2 40) T ransf er

GrowHa GrowHa GrowHa

SellT ons GrowHa GrowHa

A new set of restrictions is necessary. If the farmer wants to buy fertilizer

XFBuyKg BuyF ertilizer

XFBuyKg BuyF ertilizer

XFBuyKg BuyF ertilizer

XFBuyKg BuyF ertilizer

SellT ons SellT ons Of f F arm Deposit

1.6XFBuyKg BuyKg BuyKg

2XFBuyKg BuyKg RaiseP igs Acquire Deposit

GrowHa GrowHa GrowHa RaiseP igs

RaiseP igs (1 15) T ransf er

RaiseP igs (1 15) T ransf er

RaiseP igs (2 15) T ransf er

RaiseP igs (2 15) T ransf er

RaiseP igs EnergyF romM aize

RaiseP igs EnergyF romM aize

SellT ons EnergyF romM aize GrowHa GrowHa

SellT ons EnergyF romBean GrowHa GrowHa

SellT ons SellT ons Of f F arm RaiseP igs

Piglets per sow and year 7

GrowHa GrowHa GrowHa KeepN T ransf er