Linear Programming- Farming Estimates for Australian Resources

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Veggie-lovers Consultancy Report

Prepared by Cherie Dearle and Brad Riner

University of Sydney
2012

Introduction

Veggie-lovers is a 300ha property located in the Murrumbidgee region. It is a fully irrigated property with the ability to furrow, flood and sprinkler irrigate. The property has an annual water allocation of 1850ML, 1000ML being allocated to the autumn and winter months, while the remaining 850ML are allocated to the spring and summer months. The team of veggie-lovers include 2 full time employees, 2 part time employees and one casual employee, giving a total of 360 labour hours available each month.

Currently, Veggie-lovers runs a crop rotation of either processing sweet-corn or processing potatoes in the summer, and faba beans in the winter. The management objective for this property is to continue with the summer crops but possibly grow a different winter crop. It is hoped that this report will inform the managers of the property of the most profitable mix of summer crops to run combined with a more profitable winter crop, while meeting all labour and cash flow constraints.

Modelling

In order to determine the optimal farm plan for Veggie-lovers, linear programming models were used. These models were initially very simple and then gradually built in complexity as they moved towards a more realistic situation. This process allows greater analysis of the major factors that impact the total gross margin. When factoring each of the constraints, an informed decision can be made as to which plan is the optimal whole farm plan. Using data from the other models helps decide what decisions to make in the future, when scarce resources become more available for the farmer.

Using only the current three crops being grown, without considering monetary constraints, the optimal farm plan was 106.25ha of processing potatoes and 193.75ha of faba beans. This plan gives a gross margin of $510,794. Summer water allocation is the limiting factor here, but the farm would be willing to pay a shadow price of $365.88 if the resource is available. Having more water available will give the farm more security in a dry season, or to grow other vegetables that are more profitable that require more water. There is plenty of labour available in each of the months in this particular model. Processing sweet corn should not be taken into consideration because growing a hectare will decrease the total gross margin value by $3,489.

Some options for other winter crops to grow include, fresh potatoes, barley and canola. When these crops were added in to the model, again without considering monetary constraints, the optimal farm plan was 106.25ha of processing potatoes and 125ha of fresh potatoes. This plan gives a gross margin of $731,506 and leaves 68.75ha of land left over. Both summer and winter water allocations are the limiting factors in this scenario. If the farmer could afford one more ML per hectare in winter the gross margin would increase by $349.75 or $449.13 in the summer. January is the most labour intensive month but the farm still has 76.25 out of the 360 hours available to use. The other months have a substantial amount of labour left over, so labour is not a concerning factor in this particular model. This model shows that growing a hectare of canola will decrease the total gross margin by $445.12, a hectare of barley will decrease it by $741.38, a hectare of faba beans will decrease it by $907.88, or a hectare of processing sweet corn will decrease it by $3489.

The next model that was run factored in the possibility of purchasing extra water for the property, 500ML extra in the winter and 400ML extra in the summer. The optimal farm plan determined at this stage was 150ha of processing potatoes and 150ha of fresh potatoes, giving a total gross margin of $944,516. In this scenario, 200ML of extra winter water was purchased at $13.27/ML and 350ML of summer water was purchased at $32.80/ML....
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