The Optimal Management of Orchards

• Agricultural Economics Workshop

Date and Location

Thursday, October 4, 2018, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

A fundamental issue in perennial crop economics is finding the optimal time to replace trees in an orchard. Orchards have two key characteristics: they consist of trees of multiple vintages, and the trees have a non-monotonic yield curve. We present the first analysis of optimal tree replacement in an orchard that has both characteristics. Our results show that cyclical production is optimal in the long-run, and that optimally managed orchards converge to the long-run cycle surprisingly quickly. Our results have implications for orchard valuation, orchard planting, and orchard conversion. We are also the first to provide comparative statics on the long-run cycle radius. In addition, forest management is a natural point of comparison to orchard management. We contrast the optimal replacement rules for orchards and forests to show the qualitative differences.

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