Optimal ranch management strategies with stochastic sequential decision models

Abstract

The profitability of ranch operations are largely dependent on stochastic prices and range conditions. These variables are stochastic, but not entirely beyond the influence of ranchers. Current management decisions will impact range conditions and prices received for livestock in the future. These characteristics necessitate the application of stochastic sequential modeling techniques for empirical analysis of management alternatives. This study utilized discrete stochastic and dynamic programming to determine decision rules for two range livestock applications. The first application is concerned with the timing of range improvements on Macartney rose infested rangeland. Roller chopping followed by burning is an effective method of improving Macartney rose on rangeland. However, uncertainty associated with implementing effective burns adversely affects economic feasibility of the treatment sequence. Discrete stochastic programming is used to determine optimal burning schedules under uncertainty. These schedules and expected net returns vary with changes in the probability of a successful burn. Generally, as the probability of a successful burn increases the frequency of burning decreases and net returns increase. The second application addresses the marketing of weaned calves as a method of improving the efficiency of forage utilization. Many of the problems encountered in ranching stem from the uncertainty associated with forage availability and the relatively stable forage requirements of the traditional cow-calf operation. This results in under utilization during forage surpluses and costly over utilization during shortages. Smaller cow herds combined with opportunistic wintering and possible carrying over of calves to the following fall would allow forage requirements to be manipulated in response to forage availability. Dynamic programming results suggest that the smaller cow-calf-yearling operation has potential to increase returns over a cow-calf operation. Decomposition of these results indicates that a smaller herd increases returns under a wide range of initial price and range conditions. The opportunity to market calves as yearlings is advantageous under all initial conditions.