Abstract
Cattle producers typically react to cyclical prices by increasing the size of the breeding herd as price increases and decreasing it as price decreases. Current decisions to cull and/or replace cows are based on such data as current and expected prices, the financial condition of the firm, and the amount of unused resources available. The decision process is a dynamic problem of pursuing not only a goal for the current planning period, but goals for future periods as well. One objective of this thesis is to develop a detailed simulation model of a commercial Texas cattle farm The model can be sued experimentally to examine the effects of various decisions on a wide range of farm goals. A second objective is to interface the model with an optimizing algorithm to determine optimal annual replacement and culling decisions given various qualities of price forecasts. The assumed goal of the firm is to maximize discounted net revenue over an indefinite period of time. A ten-year rolling planning horizon is used to permit the firm to annually revise policies as it moves through time. The objective function maximized for each ten-year planning horizon is the sum of the expected present value of net revenue earned during the ten years and the present value of an annuity of expected annual net revenue after the tenth year. An adaptive plan emerges from the set of optimal first-year policies taken from a sequence of planning horizons. The adaptive plan is itself not an optimal plan since it does not maximize an objective function. Three types of price forecasts are used with the optimizing routine, (1) perfect forecasts based on actual prices, (2) forecasts based on the expectation that current prices will continue unchanged in the future, and (3) forecasts based on the expectation that future prices will have the same period and amplitude as recent price cycles. It is hypothesized that variable replacement and culling policies, sensitive to price expectations, produce a higher present value of net revenue over a ten-year period than policies calling for constant culling and replacement rates...
Bentley, Ernest (1979). Adaptive planning for Texas cattle producers facing uncertain prices. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -189002.