Natural Resources Research Articles

Representing weather-year variation in whole-farm optimisation models: Four-stage single-sequence vs eight-stage multi-sequence

Document Type

Article

Publication Date

11-5-2023

Journal Title

The Australian Journal of Agricultural and Resource Economics (AJARE)

ISSN

ISSN 1364-985X eISSN 1467-8489

Keywords

AFO, Australian Farm Optimisation model, Discrete stochastic programming, Farming systems, Risk modelling, Tactical farm management, Weather-year sequence

Disciplines

Agribusiness | Agricultural Economics | Agricultural Science | Agronomy and Crop Sciences | Atmospheric Sciences | Climate | Data Science | Dynamical Systems | Environmental Monitoring | Fresh Water Studies | Hydrology | Natural Resource Economics | Natural Resources Management and Policy | Operations and Supply Chain Management | Soil Science | Statistical Methodology | Statistical Models | Water Resource Management

Abstract

The trade-off between accuracy and complexity is a common issue faced in farm systems analysis. To provide insights into the importance of representing weather-year sequence in farm modelling, two whole-farm optimisation models are constructed and applied to a mixed enterprise farming system in a subregion of Western Australia. The frameworks are (i) four-stage single-sequence stochastic programming with recourse (4-SPR) to capture weather-year variation and management tactics tailored to each weather-year and (ii) eight-stage multi-sequence stochastic programming with recourse (8-SPR) to outline weather-year sequences and management tactics tailored to particular weather-year sequences. Results show that single-year stochastic programming generates similar expected profit and strategic management as multi-year stochastic programming. However, optimal tactical farm management is affected by the outcome of the previous year. Tactical decision-making in response to the outcome of the preceding weather-year increases profitability by 14%. Technology changes over the last decade, particularly the increase in computer speed and computational power, increase the ease of construction and application of the 4-SPR and 8-SPR frameworks. Nonetheless, choosing which framework is best to apply to a particular issue or opportunity remains a challenge.

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