My dissertation, The Dynamics of Perennial Crop Production and Processing, focused on the economics of perennial crop production, with applications to Brazilian sugarcane and the expansion of the Brazilian biofuel industry.
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 uniformly to the long-run cycle. 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.
Abstract: The design of perennial crop supply chains requires an answer to the question: what is the optimal age to replace the crop? We present a novel theoretical framework to study optimal perennial crop age when the output is used as a feedstock for a processing facility. We prove that our model has a solution and generate analytical comparative statics with respect to facility size and cost parameters. To show the empirical robustness of these theoretical results, we calibrate simulations to the sugarcane industry in Sao Paulo, Brazil and the almond industry in California, showing that that the optimal age is very close to the maximum sustainable yield age. These results support the use of maximum sustainable yield as an important management heuristic, since the difference in cost between the two approaches is negligible and the MSY approach requires less, more easily obtainable information.