Perennial Crops Case Study

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There are four distinctive characteristics, when dealing with supply response of perennial crops. According to Soontaranurak(2011), these characteristics separately and collectively, imply that producers must have foresight or long-term planning with reference to investment. First, perennial crops have a biologically-determined gestation period between planting and harvesting. Second, current production depends on previous output levels. Third, there are significant costs of adjustment which restrict the planting and removal of trees. Fourth, planting and removal decisions are restricted by both past decisions and the existence of binding non-negativity constraints about the adjustment process(technical conditions of production, the availability …show more content…

Once the models are constructed, reduced forms are derived and empirically tested. The estimated results usually include both short-run and long run price (own and related prices) elasticities. In studying the economics of perennial crops short-run responses refer to changes in supply from a fixed stock of capital consisting of the existing number of trees. Long-run responses refer to changes in capacity. Putting it differently, the issues related to short-run responses are not different from those pertaining to annual crops. In such a case the variable inputs are use of fertilizer and labour. The short-run consideration is, therefore, the alternative renumerative activities for such …show more content…

(1979) study the production and acreage adjustment for Californian cling peaches. New planting and removal equations are specified in terms of expected profits (where price and cost variables are transformed into a single measure of profitability) and other determinants. Separate variables for young and old bearing trees are used to capture the effects of age distribution on tree removals and plantings. The removal equation also includes dummy variables to reflect the effects of a tree-removal incentive programme. Yield variation is explained by varieties of trees, districts of designation, ages, and time

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