Capacity Management in Agricultural Commodity Processing

W e consider a firm that procures an input commodity to produce an output commodity to sell to the end retailer. The retailer's demand for the output commodity is negatively correlated with the price of the output commodity. The firm can sell the output commodity to the retailer through a spot, forward or an index-based contract. Input and output commodity prices are also correlated and follow a joint stochastic price process. The firm maximizes shareholder value by jointly determining optimal procurement and hedging policies. We show that partial hedging dominates both perfect hedging and no-hedging when input price, output price, and demand are correlated. We characterize the optimal financial hedging and procurement policies as a function of the term structure of the commodity prices, the correlation between the input and output prices, and the firm's operating characteristics. In addition, our analysis illustrates that hedging is most beneficial when output price volatility is high and input price volatility is low. Our model is tested on futures price data for corn and ethanol from the Chicago Mercantile Exchange.

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“…Similar capacity and risk management problems for agricultural commodities are addressed by Boyabatli et al. (2016) and Noparumpa et al. (2015).…”

Section: Literature Reviewmentioning

confidence: 60%

Financial Hedging and Optimal Procurement Policies under Correlated Price and Demand

Goel

Tanrısever

2017

Production and Operations Management

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“…13 The Journal of Operations Management has called for a special issue on sustainable agriculture (Durach al., 2023). Boyabatli et al (2021) have compiled recent OM research streams that examine ways to improve farmer productivity, including ways to facilitate learning about sustainable farming techniques and financial subsidies to entice farmers to grow crops that could be better for the environment and the farmer. 2.…”

Section: A Vertical Cut: Reducing Hunger Through Responsible Consumpt...mentioning

confidence: 99%

Seeking and Exploiting Synergies Among the UN Sustainability Development Goals: Research Opportunities for Operations Management

Sodhi,

Tang

2024

Production and Operations Management

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In 2015, the United Nations countries signed up to achieve 17 Sustainable Development Goals (SDGs) for people, planet, prosperity, peace, and partnership by 2030. However, the trend of progress toward achieving these goals indicates that none of the 17 goals may be achieved by 2030 globally. We first provide a foundation for OM researchers to help shape the interventions for countries and companies to help achieve the SDGs by (1) identifying the synergies among the SDGs so that interventions can impact multiple SDGs positively and (2) linking some of the extant OM research with the synergies among the various SDGs. This way, researchers can understand the complexity of the challenges ahead and build on the OM research to influence the interventions of governments and organizations to maximize the attainment of the SDGs. We also provide some research opportunities to help OM researchers develop research agendas.

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“…Farmers’ welfare is becoming an important concern (Boyabatli et al., 2022; Chintapalli and Tang 2021a; Tang et al., 2016). We identify the following important functions that support farmers and add to their welfare, namely insurance, finance, and human risk management at farms.…”

Section: Emerging Opportunities For Future Research and Conclusionmentioning

confidence: 99%

“…Therefore, we review published literature and provide directions to OM researchers for future research opportunities in farming. We searched for the relevant papers in OM and related journals, and a recently published book, Agricultural Supply Chain Management Research Operations and Analytics in Planting, Selling, and Government Interventions', edited by Boyabatli et al (2022). We found 298 papers, whose details are given in the endnote.…”

Section: Production and Operations Managementmentioning

confidence: 99%

Opportunities in farming research from an operations management perspective

Gupta

Berenji

Shukla

et al. 2023

Production and Operations Management

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We review and analyze the farming (upstream agribusiness supply chain) research literature since 1965 to identify farming research opportunities for operations management (OM) researchers. A majority of reviewed papers in our corpus, until the turn of the 21st century, primarily focus on improving operational efficiency and effectiveness of farming using optimization techniques. However, during the last two decades, farmers’ welfare and the interests of other stakeholders have drawn OM researchers’ attention. This expanded focus on farming research has become possible due to the proliferation of mobile communication devices and the Internet as well as advancements in information technology platforms and social media. Our review also shows that there is a paucity of OM literature that leverages increased data availability from the emergence of precision agriculture and blockchain to address major challenges for the farming sector emanating from climate change, natural disasters, food security, and sustainable and equitable agriculture, among others. Big data, in conjunction with opportunities for field‐based experimentation, artificial intelligence and machine learning, and integration of predictive and prescriptive analytics, can be leveraged by OM scholars engaged in farming research. We zero in on specific questions, issues, and opportunities for research in farming.

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Capacity Management in Agricultural Commodity Processing

Cited by 4 publications

References 26 publications

Financial Hedging and Optimal Procurement Policies under Correlated Price and Demand

Financial Hedging and Optimal Procurement Policies under Correlated Price and Demand

Seeking and Exploiting Synergies Among the UN Sustainability Development Goals: Research Opportunities for Operations Management

Opportunities in farming research from an operations management perspective

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