Dynamic Asset Replacement Decisions to Enhance Farm Profits

摘要

The model developed here can improve farm profitability by helping farmers determine when to rejuvenate assets instead of replacing them. The model is especially applicable to recyclable assets (like breeding stock, producing stock, farm machinery) and when replacement costs are a significant portion of production costs. In making its rejuvenation/replacement recommendation, the model considers seasonal fluctuations in net revenue resulting from price cycles of the farm product. Applied to the egg industry, the model shows that force molting hens (temporarily halting egg production) can extend their productive life. A mixed strategy of asset rejuvenation and replacement can raise profits significantly.