EURO 2024 Copenhagen
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1114. Managing Hog Farm Operations under Uncertainty: Inventory and Selling Strategies

Invited abstract in session TA-12: OR in Livestock farming, stream OR in Agriculture and Forestry .

Tuesday, 8:30-10:00
Room: 13 (building: 116)

Authors (first author is the speaker)

1. Panos Kouvelis
Olin Business School, Washington University in St.Louis

Abstract

Problem Definition: We study the finishing stage (weeks 23-26 in the pig’s life) planning problem of a pork producer who gets to see how market-ready hogs he has available at the beginning of each week for sale and the current market prices. Then, he must decide how many hogs to sell through to a meatpacker and on the open market. The producer has a contract to deliver a fixed quantity to the meatpacker each week according to a predetermined price formula that depends on commodity indices. He pays a penalty if he fails to deliver. The numbers of hogs that become market-ready every week, all costs, and all prices are stochastic.
Methodology: We use a dynamic programming approach (optimal policy, a one period look ahead approximation).
Results: We show there are two types of thresholds in optimally making decision switches (holding to contract fulfilling, holding to spot selling), each one specific to the under-weight and the regular-weight hogs. The thresholds are sensitive to the number of available hogs and prices and not straightforward to derive. An approximate dynamic program preserves the optimal policy structure and offers a practical solution approach.

Keywords

Status: accepted

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