A Risk Programming Model for Shrimp Farming in Honduras
By Diego Valderrama and Carole R. Engle
ABSTRACT
A risk-programming model based on the Target MOTAD methodology was developed to identify optimal management strategies and associated risk levels for shrimp farms in Honduras. Production records on technical parameters of shrimp culture as well as associated costs of production were collected from four of the largest shrimp farms in the country in 1998 and 1999. Data were analyzed to identify production variability on a month-per-month basis. This information was used to formulate a number of alternative activities for every month of the year. Namely, the farm manager was given the choice of selecting among three different stocking densities and two lengths of grow-out cycles (six activities per month). Expected net returns/ha were calculated for each activity, as well as possible deviations from the expected returns that reflected different levels of management success. Expected net returns/ha for each activity were used to develop a Linear Programming model to formulate an annual plan of activities that maximized farm income. Next, a Target MOTAD model was developed to quantify the potential for loss associated with the optimal plan. An additional set of activity plans was formulated which generated lower levels of risk but had a reduced potential for profit. The trade-off between expected income and risk was used to construct a risk efficient frontier that helped identify management options selected by farm managers with different attitudes towards risk. The model also served to identify those factors that generate greater uncertainty in the profitability of shrimp farming in Honduras.
KEYWORDS: risk, Target MOTAD, farm management, Honduras, shrimp farming.
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