An assessment of apple orchard investments in South Africa under uncertainty and irreversibility

Abstract

The competitiveness of the South African fresh apple export value chain can be improved if local farmers grow and market more new apple cultivars. An ex ante version of the Dixit-Pindyck investment model is used to assess how uncertainty and irreversibility associated with adopting the new Pink Lady cultivar rather than a traditional Golden Delicious cultivar will raise the hurdle rate required to trigger investment. Modified real hurdle rates reflecting the value of the option to delay investment estimated for both cultivars, are about double the real rate of five per cent that is often used in orthodox investment analyses. The Pink Lady investment seems to be relatively more profitable under the assumed conditions, but it also has a relatively greater variance in expected real annual net returns.

Optimal resource management in the presence of a deleterious alien species: a stochastic model for an orchard

“…Park and Florkowski (2003) have analyzed the impact that orchard conditions and other factors have on the decision to utilize new varieties in peach production in the United States. Darroch et al (2004) have studied the effect of alternate investment decisions on the profitability of apple orchard owners in South Africa. Florkowski and Sarmiento (2005) have analyzed the nexus between the prices received by pecan growers and the attributes of their orchards in the United States.…”

Optimal Resource Management in the Presence of a Deleterious Alien Species: A Stochastic Model for an Orchard

“…4 varieties in peach production in the United States. Darroch et al (2004) have studied the effect of alternate investment decisions on the profitability of apple orchard owners in South Africa. Florkowski and Sarmiento (2005) have analyzed the nexus between the prices received by pecan growers and the attributes of their orchards in the United States.…”

An approach to the management of orchards that are vulnerable to attack by invasive species

“…Park and Florkowski (2003) have examined the effect that orchard conditions and other factors have on the decision to utilize new varieties in peach production in the United States. Darroch et al (2004) have analyzed the impact of alternate investment decisions on the profitability of apple orchard owners in South Africa. Florkowski and Sarmiento (2005) have analyzed the connection between the prices received by pecan growers and the characteristics of their orchards in the United States.…”