; Modeling Risk and Presenting Results with Dynamic Simulation Tools | Conferences | AgRisk Library


Conference Name Modeling Risk and Presenting Results with Dynamic Simulation Tools

Gregory Ibendahl and Terry Griffin


Modeling risk so that farmers can appreciate the potential danger to their operations can be difficult. Academics typically use probability density functions and cumulative distribution functions to show the range of outcomes that can occur. While these graphs can be valuable they may be difficult for farmers to interpret. In addition, presentations using these types of graphs are static so farmers may not fully appreciate what these graphs are showing. What is needed is a way to show how risk might impact a farm in a simulation setting so that farmers can better visualize what is occurring on their operation.

This presentation uses the dynamic modeling software Stella to show how farm risks can be presented to farmers in an easy to understand presentation. Stella is used as a modeling environment because it allows the generation of web based models that can be run over any browser.

Stella is very similar to other dynamic simulation packages. Nearly every tool for this use has the concepts of stocks, flows, and converters. Unlike a spreadsheet that calculates all cells at the same time, a dynamic simulation software tool calculates values step by step. Not only does this allow for values to change as the model runs, it also allows for graphics to update as the model runs. Farmers can thus see how various risks might affect their farm profitability over time. Because these simulation tools allow for a Monte Carlo simulation of various functional farms, nearly any risk can be modeled. One limitation though is that these tools do not typically allow for an easy way to model correlated random variables.

This presentation will show the risks that farmers take when trying to stretch a combine to harvest more acres. Combines are expensive so farmers may be tempted to try and harvest large acreages with the machine in order to spread the machine costs over more acres. However, by stretching acres like this, farmers run a risk of weather events impacting their ability to finish the harvest. This presentation will help show how farmers can find the optimal number of acres for a given combine based on their ability to tolerate risk.