Economic Evaluation of the Pruning Frequency of Pecans

Abstract

Employing a simultaneous equation model applied to panel pecan data, the study presents a model to quantify the profitability of different annual pecan pruning frequencies. Production data estimated are from The Green Valley Pecan Company (GVPC) located in Sahuarita, Arizona, which started a pruning program 9 years ago. Profit maximization is attained where the value of the marginal productivity exceeds or equals the marginal cost for discrete annual increments. The simultaneous model transposes two major variables: yield and quality. A simultaneous model was utilized to evaluate the tradeoff of pecan yield and quality by computing the marginal productivity of pruning frequency. After estimating the simultaneous design by three stages least squares (3SLS) and progressively adding covariates, we found that the tradeoff between yield-quality and the pruning frequency coefficient were all significant and appropriate to be used in the computation of marginal productivities. The marginal cost was obtained by adding both pruning and processing costs. Optimal pruning frequencies were identified for two price scenarios using the value marginal product marginal cost (VMP-MC) condition where the marginal cost equals the marginal productivity for the Wichita and Western Schley varieties. Under the low (high) price scenario, the optimal pruning frequency is every three (four) years for both varieties.