Design, simulation and feasibility of the innovative agricultural warehouse receipt system through dynamic programming and agent-based models

Abstract

Abstract To address marketing challenges in the agricultural sector, provide financial support for small-scale farmers over marketing seasons, manage price risks of agricultural products, and enhance the functioning of agricultural mercantile exchanges, it is attainable to implement an efficient and compliant warehouse receipt system (WRS) that aligns with the legal, institutional, social, and economic-financial conditions of a country. The aim of this study is to design, simulate, and assess the feasibility of an innovative WRS in the agricultural sector. To achieve this, a WRS was designed and evaluated for maize crop in Iran. The research methodology of this study is divided into three main parts: design, simulation, and feasibility assessment of the WRS. The design process incorporated the FAO-provided (2009) warehouse receipt system development, considering the experiences of various countries and the institutional and financial regulations specific to Iran. Additionally, a dynamic programming model was used to simulate the system, and an agent-based model was utilized for system feasibility assessment. The study results demonstrated that it is possible to design an innovative and efficient WRS by involving five key actors, including farmers, buyers (maize traders), banks, mercantile exchange market, and the warehouse (governmental institution), and establishing clear communications among them. Based on simulation results using dynamic programming model, it was evident that four parameters, namely the annualized loan interest rate, the valuation coefficient for loan collateral, price volatility of the product over the marketing season, and the warehouse cost-to-product value ratio, significantly impact the adoption of the WRS by farmers. In conclusion, the findings from the agent-based model revealed that setting the annualized loan interest rate at 8%, a collateral valuation coefficient of 85%, price fluctuations over the non-harvest time at 60%, and a warehouse cost-to-product value ratio of 2% can result in the participation of nearly 100% of farmers in the proposed WRS.

Keywords

• Agricultural marketing
• Short-term financing
• Price risk management
• Mercantile exchange market