Economic Analysis of Disease in Perennial Plants:

Application to Pudrición del Cogollo Disease Control in

the Colombian Palm Oil Industry

By PhD. Thomas H. Spreen, PhD Candidate Mauricio Mosquera , PhD. Kelly A. Grogan
and PhD Edward A. Evans

Food & Resource Economics Department

Institute of Food & Agricultural Sciences (IFAS)
University of Florida, PO Box 110240
Gainesville, FL 32611
 Introduction
• With increased movement of people and goods, spread of
unwanted pests and disease has become an increasingly important
problem in not only commercial agriculture, but also as a cause of
environmental degradation.
• Perennial crops offer special challenges because of the multi-year
nature of the production process.
• The decision to produce a perennial crop involves investment in a
tree (or bush or vine). This means that traditional cost-benefit
analysis is complicated in that the benefits from treatment will be
spread over several years.
• A generalized economic framework for analysis of disease in
perennial is not available.
• In this paper, we propose to use net present value to measure
asset value.
• Net present value (NPV) is defined as
𝑇
𝑅𝑡 − 𝐶𝑡
𝑁𝑃𝑉 =
1+𝑟 𝑡
𝑡=1
where 𝑅𝑡 is revenue in period t, 𝐶𝑡 is cost in period t, and r is the
interest rate.
• We seek to find that strategy that maximizes NPV
• We also use NPV to determine when a plant should be replaced
with a new plant
 Colombian oil palm agroindustry
• 430,000 hectares planted 7% annual growth (Fedepalma, 2011)
• Represents 4% of Colombian agricultural GDP (Fedepalma, 2011)
• Versatility protects from international prices fluctuation (Gomez, et al.,2005)
• Labor intensive 1worker/ 20 acres (Oliveira et al., 2011)
• Permanent labor is required (Mosquera and Garcia, 2005)
Pudrición del cogollo (PC) (Martinez, 2010; Martinez et al., 2009)
Causal agent: Phytophthora palmivora (micro-organism)

Known vectors: Contaminated water, tools, wind

Symptoms: Necrosis on the youngest leaves and if severely infected they collapse

Consequence: Affects immature tissues of the emerging leaves, leading to death of the oil
palms if the infection reaches the meristem
 PC Control Strategy

• Effectiveness of the control depends upon early detection

• If infection is too severe there is no chance of recovery (Torres et.al,2010)
 Foundations of the model
PROBLEM: A disease alters the perennial crop’s original replanting plan
because it affects the entire stream of yields and costs.

TWO SCENARIOS
• No disease scenario: the forest rotation (Faustmann, 1849), modified to
consider output sold at every period (Clark, 2005).
• Diseased field scenario:
1) Optimal control problem
2) A structural damage function: equation of motion for disease incidence.
That is, an equation that describes the spread of the disease
 Foundations of the model
GOAL

Determine the optimal level of control in every

period and the optimal moment of replanting
once PC disease attacks the oil palm orchard
 GROWER’S MODIFIED PROBLEM: ONCE PC ATTACKS
𝑇
𝑀𝑎𝑥 𝑁𝑃𝑉 = 𝑝𝑌 𝐷𝑡, 𝑎𝑡 − 𝐶(𝐻𝑡 ) 𝑒 −𝑟𝑡 𝑑𝑡 + 𝜙(𝑇, 𝐷𝑇 )
0
net income Control Scrap
at t cost value
Subject to:
𝐷 (𝐷𝑡 , 𝐻𝑡 ) = 𝑏 + 𝑐𝐷𝑡 − 𝐻𝑡 Disease equation of motion
T, Free Chooses T optimally
DT , Free Chooses 𝐷𝑡 optimally

𝐩:net price (fixed)

𝐘 𝐃𝐭, 𝐚𝐭 : yield if PC
𝐻𝑡 enters linearly, so
𝐃𝐭 : # diseased palms (stock variable)
the problem must be
𝐂(𝐇𝐭 ) control cost function
solved as a bang-bang
𝐇𝐭 ∶ #𝐩𝐚𝐥𝐦𝐬 𝐭𝐫𝐞𝐚𝐭𝐞𝐝 (control
variable)
T : final period
r : discount rate
 Diseased scenario
0

85
13
25
37
49
61
73

97
1

385
109
121
133
145
157
169
181
193
205
217
229
241
253
265
277
289
301
313
325
337
349
361
373

397
D at steady state

-200

-400

-600

-800

-1000 t

• 𝐷 ss is always negative
• The rate at which PC spreads is quite high (20% a month)
• Indicates that growers should immediately remove all diseased tissue
 Scenario with PC
Optimal T for different monthly Optimal T for different price scenarios
discount rate scenarios holding p=108 holding r=0.008 (monthly)
450 p=56
450
r = 0.004 400 p=108
400
r = 0.008 350
350 p=160
r = 0.0125 300

Optimal T
300 Poly.
Trend(p=108)
Poly. (r =for
0.008)
Optimal T

Trend r=0.008 250

250 p=108
200
200
150
150
100
100
50
50
0
0
1 50 100 150 200 250 300 350
1 50 100 150 200 250 300 350
Age at first disease detection
Age at first disease detection
• Optimal T in the diseased scenario is negatively related to the age of the trees at first PC detection
• The larger the net price the larger the optimal replanting period (contradicts non-diseased scenario)
 Conclusion
• If not properly controlled, PC disease is a major threat to
the Colombian oil palm sector
• Our results support early detection and full removal of
diseased tissue, which coincides with the current
recommendations
• Our model provides optimal replanting times under
different price and discount rate scenarios with and
without PC. Optimal replanting times were previously
unknown
Thank you!
E-mail: tspreen@ufl.edu