Fractal Farms for Oil Palm Crops: Economic Feasibility and Institutions

Articles Title: Authors: Flavio Pinto1, Philipp Grundmann Affiliation: Leibinz Institute for Agricultural Technology AT , Potsdam and !umboldt "niversity, erlin Key Words: Farm, Fractals, #rganization, $ustainability Hot Topics: 1% Farming $ystems

Objective of the Paper: &valuate the economic, organizational and institutional conditions of fractal multi'farms for the production of oil palm%
Abstract: The usual pattern of e(pansion of agriculture )pac*ages of odd'sized farms) is incompatible +ith the connectivity of ecosystems re,uired for preserving ecosystems- functions ./e Groot 10012% Part of the conflict of agriculture +ith nature emerges from the discordant geometries of human activities and natural systems3 +hile the geometry of natural systems is fractal .4andelbrot 10512, humans organize their activities in modular forms .$imon 1061, Langlois 17712% In agriculture, modular forms adopt &uclidean shapes in farms, and periodical crops, tas*s- paths, etc% 4odular forms economize the activity but eliminate interconnected gaps necessary for maintaining the ecosystemsfunctions% $mall and large farms e(isting in the production of oil palm differ and complement in function% Large corporatized farms dominate )even develop) technology, posses ade,uate infrastructure, organizational s*ills or access to financial and capital resources, issues beyond the scope of small farms% At the other side, small farms provide labor and outputs to large farms, may produce other crops and goods, and benefit local rural inhabitants% $mall and large farms attend the aspirations of different actors, e%g% about property rights, income% The interdependence bet+een small and large farms is evident, both in nucleus'plasma-s clusters and outgro+ers- schemes, and also in the variety of associations, among farmers, or among farmers, gro+ers or millers% &ach farm faces particular economic and organizational problems, and deploys conse,uent strategies for coping +ith these challenges% 8e propose fractal farms3 a system that integrates the functional interdependences of farms +ith the spatial interconnectivity of ecosystems% Fractal farms are scattered farms of different scales, +ith common and complementary functions% Fractal farms preserve basic modular characteristics of agriculture )trees location patterns, tas*s- paths), but poses a spatial separation among nuclear farm types necessary for the sustainability of ecosystems% y preserving the geometrical characteristics of natural systems, fractal farms aim to solve some shortcomings of other alternatives e%g% reservesareas% Fractal farms additionally preserve the functional characteristics of small and large farms,
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regarding the economic and social e(pectations of different sta*eholders, hierarchies, organization and property rights% The paper analyzes and evaluates the economic and organizational implications of fractal farms% The separation of farm units increases production costs .input and output transport2 and transaction costs .monitoring and coordination2% These increments +ould represent the costs of preserving the ecosystems affected by the production% $cattering production units also poses ne+ coordination problems that demand organizational solutions% :et, the optimality of the system may play in favor of its e,uity% The increase of the distance demands the installation of decentralized mills for reducing bunches- transportation costs% It poses relevant ,uestions3 e%g% +hat is the optimal number and capacity of small mills, according to the geometrical characteristics of the system .its fractal dimension2, and other important ,uestions li*e +ho o+ns the small mills and +hat are the most suitable association schemes for satisfying technical and e,uity re,uirements% Originality and Main ontribution: The paper integrates modern theories of comple( systems to the analysis of specific problems related to the sustainability of agriculture% It e(plores a solution for the conflict bet+een agriculture and natural resources, no+adays e(acerbated by the e(plosion of oil palm crops every+here% Method: The paper first analyzes the farming systems present in oil palm, by characterizing small and large farms, according to property rights, hierarchies, coordination and monitoring, methods, access to capital and resources, and the role and bargaining capacity of farm types in transactions .e%g% farmers transacting outputs +ith mills2% It also summarizes the e(isting associations of these farm in the production of oil palm, based on the actual trends of three representative countries3 Indonesia, 4alaysia and ;olombia% The analysis accounts for the structure of costs of oil palm production, specially considering the scale of production and transportation% The cost function is evaluated according to the number of scales, farm units per scale and distance to mills% <egarding some crucial attributes of oil palm .bunches have to be processed +ithin the ne(t 1= hours after pruned2, the evaluation calculates the optimal number of mills that minimizes transportation costs% Finally, the paper discusses ho+ property rights can and should be allocated for solving the usual monopsony of mills% !esults: 1% ;haracterization of oil palm farm types% 1% ;haracterization of the costs function, according to scale and transportation% >% 4odeling the costs function of the fractal farm, according to, n the number of scales, fn the number of farms per scale, sn the farm-s scale the scale n% =% Assessment of the costs of ne+ transactions implied by the coordination of the production at different scales% ?% /iscussion of governance structures, business as usual that reproduce bargaining asymmetries, and alternative economizing structures that +ould ma(imize the e,uity of the system% "ibliography: /e Groot, <%$% 1001% Functions of Nature: Evaluation of Nature in Environmental Planning, Management and DecisionMaking% Groningen3 8olters @oordhoff A % Langlois, <% 1771% Modularity in Technology and Organi ations% Bournal of &conomic ehavior C #rganization% Aolume =0, Issue 1, $eptember 1771, Pages 10)>D 4andelbrot, % 1051% The Fractal !eometry of Nature% 8%!% Freeman and ;ompany $imon, !%A%, 1061% The "rchitecture of #om$le%ity% In3 Proceedings of the American Philosophical $ociety, Aol% 176, pp% =6D)=51%