Von Thunen Model Access to Markets. Marketing Qualities of MDC Commercial Agriculture Multiple factors determine what and where is grown in MDC agricultural.

Von Thunen Model

Access to Markets

Marketing Qualities of MDC Commercial Agriculture

• Multiple factors determine what and where is grown in MDC agricultural practices.

• Some include:– Climate– Income– Distance from Farm to market

Examples

• The most market proximity sensitive commercial agriculture is Dairy farming.

• How quickly farmers can get product to market determines where and what they farm.

Von Thunen Model

• Commercial farmers initially consider which crops to cultivate and which animals to raise based on market locations.

• Two considerations: cost of land and cost of transportation.

• First: market price must exceed the cost of land. i.e if one hectare will cost $100 then the profit of wheat cultivated there must exceed $100 per year.

V.T continued

• However, farmers cannot just plant the crops that have the highest value per hectare. They must also consider the total cost of transportation to the nearest market centers.

Transportation Costs• Example One: Gross profit from sale of wheat grown one 1 hectare of

land NOT including transportation cost:– Wheat can be grown for $0.25 per kil.– Yield per hectare of wheat is 1,000 kil.– Gross profit is $250 per hectare.

• Example Two: Net profit from sale of wheat on 2 hectares including transportation cost:– Cost of transporting 1,000 kilo. of wheat to the market is $62.50 per kilometer. – Net profit from the sale of 1,000 kilo. of wheat grown on a farm located 1

kilometer from the market is $187.50 ($250 profit minus $62.50 in transportation cost)

– Net profit from sale when market is four kilometers from farm. ($250 profit minus $250 transportation cost) $0 profit.

V.T Model application

• A farmer must calculate the transportation cost in relationship to crop profit (value yield per hectare) to calculate the farthest distance from market they can farm.

• Farmers that are closer to the market centers typically select crops with higher transportation cost per hectare output where farmers who are further away select crops that have higher yield prices and low transportation costs.

Model

Concentric Circle: Agricultural Land Use

• City in center• First Ring: Market Gardening • Second Ring: Dairy• Third Ring: Livestock Fattening • Fourth Ring: Commercial grain• Fifth Ring: Livestock Ranching• Sixth and outer: Nonagricultural.

1: Market Gardening

• Bulking perishable items: melon or vegetables. – Chance of spoilage – Cost of transportation is high because of bulk and

weight

2: Dairy

• Close to market because of potential spoilage. • Refrigeration is costly• California has seen an increase in dairy

production as a reaction to their large population and the population growth of neighboring states.

3: Livestock Fattening

• Deliberate adding of weight to animals to increase their sale price.

• Small “fattening cells” rather than large pasture land.

• Costly, but bringing livestock to market occurs seasonally. This helps to keep costs low.

• Feedlots are also used as “fattening plants” These can accommodate thousands of animals at a time. They are messy and smelly. Can cause other environmental issues as well.

4: Commercial Grain Farming

• Selling of wheat, corn, millet or other grains. • Field to truck. Highly mechanized. • Combines are expensive: $250,000• Food Chain- farmer to producer to wholesaler

to grocery to consumer.

5: Livestock Ranching

• Uses the most land per farm of any zones. • Farmland is less expensive because of the

distance from the farm to the urban market. • Free grazing animals with gps or branding. • Product to market occurs seasonally which

also keeps transportation cost low.

6 and beyond: Nonagricultural Land Use

• Distance so farm from market it doesn’t make sense to farm this area.

Considerations:

• Topography: river, hill• Social Customs: What produce/livestock is

valued• Government Policy: subsidies • Although there are many variables this model

can be applied to industry and services as well.