Case:

It was early 2019 and Chrystopher Jesse was sitting in class thinking about potential business ventures, having inherited a 10-acre plot of land from his parents earlier in the month. Since receiving the plot, Jesse had been considering many options and finally decided on either selling the land or converting it to a farm for carrots or potatoes. With the next planting season approaching, he wanted to make the decision quickly, and he had much to consider before making his decision.

KENYA

Kenya was a former British colony located in East Africa with a population in 2019 of approximately 53 million} Back in 2007, the country faced many issues, including political corruption, social violence, and growing unemployment. Since then, Kenya had made significant political, structural, and economic changes to improve the health of the country. In cities such as Nakuru, located three hours outside Nairobi, many small businesses had prospered, fuelled by the country's 5.7 per cent gross domestic product (GDP) growth rate in 2018.2 Additionally, in 2018, the World Bank reported that only about 93 per cent of the labour force was currently unemployed with the services sector employing approximately 32 per cent of the population.

The Agriculture Industry

Despite the advancements in Kenya's infrastructure, entrepreneurship, and innovation, agriculture remained the backbone of the country's development. In 2019, 33 per cent of the country's GDP was generated by the sector and 40 per cent of the population was employed in the space. There was a particular focus on small-scale plots, from which much of Kenya's rural population derived their income. However, despite the industry's importance, several issues were preventing its modernization. In response, the government released a national approach to address the problems, called the Agricultural Sector Transformation and Growth Strategy (ASTGS).

The ASTGS was anchored in several priorities. The two most important were (1) increasing the income of small-scale farmers, pastoralists, and fisherfolk; and (2) elevating agricultural output and value added. In both cases, potato crops were a key focus.

The first priority was to try and increase the incomes of small-scale farmers, pastoralists, and fisherfolk. The government targeted farmers who grew crops with the greatest potential, believing they would be positively impacted the most. Potatoes were noted as one of the top six crops with regard to their potential for increased efficiency and productivity. Additionally, the government was planning_ to expand its subsidy program for small-scale farmers and provide support for the purchase of inputs such as fertilizer, seeds, mechanization, and education With these initiatives, the government hoped to increase small-ale farmers' incomes by 35 per cent by 2030.

The second priority of the ASTGS was elevating agricultural output. Kenya's fanning industry was under-mechanized compared to its African peers, with only 7 per cent of farms having access to irrigation.

This reduced the value each worker added and led to lower yields. Additionally, the crop mix within the country lacked diversity, with 75 per cent of small-scale fanning land used for just maize and beans. This limited diversity exposed Kenya to significant risks associated with major crop disease or crop failure. The Kenyan government had stated its intention to support fanners who planted a highly diverse set of crops.

While farmers' individual success largely depended on their own expertise and natural conditions, the ASTGS was expected to play a role in how the agricultural industry progressed into future.

THE FARMING DECISION

Jesse was in his second year at Jomo Kenyatta University of Agriculture Technology in Nakuru, Kenya, pursuing a bachelor's degree in procurement. Despite receiving a university-level education, Jesse knew that finding a job after graduation might be difficult, driving him to look for a "side hustle." Given his family's history in dairy fanning, his ability to operate farming machinery and the government's support for small-scale farmers, Jesse believed he could leverage existing knowledge as well as additional research to begin his own farm. If his first attempts were successful, he hoped he could pursue farming full-time.

Decision 1: Farm or No Farm

The first decision Jesse had to make was whether to use his 10-acre piece of land for a business venture. Even though his family had a history with the land, Jesse was considering selling the plot if he decided that a business venture would not succeed.

Decision 2: Potatoes or Carrots

If Jesse chose to use the land to farm, his next decision was whether to farm potatoes or carrots. Potato seeds cost KSh 2,500 for every 50 kilogram (kg) bag, with 16 bags needed for each acre of land. Carrot seeds cost KSh 45,000 per acre. Jesse calculated that he would need to employ 10 workers for the entire season and pay them wages of KSh 250 per day. Employees worked every day of the season, which spanned four months, with an average of 30 days in a month. Transportation costs for harvested products would be KSh 9 per kg.

Decision 3: Irrigation or No Irrigation

After deciding which crop to plant, Jesse would then have to choose whether to irrigate the farm. Without irrigation, Jesse would have to rely on rainfall. Irrigation would deliver a more consistent water supply to the farm and would impact the yield, the impact depending on the specific crop that was planted. Regardless of what Jesse chose to plant, the cost of irrigating the farmland would be KSh 300,000 per year.

Probabilistic Event: Favourable Season or Unfavourable Season The yield during harvest was heavily dependent on the level of rainfall during growing months. Jesse believed there was a 65 per cent chance of favourable farming weather conditions for potatoes in the upcoming year.

For potatoes, if the land was not irrigated and the weather was favourable, he would receive a 65 per cent yield on his crops. An unfavourable rainy season without irrigation would result in flooded soils. This would cause harvested potatoes to develop rings, making them commercially tunable and reducing the yield to 10 per cent. If irrigated, potato crops would no longer be solely reliant on rainfall for water, increasing the harvest yield to 80 per cent in good weather. Because increased watering from irrigation would fail to remedy flooding, unfavourable weather would still result in a yield of 10 per cent.

Carrot yield suffered heavily from a lack of precipitation, with harvested carrots being significantly smaller in unfavourable weather conditions. According to Jesse's predictions for Carrots, there was a 75 per cent chance of favourable farming weather conditions in the upcoming year.

If irrigated, carrot crops would produce 80 per cent yield in favourable weather conditions (heavy rainfall) compared to a 70 per cent yield in low-rainfall season. Carrot crops were better able to withstand heavier rain conditions but were more at risk when rainfall was sparse, and soil was dry. Kenya's heat made excessive watering essential to maximizing carrot yield, which was why irrigation would be especially crucial. If fields were not irrigated and the rainfall season was bad, Jesse would receive a 20 per cent yield, but even in a good season. the Kenyan climate would result in only a 40 percent yield.

Pests and diseases were a constant threat to potato and carrot crops, preventing yields from reaching 100 percent even in favourable weather condition.

PROFIT POTENTIAL

Jesse estimated that in a scenario of 100 per cent yield, he would be able to harvest 120,000 kg of carrots in total receive KSh 3,500 for every 150 kg. In terms of potatoes, Jesse estimated he would be able to yield 5,000 kg per acre in a scenario of 100 per cent yield and receive KSh 60 for every kg.

CONCLUSION As Jesse arrived at his home in Nakuru, he stopped by the local Gilani's Supermarket to buy some dinner and collect his thoughts. How could he make the best use of his newly inherited land? Should he invest in a carrot farm or a potato farm? As he ate his ugali,8 he knew he had to decide soon.

Questions:-

Draw a decision tree to model the uncertainty and decisions Jesse faces.

What should Jesse do, and why?

Besides expected values, what other factors may influence Jesses decision?