Syngenta planned a South American second planting as an option on US seed-corn uncertainty

Every year Syngenta Seeds grows more than 50 seed-corn hybrids and then markets over 100 under the NK brand. Production planning is complicated by biology: yields depend on local weather and insects during the growing season, and customers' experience with a hybrid in one year strongly shifts demand for it the next.

Seed companies hedge with a second growing season in South America, which starts after many yield uncertainties and some demand uncertainties have been resolved. Syngenta and the University of Iowa developed a second-chance production-planning model to size that hedge: given what is already known about US yields and next year's demand, it decides how much additional seed to produce in South America.

A retrospective trial showed that planning the 2000 crop with the model would have raised margins by about $5 million. Syngenta went on to use it for the varieties that account for 80 percent of its total sales volume.

Treat South America as a second-chance production option

Crop yields and demand are revealed progressively, so a staged decision beats one made entirely in advance

South America's off-season planting is a natural call option on uncertainty—a structure, not a slogan

The optimizer sizes the hedge against both yield shortfall and demand surprise, which fight each other

Measured: about $5M of margin on the 2000 crop in trial, then rollout to 80 percent of sales volume

When nature gives you two shots at supply, the second one is an option: delay part of the decision until uncertainty resolves, and let a model price and size the extra planting.

The model moved from trial to production planning for varieties covering 80 percent of Syngenta's sales volume, and the work was published in Interfaces 33(1) in 2003 as a Franz Edelman Award finalist write-up by the Syngenta and University of Iowa team.