The inventory control theory in the operations research and management literature is primarily

concerned about manufactured products, for which, the typical assumptions are ample external
supplies and predictable prices, and the decision is on how much to order or produce.
Agricultural products, on the other hand, are rarely studied in this literature but deserve an
attention long overdue because of their unique features, such as the limited and unpredictable
supply, inelastic demand and thus highly unpredictable prices, and a decision of how much to
sell. Such features are considered in the agricultural economics literature which provides
insights and strategic guidelines but with limited structural results on the theory. Inspired by
reallife practice in the Kenya coffee industry, we consider a class of stochastic and dynamic
inventory models for storable agricultural products with random exogenous supply and price.
We characterize the optimal inventory (selling) policies for a variety of cost functions relevant in
practice. In the cases of linear cost functions, we derive closed-form expressions for the optimal
policies and the optimal discounted profits. Our theoretical advancement reveals additional
insights and deepens the understanding of inventory management for agricultural products.
Applying the theory to practice, we show that making selling decisions judiciously can
significantly outperform the prevailing practice of selling-all regardless.

Many of the world’s poor still depend directly or indirectly on agricultural commodities for their
income, most of them are small-scale farmers in the third world countries. Taking coffee as an
example, an estimated 25 million small-scale farmers grow about 70% of the world’s coffee, and
about 125 million people in the world depend directly on coffee for their livelihoods (Oxfam
2001). In the 1990s, exports by the 52 developing countries (Brazil, Vietnam, Colombia, Kenya,
etc.) were about U.S. $10-12 billion with the retail sales value, mainly in industrialized countries
(the United States, Germany, Japan, Italy, etc.) of about U.S. $30 billion (Osorio 2002). This
makes coffee the second most traded commodity in the world after petroleum.

Agricultural Inventory Management System makes agricultural production pattern accessible to the
detail of agricultural parcel and farmer. Moreover, animal and agricultural mechanization assets and
their details are recorded at village and farmer level. Thus, it becomes posibble to produce
agricultural statistics which leads national agricultural policies and strategies by using reliable, in-
situ data and support national commerce policies by annualy, semi-annually, quarterly and monthly
periods. In addition, with online upto-date data warehouse and data mining services, on-field checks
of agricultural supports; monitoring agricultural activity seasonaly; planning and timing activities like
expropriation and land consolidation that can harm the crops; detection of production and farmers
that are effected by natural desasters are made possible. System is controlled and managed by
Control Center.
For small businesses, inventory management concerns space utilization, while for larger businesses,
it concerns the information system that helps manage the inventory of several products. Plenty of
previous research papers had applied the inventory management theory to improve the inventory in
many businesses, such as shoe retail stores (Ngarmpornprasert, 2020), an agricultural business
(Erden, 2015 (Hindam & Suthikarnnarunai, 2020), a frozen food business (Rodprayoon & Chanasit,
2020), and a Plastic Lamp Manufacturer (Jiumsanga et al., 2020). The well-known inventory
management techniques and theories that were applied in those research are Economic Order
Quantity (EOQ), Inventory policy, and ABC analysis