Economic viability of eucalyptus production in the interior of São Paulo

Helder Roberto Dota Janoselli, Ricardo Harbs and Fernanda Latanze Mendes

Revista IPecege, 2016, vol. 2, issue 2

Abstract: With projected growth in demand for wood in the coming decades, eucalyptus production has gained prominence in recent years, accounting for more than 70% of the planted tree area in Brazil. Small rural producers have been increasing their participation in production. The search for an investment alternative that generates profit and requires little infrastructure and labor, especially for small rural producers, motivated this study. Therefore, the main objective was to analyze the economic viability of eucalyptus cultivation in the city of São João da Boa Vista, in the interior of São Paulo state. To this end, a cash flow was prepared for a period of 14 years, the Net Present Value (NPV), Internal Rate of Return (IRR), and payback indicators were calculated, and a sensitivity analysis was performed. The economic indicators demonstrate that the installation of eucalyptus cultivation, as proposed, with stump removal and opportunity cost of land, proved unfeasible, generating no profit for the investor. With a negative NPV of R$ 40,808.70, an IRR of 3.41%, and a payback period of 7.82 years using simple payback and 8 years using discounted payback. The same project with a different management approach, not removing the stumps and allowing for new eucalyptus planting, becomes viable, with a positive NPV of R$ 6,802.85, an IRR of 4.55%, and a payback period of 7.82 years using simple payback and 8 years using discounted payback.

Keywords: Crop; Production/Industries (search for similar items in EconPapers)
Date: 2016
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