Comparative profitability analysis of sugarcane production under a leasing and supply system in Chavantes/SP

Aline Magalhães Galindo and Marcia Eugenia Amaral Carvalho

Revista IPecege, 2016, vol. 2, issue 3

Abstract: This study aims to compare the profitability of sugarcane production through leasing and self-supply systems, in order to assist landowners in making decisions regarding the most viable alternative in the current market situation. The supply system was divided into two modalities: " spot sugarcane " and "conveyor cane". For the financial analysis, data from the 2014/2015 harvest of suppliers affiliated with an association located in Chavantes, in the central-west region of São Paulo, were used. Subsequently, cash flows were projected for each production system; the net present value (NPV), the internal rate of return (IRR), the simple payback period were calculated , and a sensitivity analysis was performed. The calculations indicated the unviability of sugarcane production in all cases, as they presented a negative NPV and an IRR lower than the minimum attractive rate of return (MARR). However, after sensitivity analysis with higher remuneration values ​​for the producer, the " spot sugarcane " and leasing supply options showed optimistic results. Thus, it is concluded that sugarcane production is an unviable activity for landowners with small areas in Chavantes/SP. However, considering the sensitivity analysis, the " spot " sugarcane supply model is the most economically attractive alternative, as the NPV and IRR showed higher values ​​than those found in leasing. However, that option has a high risk for the producer, who is dependent on market demand.

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