Economic return of citrus farming versus grain cultivation in the Paranapanema region - SP

Thiago da Rocha Ribeiro and Monica Regina Franco

Revista IPecege, 2017, vol. 3, issue 4

Abstract: Given the current scenario of the Brazilian economy, agriculture has proven to be attractive and sustainable, especially when compared to other sectors, encouraging new investments in the field. However, for both traditional producers and novice investors, there is a huge variety of crops and production systems available. In this context, the Paranapanema region, in the state of São Paulo, stands out in irrigated grain production, and its citrus farming is constantly growing. Therefore, this study sought to evaluate and compare the economic return of citrus farming with irrigated grain crop rotation. The parameters used were Net Present Value [NPV], Internal Rate of Return [IRR], Net Uniform Value [NUV], Profitability Index [PI], and Discounted Payback. For risk assessment, a statistical evaluation of random numbers generated through the Monte Carlo method was used. The resulting data showed that the orange crop obtained a projected NPV of R$ 2,625,495.12, with a 2.87% probability of it being negative. While grain cultivation presented an NPV of R$ 902,977.92, with a 7.05% chance of resulting in a negative net present value. Despite the low probability of obtaining an NPV < 0, there is still a risk that the ventures will present negative intermediate cash flows, and that the producer will be forced to resort to resource reserves or raising capital through rural credit, both alternatives generating impacts on the final result. Given the above, although both projects are viable, citrus farming demonstrated a greater economic return for the rural producer.

Keywords: Financial; Economics (search for similar items in EconPapers)
Date: 2017
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