Financial Analysis of Crop-Livestock-Forestry Systems in Goias, Brazil

Abstract

Integration system is used to denote practices that combine systematic use of the land and technologies, in which forest species are used in conjunction with herbaceous plants and/or animals respecting a spatial or temporal arrangement. Knowing that this type of production seeks to balance ecological and economic factors, it is important to understand the financial benefits and risks involved in this production. Financial analysis, therefore, acts as an important analysis tool to foster this type of activity. The paper aimed to conduct analysis of investment risk of a crop-livestock-forestry system deployed in Brazil, comparing two different production scenarios, scenario I with 17 ha and scenario II with 25 ha. The risk analysis was performed using the Monte Carlo method and sensitivity analysis (by varying the factors: the discount rate, productivity and price). A cash flow was elaborated based on annual cost and revenues data of the agricultural crops (corn and soybeans), livestock and eucalyptus, using an interest rate of 6% per year. The results indicated that the optimal age for cutting the eucalyptus was at seven years on both scenarios; scenario I had better return on investment using deterministic and probabilistic methods; scenario I presents higher investments risks; there is a negative relation between discount rate and annualized net present value (ANPV); increased productivity of crops provides greater profitability to the system; there has been an increase in the economic viability of the system, as value has been added to the products. Monte Carlo method and the sensitivity analysis showed to be an appropriate tool to analyze the risk of crop-livestock-forestry systems, making it possible to foresee how the project will respond to possible scenarios.