Financial returns, stability and risk of cacao-plantain-timber agroforestry systems in Central America

Authors: Ramírez O.A.¹; Somarriba E.²; Ludewigs T.³; Ferreira P.²

Source: Agroforestry Systems, Volume 51, Number 2, 2001 , pp. 141-154(14)

Publisher: Springer

Abstract:

Diversification of agroecosystems has long been recognized as a sound strategy to cope with price and crop yield variability, thus increasing farm income stability and lowering financial risk. In this study, the financial returns, stability and risk of six cacao (Theobroma cacao L.) – laurel (Cordia alliodora (R&P) Oken) – plantain (Musa AAB) agroforestry systems, and the corresponding monocultures, were compared. Production and cost data were obtained from an on-going eight-year old experiment. The agroforestry systems included a traditional system and a replacement series between cacao (278, 370, 556, 741 and 833 plants ha^−1) and plantain (833, 741, 556, 370 and 278 plants ha^−1) with a constant laurel population (timber tree; 69 trees ha^−1). An ex-post analysis was conducted using experimental and secondary data to build a simulation model over a 12-year period under different price assumptions. The probability distribution functions for the three commodity prices were modeled and simulated through time, accounting for their possible autocorrelation and non-normality. The expected net incomes from the agroforestry systems were considerably higher than from monocultures. The agroforestry systems were also less risky. Agroforestry systems with proportionally more cacao than plantain were less risky, but also less stable. The timber component (C. alliodora) was a key factor in reducing farmer's financial risks. Methodologically, the study illustrates a technique to evaluate both expected returns and the corresponding financial risks to obtain a complete, comparable profile of alternative systems. It shows the need to allow for the possibility of non-normality in the statistical distributions of the variables entering a financial risk and return analysis.

Keywords: Cordia alliodora; financial analysis; Musa; price modeling; risk and uncertainty; Theobroma cacoa

Language: English

Document Type: Regular paper

Affiliations: 1: Department of Agricultural and Applied Economics, Texas Tech University, Box 42132, Lubbock TX 79409-2132, USA; E-mail: Octauio.Ramirez@ttu.edu 2: CATIE 7170, Turrialba, Costa Rica 3: Projeto Arboreto – Parque Zoobotanico, Universidade Federal do Acre BR-364 km 4 s/n, Distrito Industrial C.P. 1035-CEP 69908-210

Publication date: 2001-01-01

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• By this author: Ramírez O.A. ;  Somarriba E. ;  Ludewigs T. ;  Ferreira P.

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