Economic viability of a crop-livestock integration system

Vinholis, Marcela de Mello Brandão; Souza Filho, Hildo Meirelles de; Shimata, Isabela; Oliveira, Patricia Perondi Anchão; Pedroso, André de Faria

doi:10.1590/0103-8478cr20190538

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ANIMAL PRODUCTION • Cienc. Rural 51 (2) • 2021 • https://doi.org/10.1590/0103-8478cr20190538 copy

Economic viability of a crop-livestock integration system

Viabilidade econômica de um sistema de integração lavoura-pecuária

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT:

Crop monoculture and single conventional cattle raising were designed for a rapid increase in productivity and food supply. However, some of these production systems have shown signs of saturation and negative environmental impacts. Crop-livestock integration systems have been developed as an alternative that delivers increased productivity and greater environmental sustainability. This article presents an evaluation of the economic viability and the financial risk associated with an investment in crop-livestock integration with a focus on the production of beef cattle in São Carlos, SP, Brazil. Results showed that the investment is economically viable and has an Internal Rate of Return higher than that of a conventional system. Monte Carlo simulations showed that the integrated system presents lower market risks when compared to the conventional system.

Key words:
integrated production system; investment analysis; Monte Carlo simulation

Authorship

Marcela de Mello Brandão Vinholis ^*E-mail: marcela.vinholis@embrapa.br. *Corresponding author.

Empresa Brasileira de Pesquisa Agropecuária (Embrapa), 13560-970, São Carlos, SP, Brasil. Empresa Brasileira de Pesquisa Agropecuária (Embrapa)BrazilSão Carlos, SP, BrazilEmpresa Brasileira de Pesquisa Agropecuária (Embrapa), 13560-970, São Carlos, SP, Brasil.

https://orcid.org/0000-0003-3033-0230

Hildo Meirelles de Souza Filho

Departamento de Engenharia de Produção, Universidade Federal de São Carlos (UFSCar), São Carlos, SP, Brasil.Universidade Federal de São Carlos (UFSCar)BrazilSão Carlos, SP, BrazilDepartamento de Engenharia de Produção, Universidade Federal de São Carlos (UFSCar), São Carlos, SP, Brasil.

https://orcid.org/0000-0002-7580-157X

Isabela Shimata

https://orcid.org/0000-0001-6447-6110

Patricia Perondi Anchão Oliveira

https://orcid.org/0000-0003-4665-3755

André de Faria Pedroso

https://orcid.org/0000-0001-9079-3048

E-mail: marcela.vinholis@embrapa.br. ^*Corresponding author.

DECLARATION OF CONFLICTS OF INTERESTS

The authors declare no conflict of interest. The founding sponsors had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, and in the decision to publish the results.

AUTHORS’ CONTRIBUTIONS

The authors contributed equally to the manuscript.

SCIMAGO INSTITUTIONS RANKINGS

Figures | Tables

Figures (4)
Tables (6)

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Figure 1
Rotation of agricultural activities in the CLI system.

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Figure 2
Steps for Monte Carlo Simulation.

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Figure 3
Frequency distribution of NPV for CLI system resulting from Monte Carlo simulation.

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Figure 4
Frequency distribution of NPV for CC system resulting from Monte Carlo simulation.

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Table 1
Residual values for infrastructure, machines and implements.

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Table 2
Parameters of probability distribution of the random variables used in the Monte Carlo simulation.

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Table 3
Technical coefficients of the CLI system (6 ha), amount of inputs per year.

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Table 4
Technical coefficients of the CLI system and the CC system (6 ha of each system).^*

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Table 5
Cash flow of the CLI system (6 ha), in R$.

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Table 6
Cash flow of the CC system (6 ha), in R$.

Figure 1 Rotation of agricultural activities in the CLI system.

Figure 2 Steps for Monte Carlo Simulation.

Figure 3 Frequency distribution of NPV for CLI system resulting from Monte Carlo simulation.

Figure 4 Frequency distribution of NPV for CC system resulting from Monte Carlo simulation.

Table 1 Residual values for infrastructure, machines and implements.

Group	Item	Residual value
Infrastructure	Hydraulic equipment	20%
	Water trough	20%
	Electric fence	37%
	Boundary fence	37%
	Salt trough	20%
--------------Farm implements---------------		10%

Table 2 Parameters of probability distribution of the random variables used in the Monte Carlo simulation.

Random variable	Most likely	Min.	Max.	Probability distribution	K-S^*
Price of Silage (R$/t)	124.10	90.60	157.50	Triangular	0.1023
Price of carcass (R$/@ of finished steer)	146.68	129.85	172.60	Pert	0.0965
Price of steers (R$/head)	1570.00	1315.00	1907.00	Triangular	0.1037

Note. ^*Kolmogov-Smirnov test.

Table 3 Technical coefficients of the CLI system (6 ha), amount of inputs per year.

Annual inputs for the CLI system (6 ha: 2 ha corn and 4 ha pasture)	Labor (h)	----------------------------------------Machines and equipments (h)--------------------------------------------
	Tractor operator	Silage equipment	Fertilizer applicator	Sowing equipment	Sprayer (600 L)	Corn planting machine	Tractor (85/90 HP)	Corn harvester (1line)	Tractor (120 HP)	Silage wagon
1 - Operation
NPK fertilizer application	3	-	3	-	-	-	3	-	-	-
Herbicide application	3	-	-	-	3	-	3	-	-	-
Urea application	6	-	6	-	-	-	6	-	-	-
Sowing of Piatã seeds	1.5	-	-	1.5	-	-	1.5	-	-	-
Cultivation of corn	2.5	-	-	-	-	2.5	2.5	-	-	-
Harvesting of corn	3	-	-	-	-	-	3	3	-	-
Ensiling of corn	2	2	-	-	-	-	-	-	2	-
Transport	4	-	-	-	-	-	4	-	-	4
Total of hours	25	2	9	1.5	3	2.5	23	3	2	4

2 -Inputs		Quantity
Corn seeds		40	kg
Herbicide		10	L
Fertilizer (08-28-16)		1000	kg
Fertilizer (20-05-20)		1000	kg
Piatã seeds		16	kg
Urea		2400	kg

Table 4 Technical coefficients of the CLI system and the CC system (6 ha of each system).^*

Year	Stocking rate (heads of steer)	Carcass (@, finished steer)	Silage (t)
----------------------------------------------------------------------------CLI System----------------------------------------------------------------------------
1	16	274.68	73
2	12	232.73	74
3	14	256.41	93.12
Mean (Year 4-10)	14	254.61	80.04
----------------------------------------------------------------------------CC System----------------------------------------------------------------------------
1	19	391.50	-
2	16	288.42	-
3	18	337.98	-
Mean (Year 4-10)	18	339.30	-

^*Note. Technical coefficients were obtained from an experiment carried out during the seasons 2013/2014, 2014/2015 and 2015/2016 by Embrapa, São Carlos, SP.

Table 5 Cash flow of the CLI system (6 ha), in R$.

Item/year	Year 0	Year 1	Year 2	Year 3	Year 4 to 9	Year 10
Selling of finished steers	-	40,290.06	34,136.84	37,610.22	37,345.71	37,345.71
Selling of corn silage	-	9,059.6	9,183.71	11,556.58	9,933.3	9,933.3
Residual value of infrastructure	-	-	-	-	-	7,858.75
Residual value of machines	-	-	-	-	-	614.81
Investment	32,079.52	-	-	-	-	-
Infrastructure (fences, salt and water troughs, hydraulic material)	24,680.02	-	-	-	-	-
Liming (total area)	1,251.4	-	-	-	-	-
Machines and implements	6,148.1	-	-	-	-	-
Corn crop	-	5,532.63	5,532.63	5,532.63	5,532.63	5,532.63
Inputs	-	5,318.63	5,318.63	5,318.63	5,318.63	5,318.63
Corn seed	-	482.8	482.8	482.8	482.8	482.8
Gliphosate herbicide	-	207.2	207.2	207.2	207.2	207.2
NPK fertilizer (08-28-16)	-	2,000.00	2,000.00	2,000.00	2,000.00	2,000.00
NPK fertilizer (20-05-20)	-	1,800.00	1,800.00	1,800.00	1,800.00	1,800.00
Diesel and lubricants	-	828.63	828.63	828.63	828.63	828.63
Labor	-	214.01	214.01	214.01	214.01	214.01
Mechanical operations and silo	-	214.01	214.01	214.01	214.01	214.01
Livestock production	-	34,519.75	27,822.17	31,170.96	31,170.96	31,170.96
Inputs - bovine	-	26,790.32	20,092.74	23,441.53	23,441.53	23,441.53
Steer	-	25,120.00	18,840.00	21,980.00	21,980.00	21,980.00
Vaccines	-	75.04	56.28	65.66	65.66	65.66
Mineral mix	-	234.05	175.54	204.79	204.79	204.79
Mineral/protein mix	-	924.12	693.09	808.61	808.61	808.61
Tick insecticides	-	281.07	210.81	245.94	245.94	245.94
Antihelminthics	-	156.04	117.03	136.54	136.54	136.54
Inputs - pasture	-	5,379.13	5,379.13	5,379.13	5,379.13	5,379.13
Urea	-	4,872.00	4,872.00	4,872.00	4,872.00	4,872.00
Seeds Piatã grass	-	152,00	152,00	152,00	152,00	152,00
Diesel and lubricants	-	355.13	355.13	355.13	355.13	355.13
Labor	-	2,350.3	2,350.3	2,350.3	2,350.3	2,350.3
Animal management	-	1,939.64	1,939.64	1,939.64	1,939.64	1,939.64
Vaccination	-	323.27	323.27	323.27	323.27	323.27
Mechanical operations	-	87.39	87.39	87.39	87.39	87.39
Repairs and maintenance	-	561,00	561,00	561,00	561,00	561,00
Salt and water troughs (3%)	-	202.21	202.21	202.21	202.21	202.21
Fence (2%)	-	358.79	358.79	358.79	358.79	358.79
Land lease	-	4,260.00	4,260.00	4,260.00	4,260.00	4,260.00
Cash flow	-32,079.52	4,476.28	5,144.74	7,642.2	5,754.41	14,227.97

Note. US Dollar quotation in the period 11.01.2016 to 11.01.2017 is R$ 3.20 = USD1.00 (Source: https://www4.bcb.gov.br/pec/taxas/port/ptaxnpesq.asp?id=txcotacao).

Table 6 Cash flow of the CC system (6 ha), in R$.

Item/year	Year 0	Year 1	Year 2	Year 3	Year 4 to 9	Year 10
Selling of finished steers	-	57,425.22	42,305.45	49,574.91	49,768.52	49,768.52
Residual value of infrastructure	-	-	-	-	-	7,858.75
Residual value of machines	-	-	-	-	-	247.44
Investment	31,660.87	-	-	-	-	-
Infrastructure(fences, salt and water troughs, hydraulic material)	24,680.02	-	-	-	-	-
Pasture recovery (herbicide, lime, fertilizer, seed, labor, lubricant and diesel)	4,506.42	-	-	-	-	-
Machines and implements	2,474.44	-	-	-	-	-
Livestock production	-	42,620.75	37,597.56	40,946.35	40,946.35	40,946.35
Input - bovine	-	31,813.51	26,790.32	30,139.11	30,139.11	30,139.11
Steer	-	29,830.00	25,120.00	28,260.00	28,260.00	28,260.00
Vaccines	-	89.11	65.44	84.42	84.42	84.42
Mineral mix	-	277.93	234.0	263.30	263.30	263.30
Mineral/protein mix	-	1,097.39	924.12	1,039.64	1,039.64	1,039.64
Tick insecticides	-	333.78	281.07	316.21	316.21	316.21
Antihelminthics	-	185.30	156.04	175.55	175.55	175.55
Inputs - pasture	-	7,308.00	7,308.00	7,308.00	7,308.00	7,308.00
Urea	-	7,308.00	7,308.00	7,308.00	7,308.00	7,308.00
Labor	-	3,499.24	3,499.24	3,499.24	3,499.24	3,499.24
Animal management	-	2,909.46	2,909.46	2,909.46	2,909.46	2,909.46
Vaccination	-	484.91	484.91	484.91	484.91	484.91
Mechanical operations	-	104.87	104.87	104.87	104.87	104.87
Repairs and maintenance	-	561.00	561.00	561.00	561.00	561.00
Salt and water trough (3%)	-	202.21	202.21	202.21	202.21	202.21
Fence (2%)	-	358.79	358.79	358.79	358.79	358.79
Land lease	-	4,260.00	4,260.00	4,260.00	4,260.00	4,260.00
Cash flow	-31,660.87	9,983.47	-113.12	3,807.55	4,001.17	12,107.37

Note. US Dollar quotation in the period 11.01.2016 to 11.01.2017 is R$ 3.20 = USD1.00 (Source: https://www4.bcb.gov.br/pec/taxas/port/ptaxnpesq.asp?id=txcotacao).

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E-mail: cienciarural@mail.ufsm.br

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[1] E-mail: marcela.vinholis@embrapa.br. ^*Corresponding author.