Risk and Return in Brazilian Citrus Investment / Risco e retorno de investimento em citros no Brasil

AUTOR(ES)
DATA DE PUBLICAÇÃO

2010

RESUMO

The brazilian citrus industry has seen as a reasonably profitable business in the long term, but characterized by worrying level of risk. This study below aimed to evaluate the profitability and risk of this business, suggesting that the best to manage them is the provision of resources. Net Present Value - NPV was the method used to confront risk and return of citrus industry. Identification of the main factors (sources of risk) that may cause the variability of cash flows was made by examining accounts of cash flow activity and estimating vector autoregression forecast prediction to define joint distributions. Productivity distributions in 19-year life of orchad were adjusted by Kolmogorov-Smirvov test. Using NPV model were simulated 10,000 possible values for risk factors which replaced in accounts of the cash flow generates 10,000 possible values to business return. Orange orchard investment analysis showed that the major risk factors for citrus are: prices received by fruit, prices paid for inputs and productivity of plants. The investment has been shown economically feasible based on a discount rate of 4% per year, with chance of 0.01% to get NPV <0, 16% chance of getting NPV <0 using a discount rate of 6% per year and using a discount rate of 8% per year the investment becomes economically unfeasible, it means only 3% chance of getting NPV>0. Although the expected average return has been shown profitable (6.6% per year), producers may need resources to support negative cash flow years. In order to manage project risks, we suggest two procedures to calculate the provision: a risk-based on NPV <0 and distribution of accumulated capitalized and negative net income values. Provision value to protect the producer against 95% of possible annual deficits represents 17% of first 3 years investment value. However, the total amount to be provisioned will depend on investors further resources available to apply in the project or based on credit limit available to cover cash deficits.

ASSUNTO(S)

investment orange. citricultura laranja. risk analysis investimentos citrus análise de risco

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