The diversification of crops provided by crop-livestock-forest integration systems (ILPF) reduces market risks and ensures greater security for producers. The verification was done by researchers from Embrapa, ILPF Network and Institute Mato Grosso of Agricultural Economics (Imea). In an unpublished paper, they show that integrated systems are less sensitive to changes in commodity prices than exclusive crop or livestock production systems.
Based on the economic data of an ILPF Technological Reference Unit located in the municipality of Barra do Garças (MT) and data from reference farms for the region, one from agriculture and the other from livestock (breeding), the researchers made sensitivity. They simulated the impact of different price variations of soybean, corn and beef arroba on each property. Scenarios ranged from a 15% drop in price to a 15% increase.
Simulating the oscillation in the price of agricultural commodities, while the farm with ILPF presented a variation in the profitability index between the 28% drop and the 28% increase, the crop-only property varied its profitability from -47% to 44%. Likewise, with the price of beef arroba oscillating, the ILPF ranch ranged between -6% and 6% and the livestock ranch between -14% and 17%.
The research did not include simulations with variation in the price of the wood due to the inexistence of a historical series of prices for wood planted in Mato Grosso. According to the researcher of Embrapa Agrossilvipastoril Júlio César dos Reis, the results demonstrate that the ILPF system is less sensitive to variations in prices, both for positive and negative variations. Moreover, in extreme situations of falling or rising prices, the ILPF is more stable than the exclusive crops.
This result is important in a scenario where producers are constantly faced with the challenge of maximizing profits and reducing risks. However, the scientist warns that all the planning done may be lost due to the market oscillations that are beyond the control of the gatekeeper. Júlio César explains that the crop is more sensitive to price changes due to the scale of production, the higher technology involved and the higher production costs.
“The farmer’s reference farm presents a level of adoption of technology much greater than the productive practices that configure the technological input used in the reference livestock production system. And even considering that the farm with ILPF presents a mix of both systems and hence of practices, technologies and costs, the results of the ILPF system are superior in all situations, “analyzes the researcher.
ILPF is profitable even with occasional price declines
Another point of the research is that even in the scenarios with the biggest drop in prices of agricultural commodities or arroba, ILPF always proves profitable. Unlike the farming and livestock farms, which with a 5% drop in price are already causing losses. For the researchers, the data show that ILPF systems can be considered viable and competitive strategies to minimize market risks, providing better conditions for producers to plan in the long run.
“The impacts on the ILPF indicators were lower, indicating their ability to minimize changes in expected returns, a fundamental aspect for risk-averse producers operating in highly competitive markets,” says Júlio César dos Reis. The researcher emphasizes, however, that the data obtained in the evaluation made in Mato Grosso can suffer alterations in other regions and with different productive systems. Therefore, it considers it essential that new studies be carried out in order to give more subsidies to producers.
Independent Commodities
To reach the results on the sensitivity of productive systems, the researchers did before a cointegration test. This is a statistical analysis of time series that was used to evaluate the relationship between the price variations of the main commodities for the state of Mato Grosso.
“Diversification is one of the positive arguments in ILPF. But we needed to see how commodities behave and whether there is any dependency between them. For it is no use to diversify the products if they have a similar behavior over time, “explains ILPF Network consultant Mariana Takahashi.
Evaluating the historical series of prices of soybean, corn, cotton and beef arroba from January 2009 to September 2017, and using different analysis methodologies, they came to the conclusion that there is no dependence between commodity markets. That is, the price change in one does not interfere with the other.
“We have seen that they are different markets. They may even relate in some way, being the grains used in animal feed and corn and cotton being second crop crops, for example. However, statistically, we show that over time there is no relation between prices. Each market behaves individually, “says the consultant ILPF Network.
By the bibliographical review done by the researchers, this should be the first work to correlate so many commodities. Mariana Takahashi explains that most research correlates the same product, observing the relationship between its price in the internal and external market, or at most two of them. With the greater complexity of the ILPF, however, there was a need for a wider evaluation.
The result obtained reinforces the role of ILPF as a safer production strategy. “The relative independence of commodity markets and, as a consequence, the non-correlation between their respective market prices offer possibilities to minimize market risks through diversification of production,” concludes Júlio César dos Reis.
This text was translated by machine from Brazilian Portuguese.