SE 03. Financial projections for the evaluation of technological alternatives in the Mexican dual purpose production system

Abstract

The overall objective of this work was to perform an economic analysis of technological alternatives for the dual purpose production systems under Mexico’s tropical conditions. This production unit was based on grazing 100 ha of improved species of grass and supplemented with Napier grass and corn silage during the dry season. Two alternative scenarios were analyzed: 1) the use of BST and 2) the purchase of a milk cooling tank. A farm level, income and policy simulation model (FLIPSIM), developed at Texas A&M University was used to analyze the production and financial conditions of the production unit over a six year planning horizon (1995-2000). The results indicate that to pay for the use of BST, on average, the milking herd should increase milk production by 21.38 % for the first year in the planning horizon. As inflation decreases and financial conditions improve over time, smaller increments in milk production would be necessary to pay for the hormone. The initial investment necessary for the purchase and associated facilities for a milk cooling tank and operation costs associated to cooling the milk required the net income to increase to US$12,500 over the baseline during the first year for the farm to break-even. The more dramatic effect is realized in the first year because of the 20$ 4,000 to US$5,700 over the rest of the planning horizon. The effect of this on the unitary BE milk price is a difference of US$ 0.046 /liter of milk in the first year and a range of US$ 0.015 - 0.0213 /liter of milk over the rest of the planning horizon