Burkart, Stefan

Enciso, Karen

Peters, Michael

Sotelo Cabrera, Mauricio Efren

CGSpace (CGIAR)

International Leucaena Conference 2018November 13, 2018Enciso, Karen; Sotelo, Mauricio; Peters, Michael; Burkart, Stefans.burkart@cgiar.orgThe inclusion of Leucaenadiversifolia in Colombian cattle systems: An economic perspectiveContext Improvements in animal feeding and sustainable intensification are the most promising strategies for mitigating these impacts. The inclusion of forage legumes in cattle production systems has the potential to increase yield, efficiency and nutritional value of the forage, with less environmental impact. But adoption and use by the producers remain limited due to:• Economic factors• Lack of knowledge• Limited perceived benefits by the producer• Risk aversion and uncertainty.The forage-based cattle sectorplays a key role inand nutrition securityFOODAlleviationPOVERTYBut it is also associated with causing negative environmental impacts:of greenhouse gasesEMISSIONSdegradationLANDpollution and depletionWATERthreatenedBIODIVERSITYDEFORESTATIONObjectiveTo evaluate the profitability of including Leucaena diversifolia in the Colombian cattle production system, in comparison with a grass monoculture.Materials and methodsData source: Monthly field measurementscarried out by the International Center forTropical Agriculture (CIAT) in Palmira, Valle del Cauca, Colombia, between August 2014 and August 2015.Evaluated diets:T1) Brachiaria hybrid cv. CIAT BR 02/1752 (Cayman) monoculture (100%)T2) Cayman-L. diversifolia associationin a proportion of 70:30%(2,000 Leucaena diversifolia plants/ha).Materials and methodsTable 1: Animal response data of T1 and T2Variable T1 T2(Mean ± SD) CV (%) (Mean ± SD) CV (%)Carrying capacity (LSU/ha) 3.36 4.04Weight gain (g/animal/d) 440 ± 419.3657 ± 7311.2Animal productivity (kg/ha/y) 723 ± 68* 1078 ± 120*Time to reach sales weight (months)118 12LSU: 450 kg/animal SD: standard deviation.*Statistically different at 1% significance level P<0.01.1Period of time required to bring a calf with an average weight of 200 kg to a sales weight of 450 kg.Materials and methodsEconomic, risk and sensitivity analyses • A discounted cash flow model for the estimation of financial profitability indicators was developed.• A quantitative risk analysis by running a Monte Carlo simulation was carried out.• Three pasture persistence scenarios and the following variables were randomly combined: Live weight gain per animal and year Investment costs Maintenance costs Sales price per kg of live weight Purchase price per kg of live weight.• Sensitivity and scenario analyses were carried out to identify those variables with the strongest effects on the profitability indicators.Scheme of a Monte Carlo simulationSimulation madewith @RISK SoftwareResultsTable 2: Summary of profitability indicators of the simulation model.Decision criteria Indicator T1 T2Scenarios S1 S2 S3 S4 S5 S6NPV Mean1 (288) (342) (473) 2,055 1,881 1,716SD2 447 434 404 697 673 651CV 1.55 1.26 0.85 0.34 0.36 0.38CI (95%)3 (1,135)-558 (1,165)-481 (1,239)-292 743-3,389 610-3,172 484-2965IRR Mean 9.7% 19% 17% 22% 21% 21%CI (95%) 4%-15% 4%-15% 4%-14% 16%-28% 15%-28% 15%-27%Benefit/Cost4 Mean 0.98 0.90 1.5 1.13 1.12 1.12CI (95%) 0.9-1.05 0.9-1.04 0.89-1.03 1.05-1.22 1.04-1.21 1.03-1.20Payback period (years)Mean 6 6 6 4 4 4CI (95%) 3-8 3-8 3-8 3-5 3-5 3-5Minimum area (hectares)5Mean 6.54 3.76Scenarios were determined by considering three annual degradation rates that decrease the total forage supply and therefore the carrying capacity: for T1 at 1% (S1), 3% (S2) and 8% (S3), and for T2 at 1% (S4), 3% (S5), and 5% (S6), respectively. 1Mean value of the VPN obtained in the simulation (5,000 iterations and confidence level of 95%); 2SD: Standard deviation of the NPV with respect to the mean value; 3CI: Minimum and maximum values in a 95% confidence interval; 4Quotient between benefits and discounted costs; 5Minimum area required for two basic Colombian salaries in hectares (1 CBS=US$279).ResultsFigure 1: Probability and accumulative density distributions for the NPV for T1 and T2.ResultsFigure 2. Multiple tornado graph displaying the contributions of random input variables to the variance of the NPV for T1 and T2. Conclusions• L. diversifolia has significant potential to increase animal productivity and profitability, under different scenarios of animal productivity and market conditions, which is conducive to the sustainable intensification of meat production in grazing systems.• The inclusion of L. diversifolia comes along with a reduction of the risk of economic loss and less variance to changes in critical variables.• This is key to encourage adoption, since farmers, being naturally rather risk adverse, will most likely favor technologies with a relatively lower variance.Conclusions• The establishment of grass-legume associations should be accompanied by specific training and extension programs that overcome the lack of knowledge and experience in the use of tropical forage legumes.• This will reduce uncertainties associated with technology adoption and increase adoption rates.• The access to and structure of necessary financial resources (e.g. credits) needs to be improved in order to provide the required framework for technology adoption.Thank you!AcknowledgementsThis work was done as part of the CGIAR Research Program on Livestock. We thank all donors that globally support our work through their contributions to the CGIAR system.

The inclusion of Leucaena deversifolia in Colombian cattle systems: An economic perpective

IntroductionThe inclusion of Leucaena diversifolia in Colombian cattle systems:An economic perspective» The forage-based cattle sector plays a key role in tropical food production, food security and poverty alleviation.» But it is also associated with causing negative environmental impacts, e.g. greenhouse gas emissions, land degradation, deforestation, pollution and water depletion, loss of biodiversity.» Improvements in animal feeding and sustainable intensification are considered to be among the most promising strategies for mitigating these impacts.» The inclusion of forage legumes in cattle production systems has the potential to increase yield, efficiency and nutritional value of the forage, with less environmental impact.» But adoption and use of forage legumes by the producers remain limited due to economic factors, the lack of knowledge and limited perceived benefits by the producer, and aspects associated with risk aversion and uncertainty.ObjectiveMethodologyResultsTo evaluate the profitability of including L. diversifolia in the Colombian cattle production system, in comparison with a grass monoculture.Conclusions» L. diversifolia has significant potential to increase both animal productivity and profitability, under different scenarios of animal productivity and market conditions, which is conducive to the sustainable intensification of meat production in grazing systems.» The inclusion of L. diversifolia comes along with a reduction of the risk of economic loss and less variance to changes in critical variables. This is key to encourage adoption, since farmers, being naturally rather risk adverse, will most likely favor technologies with a relatively lower variance.» The establishment of grass-legume association should be accompanied by specific training and extension programs that overcome the lack of knowledge and experience in the use of tropical forage legumes. This will reduce uncertainties associated with technology adoption and increase adoption rates.» The access to and structure of necessary financial resources (e.g. credits) needs to be improved in order to provide the required framework for technology adoption.Economic, risk and sensitivity analyses» A discounted cash flow model for the estimation of financial profitability indicators was developed and a quantitative risk analysis carried out by running a Monte Carlo simulation (software @Risk).» Three pasture persistence scenarios and the following variables were randomly combined: live weight gain per animal and year, investment costs, maintenance costs, sales price per kg of live weight, and purchase price per kg of live weight.» Sensitivity and scenario analyses were carried out to identify those variables with the strongest effects on the profitability indicators.» Establishment costs of T2 are 60% higher than of T1.» The evidenced animal productivity indicators for T2 allowed average annual increases per hectare of 66% in gross income and 119% in net profit, when compared to T1.» The probability of obtaining no financial feasibility reduces from 72.1% in T1 to 0% in T2.» The profitability is affected mainly by two variables: the sales price per kg of live weight, and the animal productivity.This poster is licensed for use under the Creative Commons Attribution 4.0 International license (CC BY 4.0) 2018-09. Design: JL Urrea (CIAT)AcknowledgementsThis work was done as part of the CGIAR Research Program on Livestock. We thank all donors that globally support our work through their contributions to the CGIAR system.ReferencesRao IM, Peters M, Castro A, Schultze-Kraft R, …Rudel T. 2015.. LivestockPlus - The sustainable intensification of forage-based agricultural systems to improve livelihoods and ecosystem services in the tropics. Tropical Grasslands-Forrajes Tropicales 3:59–82. DOI: 10.17138/TGFT(3)59-82Schultze-Kraft R, Rao IM, Peters M, Clements RJ, Bai C, Liu G. 2018. Tropical forage legumes for environmental benefits: An overview. Tropical Grasslands-Forrajes Tropicales 6:1–14. DOI: 10.17138/TGFT(6)1-14Shelton M, Dalzell S. 2007. Production, economic and environmental benefits of leucaena pastures. Tropical Grasslands 41:174–190International Leucaena Conference29 October - 3 November 2018Poster presented at:Enciso, Karen; Sotelo, Mauricio; Peters, Michael; Burkart, StefanInternational Center for Tropical Agriculture (CIAT), Tropical Forages Program. CONTACT: s.burkart@cgiar.orgData source: Monthly field measurements carried out by the International Center for Tropical Agriculture (CIAT) in Palmira, Valle del Cauca, Colombia, between August 2014 and August 2015.Evaluated diets: T1) Brachiaria hybrid CIAT BR 02/1752 cv. Cayman monoculture (100%), and T2) Cayman-L. diversifolia association in a proportion of 70%:30% (2,000 L. diversifolia plants/ha).VariableCarrying capacity (LSU/ha)Weight gain (g/animal/d)Animal productivity (kg/ha/y)Time to reach sales weight (months)1T1 T2(Mean ± SD)3.36440 ± 41723 ± 68*18(Mean ± SD)4.04657 ± 731078 ± 120*12CV (%)9.3CV (%)11.2Table 1: Animal response data of T1 and T2.LSU: 450 kg/animal SD: standard deviation. *Statistically different at 1% significance level P<0.01. 1Period of time required to bring a calf with an average weight of 200 kg to a sales weight of 450 kg.Decision criteriaScenariosNPVIRRBenefit/Cost4Payback period(years)Min. area (ha)5IndicatorMean1SD2CVCI (95%)3MeanCI (95%)MeanCI (95%)MeanCI (95%)MeanS1(288)4471.55(1,135)-5589.7%4%-15%0.980.9-1.0563-86.54T1S2(342)4341.26(1,165)-48119%4%-15%0.900.9-1.0463-8S3(473)4040.85(1,239)-29217%4%-14%1.50.89-1.0363-8S42,0556970.34743-3,38922%16%-28%1.131.05-1.2243-53.76T2S51,8816730.36610-3,17221%15%-28%1.121.04-1.2143-5S61,7166510.38484-296521%15%-27%1.121.03-1.2043-5Table 2: Summary of profitability indicators of the simulation model.Scenarios were determined by considering three annual degradation rates that decrease the total forage supply and therefore the carrying capacity: for T1 at 1% (S1), 3% (S2) and 8% (S3), and for T2 at 1% (S4), 3% (S5), and 5% (S6), respectively. 1Mean value of the VPN obtained in the simulation (5,000 iterations and confidence level of 95%); 2SD: Standard deviation of the NPV with respect to the mean value; 3CI: Minimum and maximum values in a 95% confidence interval; 4Quotient between benefits and discounted costs; 5Minimum area required for two basic Colombian salaries in hectares (1 CBS=US$279).Figure 1: Probability and accumulative density distributions for the NPV for T1 and T2.72.1% 27.9% 0.0%0.0% 100.0% 0.0%0 4,550-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,0000123456789Probability densityNPV -T1 (Sim#1)Minimum -1,506.18Maximum 947.67Mean -288.46Standard Dev. 447.28Values 5000NPV-T2 (Sim#4)Minimum -60.65Maximum 4,144.62Mean 2,054.60Standard Dev. 697.00Values 5000US$

The inclusion of Leucaena diversifolia in Colombian cattle systems: An economic perspective

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The inclusion of Leucaena deversifolia in Colombian cattle systems: An economic perpective

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