Financial analysis of organic and conventional coffee production in Veracruz, Mexico
Keywords:
Production costs, coffee production profitability, discounted cash flows, perennial treesAbstract
Organic coffee is typically sold at a higher price than conventional coffee. However, organic coffee yields are generally lower than those of conventional systems, and previous studies indicate that it remains unclear whether the price premium is sufficient to compensate for the reduced yield associated with organic production. The objective of this study was to compare the economics of organic and conventional coffee production by analyzing six case studies based on interviews with representative producers from the state of Veracruz, Mexico. Various financial metrics were analyzed to provide a comparative perspective on both production systems. The results suggest that both systems generate similar profitability per unit of investment. In particular, the modified internal rate of return averaged 12 % for organic and 13 % for conventional production. Although organic coffee production did not receive any additional economic incentives for its environmental and human health benefits, it represents a viable option for small farmers because it requires lower investment and allows for the incorporation of family labor.
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