Risk and return of soybeans precision production: a case study in Mato Grosso do Sul state, Brazil1

Abstract

Precision agriculture (PA) has not yet spread in Brazil, despite the benefits stressed in literature. Considering the uncertainty related to PA’s results, this study evaluated the tradeoff between risks and returns for precision production of soybeans in Mato Grosso do Sul state, Brazil. A representative farm using PA was compared to a conventional production system through the Earnings-at-Risk metric and a Modified Sharpe Index. PA presented higher expected earnings per hectare while conventional production proved to have a lower risk exposure. The positive difference in expected earnings between precision and conventional systems was insufficient to cover PA’s risk exposure, leading to the conclusion that less risk-averse farmers could assume higher risks and prefer precision system.