Uncertainty and Flexibility in the Brazilian Beef Livestock Sector: the Value of the Confinement Option
| Autor: | Luiz de Magalhães Ozorio, Carlos de Lamare Bastian-Pinto, Luiz Eduardo Teixeira Brandão, Alexandre Paula Silva Ramos |
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| Rok vydání: | 2015 |
| Předmět: |
Economics and Econometrics
geography geography.geographical_feature_category Natural resource economics business.industry Strategy and Management Environmental resource management Pasture Management of Technology and Innovation Accounting Return on investment Livestock Business and International Management Volatility (finance) business |
| Zdroj: | Brazilian Business Review. 12:100-120 |
| ISSN: | 1808-2386 |
| DOI: | 10.15728/bbr.2015.12.6.5 |
| Popis: | In this work, the value of existing operational flexibility is evaluated, its emergence being attributable to the Brazilian livestock alternatives for cattle fattening, i.e. by maintenance in pasture or through confinement. This crucial sector of the Brazilian economy, the second largest in the world, is highly fragmented, features low return margins and is subject to significant uncertainty factors. Confinement increases cattle fattening speed and when compared against maintenance in pasture it maximizes return on investment for farmers. In spite of this, confinement decision making is dependent upon appropriate time management. Confinement also poses risks related to the volatility of feed costs. Through the Real Options management methodology, assessment of financial growth in livestock fattening is directly linked to flexibility of timing in the transfer of cattle from pasture to confinement, with the presence of associated uncertainties. The results indicate that there is a significant increase in financial returns through containment, calculated using the return per head system. They also point to the importance of correct confinement timing to maximize returns. |
| Databáze: | OpenAIRE |
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