Economic Sustainability of Organic Aloe Vera Farming in Greece under Risk and Uncertainty

Abstract

During the last decade, an encouraging environment for the restructuring and modernization of the agricultural sector has formed in Greece. The diversification into higher-value crops can be a promising option for small and average-sized farms, particularly during the current economic crisis. One of the most promising alternative crops that have been recently established in Greece is the organic Aloe vera crop. The main advantage of this crop is that it can utilize poor farmlands and, therefore, can facilitate rural development in marginal areas. This study explores the economic sustainability of the Aloe vera crop, considering the embedded risk and uncertainty. The results indicate that organic aloe farming is a promising alternative to “traditional” crops in Greece, particularly for family farms in rural areas. In contrast, this activity is not advisable to the most entrepreneurial type of farmers, unless their crop size allows economies of scales. Finally, the Stochastic Efficiency with Respect to a Function (SERF) analysis associates farmers’ risk attitude with their willingness to be involved in organic Aloe vera farming. SERF analysis highlights the crucial role of farmers’ risk aversion and concludes that, above a certain level of risk aversion, farmers have no incentive to adopt this economic activity.