The economics of broiler, grain, and trout production as a risk diversification strategy

Abstract

A comprehensive farm-level stochastic and dynamic capital budgeting simulation model (AQUASIM) is used to evaluate the economic benefits of incorporating a small-scale trout enterprise with a grain and broiler farm. The simulation results indicate that combining aquaculture production with traditional agriculture increased expected income and reduced risk substantially. The use of external debt capital improved the after-tax net present values and internal rates of return but lowered net cash farm income. This study shows the importance of enterprise diversification in stabilizing variability in expected income.