The Use of Financial Tools in Small-Scale Irrigated Crops to Assess Socioeconomic Sustainability: A Case Study in Tocantins-Araguaia Basin, Brazil

Abstract

To expand financial knowledge and promote the socioeconomic sustainability of agricultural production systems, this work applied financial instruments to small-scale irrigated crops, making use of agricultural projects from the Bom Sucesso/Santa Cruz Settlement, located in the Tocantins-Araguaia basin, Brazil. The economic viability indicators of two irrigated okra production systems (furrow and drip) were calculated using the following indicators: Net Present Value, Modified Internal Rate of Return, Cost–Benefit Index, Discounted Payback, and Average Cost of Production. And a risk assessment through sensitivity analysis, a tornado chart, and Monte Carlo simulation was performed in a simplified financial model. The economic viability results showed that both irrigated systems were economically viable, although the okra drip system had lower indicators and reduced financial resilience, with a 58% probability of success, while the furrow system’s was 89%. The crops’ financial return was mainly influenced by okra’s sale price and productivity, followed by harvesting and planting costs. The financial tools applied in this study demonstrated some key factors to assess socioeconomic sustainability, such as the necessity to increase producers’ organizational capacity and to achieve technical improvements, which could result in market power, competitive sale prices, lower input costs, and greater productivity. The applied instruments increased financial management and have the potential to the build economic and social strength in the area of small-scale irrigated crops, and they can be replicated using simplified tools for producers, companies, and policy makers.