TECHNICAL AND ECONOMIC OPTIONS TO IMPROVE THE INCOME OF PEACH [Prunus persica (L.) Batsch] PRODUCERS IN THE ESTADO DE MEXICO

Abstract

Mexican peach production [Prunus persica (L.) Batsch] faces an economic crisis, as a result of the gradual decrease the area planted, production, prices, and national consumption per capita. Therefore, the producers have a low income. The objective of the study was to assess whether or not organic peach production would contribute to the improvement of the income of producers in the Estado de Mexico. The economic viability of turning the conventional production system into the organic production system was evaluated using the real options theory, while the abandonment option was assessed through the binomial option pricing model. In contrast to traditional valuation methods, the real options theory considers flexibility in decisions when the profitability of investments faces volatility and uncertainty. The quantified value of the crop by-products and residues was added to the farmer’s final income to find out if the amount would help to improve his income, during and after the conversion process. Given the positive value of the options, investing in organic production is feasible, even when the project abandonment option was considered. The economic valuation of the by-products contributed to improve the income of the producers.