REDUCING FINANCIAL RISK IN AGROFORESTRY PLANNING - A CASE-STUDY IN COSTA-RICA

We used fluctuations in net income from alternative cropping systems t o assess the financial risk associated with an agroforestry system. Me an-variance analysis was used to derive a set of minimum-risk farm pla ns for a 15-hectare farm in Costa Rica. Monocultural coffee production provided the highest expected net income, but also had the greatest e conomic risk. As risk was reduced, the optimal agroforestry system div ersified to include other cropping systems in addition to the coffee m onoculture. Risk aversion was, however, accompanied by significant red uctions in expected net income for the cropping systems studied. The i nclusion of additional cropping systems whose net incomes are negative ly correlated with the systems considered here could help reduce the e conomic risk facing rural agriculturalists in this region.