Diversification and its economic impact on dual-purpose livestock farming

Abstract

Diversification is emerging as a strategy to improve the economic performance and resilience of dual-purpose livestock systems in the Venezuelan lowland tropics, particularly under constraining edaphic conditions; this study assesses its economic impact and examines its linkage with agroecological grazing technologies and value addition. A comparative financial analysis was conducted between two farms: (i) a conventional system on fertile soils (587 ha; 1.5 animal units per hectare, AU/ha) and (ii) a diversified system on less fertile soils (282 ha; 0.5 AU/ha). Under harmonized assumptions (initial investment US$56,077, interest rate 13%, live-weight price US$2/kg, Murrah breed, equivalent mortality and calving rates), we estimated net present value (NPV), internal rate of return (IRR), benefit–cost ratio (B/C), and payback period (PBP), complemented by a recent narrative review on diversification, rational grazing, and sustainability. The conventional system displayed high early profitability (e.g., IRR 66–77%; B/C 2.07–2.18), whereas the diversified farm exhibited higher B/C values (2.49–2.62) and sustained NPV growth that approached the conventional system over the assessment horizon despite edaphic constraints; dairy processing into cheeses and grazing management emerged as key performance levers. Overall, the findings indicate that diversification can offset agroecological limitations and achieve profitability comparable to the conventional system without lengthening the PBP; however, external validity is limited by the small sample size and the absence of sensitivity analysis and per-hectare/AU-normalized metrics. Future work should incorporate replicated designs, product-line–disaggregated cash flows, and explicit risk assessment.