Abstract

Farmers select productive alternatives under risk in accordance with agronomic and economic considerations. This study was based on historical economic information generated in a long-term study (1980-1996) of the National Agricultural Research Institute of rotations in dry land areas in the Andean foothills, VIII Region, Chile. Optimum economic portfolios were quantified, selected and analyzed according to their Net Real Margin ($) and Standard Deviation, applying the concepts of the Portfolio Selection Theory or Expected-Variance Analysis (E-V Analysis), and relations with the decision processes of the farmers in a risk context. The study was carried out for farmers with different risk-aversions and farm sizes using a quadratic computer program. The net expected margin of the optimal portfolios varied between $170,000 ha-1 to $211,000 ha-1, increasing when farm size and risk aversion are lower. The optimum economic portfolios basically included the rotations: wheat/oats, wheat/sowed pasture (3 years) and wheat/natural pasture/oats. When farm size and the risk aversion increased, the rotation wheat/oat reduced its participation, and the cattle rotations increased strongly. Based on an E-V Analysis, it was feasible to select optimal economic portfolios that were relatively stable and coherent with proposals of development for the zone.