Estimating Profitability and Fertilizer Demand for Rice Production AroundPalo Verde National Park, Costa Rica

Rice cultivation is intensively cultivated in some regions of Costa Rica thanks to the establishment of several irrigation projects. This is especially important for the case of several agricultural communities that cultivate their land around the Palo Verde National Park, where the development of the Arenal-Tempisque Irrigation project has brought prosperity to the local farmers. This study made a detailed description of the current rice production system used around Palo Verde by identifying the variable and fixed inputs involved in the rice production. This study included household information of three agricultural settlements. This research also included the estimation of a profit function associated with rice production in this area and the estimation of a fertilizer demand function. Risk analysis was also included to analyze different policy scenarios and determine future fertilizer consumption.Throughout the statistical description of the current rice production system, no statistically significant differences where found among the three communities included. The estimated profit function determined that seed price and capital intensity are significant whereas for the case of the fertilizer demand function rice production, seed price and fertilizer price resulted to be significant. Risk analysis showed the important impact of the current tariff application on imported rice on profits. Regarding the different policy scenarios evaluated to discourage the fertilizer use in this region of Costa Rica, direct intervention on fertilizer price (tax application) has the greatest impact on reduction of fertilizer consumption.Results of the risk analysis concluded that no future changes in fertilizer demand associated with rice production should be expected in this area.