Agriculture Reference
In-Depth Information
The calculations of net present value (NPV), internal rate of return (IRR), bene-
fit cost ratio (B/C), return to land and return to labor (both averaged over the 30
years) of seasonal culture and the multistrata agroforestry systems are presented in
Table 11.4. The discount rate used for the NPV is 10 percent. Calculations were
made with and without inclusion of the cost of family labor (shadow-priced at $1
day −1 ). In both cases, the agroforestry system gives much higher NPVs than sea-
sonal culture. The IRR and B/C of agroforestry is more than twice that of seasonal
culture. At US$24 day −1 , the returns to labor of agroforestry are six times higher
than the of seasonal cropping that stands at less than $4 day −1 .
The sensitivity analysis focused on the discount rate and a reduction of yields or
prices. Higher discount rates should express the well-known argument that poverty
causes 'survival behaviour' with a strong focus on the very near future. Higher dis-
count rates should normally make agroforestry less attractive compared to annual
cropping, due to the time lag between investment and first fruits. For the agrofor-
estry system discussed here, however, this effect is only very slight. At a discount
rate of 40 percent, the NPVs of agroforestry and seasonal cropping still compare as
US$10,893 versus US$2,759, i.e. four to one, while comparing as five to one at a
10 percent discount rate (see Table 11.4). The reason is that the understory crops
are very fast yielders (see Fig. 11.1); even the citrus already fruits in the first year
of planting.
Lower yields or prices reflect an obvious insecurity of farmers. Also in this
respect, however, the results of the financial analysis are robust when testing for
what could normally be expected in terms of yield or price changes. On the input
side (Table 11.2), the two systems are not greatly different in the sense that one
would depend on a special risk factor. On the output side, the prices of the agrofor-
estry products (turmeric, litchi, etc.) would have to drop enormously compared to
wheat and rice for the agroforestry system to end up below the seasonal cropping
option (see Fig. 11.1).
Overall, the financial analysis shows that agroforestry is by far and robustly the
superior land use option, financially. The logical prediction would then be that
agroforestry would be prevalent in this region, or at least spreading. That, however,
is not the case at all. As stated, only some 14 percent of the households practice the
litchi-based or any other agroforestry system, and neither the adoption rate nor the
Table 11.4 Financial results of litchi-based multistrata agroforestry and rice/wheat monoculture
in Rajshahi district, Bangladesh (per ha)
Costs including family labor
Costs excluding family labor
Multistrata
Seasonal
Multistrata
Seasonal
agroforestry monoculture
agroforestry
monoculture
NPV (at 10%) (US$)
61,074
11,750
62,039
12,506
IRR
208%
86%
289%
131%
B/C
7.70
3.77
9.51
4.59
Return to land (US$ ha -1 year -1 )
8,567
1,294
8,712
1,358
Return to labor (US$ day -1 )
-
-
23.87
3.72
 
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