Improving Productivity, Profitability and Sustainability of Degraded Grasslands Through Tree-Based Land Use Systems in the Philippines - Smallholder Tree Growing for Rural Development and Environmental Services - page 288

Table 14.5 Private net present values (PhP ha −1 ) and annualized incomes (PhP ha −1 ) of alternative
land use systems over 20 years at 25 percent and 10 percent discount rates, Claveria, Misamis
Oriental, The Philippines
Land use system NPV (PhP ha −1 ) ANB (PhP ha −1 year −1 )

25% 10% 25% 10%

IMPLUS 271 498 69 58

FPLUS 21,161 30,913 5,352 3,631

TIMPLUS 35,031 149,459 8,860 17,555

TCLUS 56,074 185,762 14,182 21,819

TCSFLUS 98,121 381,466 24,816 44,807

TPLUS 241,170 1,019,206 60,996 119,716

Note: ANB = annualized net benefits; US$1 = P51, June 2001

system. These results indicate that it was financially profitable to retain Imperata
grassland for animal grazing purposes. However, it was not the most efficient type
of land use. Conversion of Imperata grassland into tree-based systems appeared to
be a more efficient land use than other land use systems. Among the timber-based
systems, the most efficient land use was observed on the TPLUS system because of
the high value of harvested timber, in addition to having lower predicted soil loss
due to the erosion and high level of soil nutrients sustained (see the discussion of
environmental impacts in the following section).
At a 10 percent discount rate, the relative ranking of the alternative land use
systems in terms of net present value and annualized income remained unchanged.
However, the financial profitability of the tree-based systems increased further
since a lower discount rate over longer periods increased the present value of sus-
tained future yields for both crops and timber trees. The NPV of tree-based land use
systems increased to a range between PhP 149,459 ha −1 and PhP 1,019,206 ha −1 .
Over 20 years, the highest benefit was realized by the TPLUS system and then fol-
lowed by the TCSFLUS system. The NPV for annual maize cropping system
(FPLUS) increased only at minimal level (PhP 30,913 ha −1 ) due to the increasing
value of productivity losses of future yields, which results from high soil erosion.
It is interesting to note that while the FPLUS system was not the most financially
profitable option for Imperata grassland at current prices and technology, survey
results have shown that farmers still continue to practice this system. In contrast,
tree-based systems were found to be the most profitable option, but the extent of
adoption was low in relation to the annual crop production. As observed, if ever
adoption takes place, then tree-growing investments are usually done in combination
with annual crops and other cash crops. Now, the question is “why are smallholders
hesitant to increase investment in tree-based farming systems”? One possible reason
is that smallholder farmers with limited resources and opportunities may need to
have a minimum cash flow each year to sustain their families. Since tree-based land
use systems have higher NPVs but with lower cash flows each year, they might be
considered by farmers as inferior options to invest in compared to an annual crop
which has a lower NPV over the same number of years, just like the tree-growing,
yet with a higher annual cash flow. This minimum cash flow is a rational consideration