Agriculture Reference
In-Depth Information
percent probability of incurring a negative NPV while other land use systems
have zero probability of incurring a loss.
For all tree-based systems, there was a probability greater than 70 percent for the
NPV to be higher than their deterministic results, while the probability was more
than 40 percent for FPLUS and IMPLUS systems. There was also a high variation
for the expected value of NPV across land use system alternatives based on the
coefficient of variation (CV) results. It is interesting to note that while timber-based
systems obtained the highest NPV, they seemed to be the most risky options, as
reflected by the high CVs ranging from 164 percent to 205 percent. A high CV on
the profitability of tree-based systems suggests that income from these systems is
highly variable and uncertain.
14.4
Conclusions, Policy Implications and Recommendations
The conversion of degraded forest margins dominated by Imperata grassland into
tree-based land use systems can provide significant improvements to a range of
on-site and off-site benefits. Tree-based land use systems (especially timber planta-
tion systems) appear to be superior compared with the current farmers' practice of
farming because they had the least cumulative soil loss, highest biomass and soil
organic carbon retained in the plant-soil system, and also greater amounts of nutri-
ents conserved in the soil.
Smallholder farmers are however driven by economic imperatives. For small-
holders to consider changing to a significantly different land use system, the new
system must be more profitable than the existing system. Benefit-cost analysis has
shown that at current prices, the tree-based systems are substantially more profitable
than the Imperata system and farmers' current farming system. In addition, there are
substantially high social benefits from carbon sequestration for tree-based systems.
While there is an economic incentive for smallholders to transform degraded forest
margins to tree-based systems, the time horizon of smallholders is important.
Investments in tree-based systems will expose smallholder farmers to some mini-
mum income constraints and risks (and consequently consumption risk) as they will
incur a loss before timber harvesting. While payments to farmers for environmental
services related to carbon sequestration would help reduce the risks of negative
returns, smallholders are less likely to adopt tree-based land use systems unless they
are capable of accepting negative profitability in the first 9 years of tree growing.
Finally, it is important to emphasize that conversion of Imperata grassland to
tree-based systems is environmentally sustainable and economically efficient
(though not a fully risk-efficient) option to undertake either for smallholder invest-
ment or for a government poverty reduction program. This clearly illustrates the
case of a win-win strategy for improving the productivity of degraded forest mar-
gins and agricultural sustainability. This lends strong support to the hypothesis that
there is no trade-off between economic growth and poverty reduction objectives in
pursuing smallholder-based strategies. A caveat for the findings of the study is that
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