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Farm Forestry: Land Availability, Take-up Rates and Economics.
Frawley, J.P. Leavy, Anthony
Frawley, J.P.
Leavy, Anthony
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2001-02-01
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Frawley, A., Leavy, J.P., Farm Forestry: Land Availability, Take-up Rates and Economics, End of Project Report, Teagasc, 2001.
Abstract
Of the Member States in the European Union Ireland has the lowest proportion of land area covered by forest. Given the large surpluses of agricultural commodities and expected future increases in farm productivity, less land resources will be needed to produce EU food requirements. The Irish government has, therefore, adopted a target to plant 25,000 ha of new forest annually to the year 2000 and thereafter a target of 20,000 ha annually. Substantial incentives to promote afforestation are in place, but with the exception of 1995, the area of land planted has been considerably below target.
The objectives of this study is to examine (i) the availability of land for afforestation, (ii) the factors which impede or promote the uptake of forestry and (iii) the relative economic returns from forestry in a farm context. The availability of land via the market has steadily diminished between 1990 and 1998. The area of agricultural land sold in the period fell from 33,282 ha to 8,656 ha, a fall of 74 per cent. At the same time average price increased from £3,964 per ha to £6,865, an increase of 72 per cent.
Surveys of the opinions of landholders indicate that attitudes toward afforestation are becoming more positive in the 1990s. This is reflected in a substantial increase in the area of farm forestry during the decade. However, a survey of opinions of farmers who had already planted forestry indicated a perception that it is not a suitable replacement for conventional farm enterprises on `good' farmland. Land planted in 78 per cent of sites in this survey was previously utilised as either summer grazing or rough grazing. The principal motivation for planting was the favourable returns to forestry on land that had limited alternative use.
The relative economic returns of forestry in comparison with farm enterprises such as dairying and cattle were assessed post CAP reform (2007), using linear programming techniques. Scenarios involved alternative uses of the farm resources such as extensive/intensive land use, forestry/no forestry and off farm job/no off farm job. The objective was to examine the profitability of forestry on farms in situations in which livestock enterprises qualified for REPS and extensification payments and in which off farm jobs were (a) not available and (b) available at different wage levels. Non economic considerations, such as the perceived unsuitability of forestry as a replacement for agricultural enterprises on `good' land and the irrevocability of the decision to plant forestry could, come into play. In order to reflect these non-economic considerations, together with the higher risk associated with investment by individuals, a high discount rate (10%) was used in calculating returns to forestry.
The analysis shows that in situations in which off farm jobs are either not available or are available at a low wage level, extensification and REPS payments enable efficient livestock enterprises to compete with forestry. In these situations forestry is a profit maximiser only on farms which have surplus land, having first qualified for both extensification and REPS on existing livestock enterprises. However, the availability of off farm earnings at or near the industrial wage rate leads to increases in the forestry area, sometimes to the exclusion of cattle enterprises.
Economic criteria therefore could mean that large areas of land could be transferred to forestry from conventional agriculture in the post 1999 CAP reform situation. Economics may not, however, be the most appropriate arbiter of such a decision.