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Can’t See the Wood for the Trees: The Returns to Farm Forestry in Ireland

Author

Listed:
  • James Breen

    (Rural Economy and Development Programme, Teagasc, Athenry, Co. Galway, Ireland)

  • Darragh Clancy

    (Rural Economy and Development Programme, Teagasc, Athenry, Co. Galway, Ireland)

  • Mary Ryan

    (Forestry Development Unit, Teagasc)

  • M. Wallace

    (School of Agriculture, Food Science and Veterinary Medicine, University College Dublin)

Abstract

The period 2007-2009 witnessed considerable variability in the price of outputs such as milk and cereals and this was compounded by a high degree of volatility in the price of inputs such as fertilizer, animal feed and energy. Previously, Irish farms have used the returns to off-farm employment as well as agricultural support payments such as the Single Farm Payment (SFP) and the Rural Environmental Protection Scheme (REPS) to protect their living standards against low and uncertain agricultural market returns. However, the downturn in the Irish economy has led to a reduction in the availability of off-farm employment and also the discontinuation of REPS. This may lead to an increase in afforestation on Irish farms, as forestry offers greater certainty through the provision of an annual premium in addition to the SFP. However, the decision to afforest represents a significant long-term investment decision that should not be entered into without careful economic consideration. The aim of this paper is to use the Discounted Cash Flow (DCF) analysis method to calculate the returns to forestry under alternative opportunity costs associated with conventional agricultural activities being superseded. The returns to forestry are calculated using the Forestry Investment Value Estimator (FIVE). These returns were then incorporated in the DCF model along with the returns to five conventional agricultural enterprises, which would potentially be superseded by forestry. This approach allows for the calculation of the Net Present Value (NPV) of three forestry scenarios.

Suggested Citation

  • James Breen & Darragh Clancy & Mary Ryan & M. Wallace, 2010. "Can’t See the Wood for the Trees: The Returns to Farm Forestry in Ireland," Working Papers 1003, Rural Economy and Development Programme,Teagasc.
    • Handle: RePEc:tea:wpaper:1003
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    References listed on IDEAS

    as
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    5. Rasul, Golam & Thapa, Gopal B., 2006. "Financial and economic suitability of agroforestry as an alternative to shifting cultivation: The case of the Chittagong Hill Tracts, Bangladesh," Agricultural Systems, Elsevier, vol. 91(1-2), pages 29-50, November.
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    Cited by:

    1. Duesberg, Stefanie & Upton, Vincent & O'Connor, Deirdre & Dhubháin, Áine Ní, 2014. "Factors influencing Irish farmers' afforestation intention," Forest Policy and Economics, Elsevier, vol. 39(C), pages 13-20.
    2. McDonagh John & Farrell Maura & Mahon Marie & Ryan Mary, 2010. "New opportunities and cautionary steps? Farmers, forestry and rural development in Ireland," European Countryside, Sciendo, vol. 2(4), pages 236-251, January.

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    Keywords

    Farm forestry; net present value;

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