Farm forestry: land availability, take-up rates and economics

The target set by the Irish Government is to increase the forest cover to 17% of the land area of the country by the year 2030. This involved an annual afforestation level of 25,000 ha to the year 2000 and 20,000 ha thereafter to the year 2030.

The target was almost achieved in 1995 but planting levels have fallen far short since, even though substantial financial incentives were put in place.

Implications

• Failure to reach the overall target by 2030 will result in failure to reach the critical mass of forest output required to support a viable timber industry. Since the employment creation potential of large timber mills is not very high, it is essential that significant value added accompanies whatever timber output is achieved in order to boost employment.
• In the absence of achieving the afforestation targets listed in the Strategic Plan for Forestry, the contribution of the forestry sector to the growth targets of the National Development Plan will be less than expected and the objectives set out regarding forestry in the CAP Rural Development Plan will not be achieved.

Background

The study objectives were to examine the factors:

1. Influencing land availability for forestry,
2. Slowing down or accelerating the rate of afforestation and
3. Affecting the economic return from farm forestry.

The amount of land becoming available for afforestation via the market has declined substantially in recent years. Land transfers are via gift or inheritance in the vast majority of cases. Land becoming available (non market) for forestry at time of change of ownership was not examined but a survey of landowners opinions was used to study the factors influencing decisions to plant.

In this study the economic returns from forestry were compared with the returns from existing farm enterprises using linear programming techniques. The technique as applied in this study is aimed at maximising total farm gross margin from all available resources thereby arriving at the optimum mix of enterprises (including forestry). The main assumptions of the economic study were as follows:

• Returns to forestry were calculated using a 10% discount rate.
• The gross margin system is used to compare returns from forestry with agricultural enterprises.
• No economic value was given to the amount of carbon dioxide fixed by growing trees, and
• Farm labour was valued both at minimum wage and at average industrial wage rates.

The discount rate normally used by those in the forestry sector is 5%. Fixed costs are proportionally much higher in agriculture than in forestry. Forestry is long-term and all costs are variable in the long term so perhaps a net figure might be more suitable for comparison purposes.

Findings

Land availability and take-up rate

• Landholders attitude to forestry are becoming more positive.
• The unfavourable responses to forestry were based mainly on pragmatic rather than cultural issues, e.g. small farm size, land quality, competing EU payments.
• The main reason for planting was the very favourable income from forestry premium payments on land that had limited other uses.
• Forestry on good farmland was not favoured but was a definite competitor to agricultural enterprises on land marginal for farming and / or situated some distance away from the main farmyard.
• Afforestation was mostly associated with large farm size. The study did not examine the question of cutting back in farm enterprises (livestock numbers) which is often associated with old age and / or ill health. The demographic profile of those in the sample with farm forests was the same as in the National Farm situation.

Economic returns

• Opportunities for off-farm employment and levels of remuneration can determine the choice of farm enterprise and the rate of afforestation.
• Off-farm earnings at or near industrial wage rate levels may result in increases in the area planted often to the exclusion of cattle and sheep enterprises at individual farm level. Since the decision to plant is for all time, economic factors alone are often not the only criteria for decision-making.
• Where off-farm jobs are not available, forestry will compete with farm enterprises only on farms where there is land surplus to that required to maximise REPS, compensatory allowance, and extensification payments.
• However, even where no off-farm jobs are available, forestry will always compete with drystock enterprises operated at moderate and low levels of efficiency.
• The study gives a clear message that a switch to forestry can improve overall farm and household income for many farmers depending on their circumstances. The findings of the study are important pointers for Teagasc staff involved in the Opportunities for Farm Families Programme.

Based on End of Project Report:

Farm forestry: land availability, take-up rates & economics. Armis No. 4256. Authors: J.P. Frawley & A. Leavy, Teagasc, Rural Economy Research Centre, Dublin, 2001. Compiled by: Jim Reidy and Dr Nuala Ni Fhlatharta, Teagasc. Tel: 091-845200.