A model to calculate ex ante the threshold value of interaction effects necessary for proposed intercropping projects to be feasible to the landowner and desirable to society

Authors: Dyack, B.; Rollins, K.; Gordon, A.

Source: Agroforestry Systems, Volume 44, Numbers 2-3, July 1999 , pp. 197-214(18)

Publisher: Springer

Abstract:

This article describes an approach to evaluate the difference in net present valued economic returns that would be expected from temperate intercropping as compared to annual cropping or tree farming alone. This tool can be used by landowners to provide a threshold level of the value of interaction effects required for a proposed intercropping project to break even, based on current data. The landowner would then need to consider, using information from other sources, whether the threshold is realistic for given site conditions. The threshold value is useful to agricultural policy-makers to consider economic instruments that would induce landowners to adopt intercropping, if it should be considered socially beneficial to do so. The approach measures the financial gap that exists between intercropping and annual cropping alone and compares this gap to the beneficial interaction effects that are associated with intercropping. The approach is demonstrated using experimental results from an on-going intercropping study at the University of Guelph, Guelph, Canada. A base model scenario using black walnut trees with annual crops is set up with a 5% discount rate, 96 trees per hectare, and sawlog prices for black walnut of $1066 per 1000 bdft as a base case. The base model predicts that black walnut and corn intercropping returns $555 per hectare less than the annual crops alone, over the entire rotation of trees. This amounts to about $42 per hectare per year in annual terms, at a 6% rate of discount. This is the threshold that would need to accounted for by the net present value (NPV) of on-farm interaction effects. This estimate depends on the specific assumptions made and the experimental situation, and should not be interpreted as reflecting returns possible in other circumstances.

Keywords: amenity values; economics; interactions; intercropping; net present value; temperate

Document Type: Research article

DOI: http://dx.doi.org/10.1023/A:1006282126349

Affiliations: 1: Email: krollins@uoguelph.ca

Publication date: 1999-07-01

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