Farm Woodlots are they worthwhile?

June 2005
Leith Knowles, scientist, Forest Research and Mike Halliday, SFF Project Manager and former President of NZ Farm Forestry Assn.

Farm woodlots are a way of retiring and stabilising pasture land that is prone to slipping, creating riparian strips and buffer zones, reducing surface runoff and limiting contamination of groundwater by nutrients. A Sustainable Farming Fund project has studied the economics of establishing woodlots in a number of situations, and developed woodlot profit calculators for use by farmers to assist decision making

Growing trees on farmland has many advantages. Woodlots can be used to stabilise hill country so that runoff is not as rapid, soil erosion is slowed down and possibly avoided, soil is not lost from the farm and the downstream effects of sediments entering rivers and causing silting and flooding are reduced. Tree roots are stronger and penetrate deeper than grass roots, and there is a tenfold reduction in soil erosion under trees compared with pasture.

Trees dont urinate or defecate, and so have a benign environmental footprint and contribute little in the way of soluble nutrients such as N and P to groundwater, rivers and lakes. They can also provide a buffer zone between livestock and waterways.

Planting woodlots adjacent to waterways or on steep or unstable slopes reduces the impact of pastoral farming on the environment, often without affecting farm profitability.

However, farm forestry can of itself be profitable in the medium to long term sometimes more profitable than running livestock on marginal areas. The question is: how can farmers determine the potential profit from growing various tree species on various parts of their farms?

Most farmers will know the areas on their properties that are obviously more suited to trees unstable hillsides or steep gullies. They will also have areas where livestock production is the best use perhaps flat to rolling areas that can be cultivated or are very productive. However, trees vs livestock profitability comparisons for the in-between areas are less certain.

In an effort to help farmers make better decisions the MAF Sustainable Farming Fund has sponsored work on the economics and sustainability of farm forestry in projects involving Forest Research, the Farm Forestry Association and several other groups.

Studies of particular farms have led to an appreciation of the many issues involved, and a Calculator has been developed so that farmers can plug in values relating to their own farm and estimate the profitability of planting trees in a range of situations.

The calculator expresses profitability in terms of EFGM Equivalent Farming Gross Margin the gross margin per livestock unit that can product the same return on capital as trees grown on that site. [GM = revenue per livestock unit minus the variable costs (fertiliser, animal health etc) but not labour.]

Once farmers have figures for EFGM for trees on various parts of their properties they can compare them with the gross margins they are getting from livestock. For some areas trees may be more profitable, in others the EFGM for trees may fall short of existing livestock profitability, and so the potential cost of retiring those areas from livestock can be estimated.

Generally speaking, if the current carrying capacity of the land being assessed is much under 10 LSU/ha then trees are a realistic option. The beauty of farm woodlots is that they can be small and farmers can give forestry a go to see if it suits them and their situation.

The calculator runs under Excel, which is commonly used on farm computers. The cost charged for its use goes into a fund for calculator maintenance. Version 2 of the calculator has just been released.

If farmers already have a stand of trees on their own property or on a neighbours property, either radiata pine or Douglas Fir, they should measure that stand of trees, for height and diameter and age and when they have been pruned or thinned. Those data are entered into the Calculator and calibrate it so that it is tuned for the growth rates of trees their situation. They can then enter the costs of labour, etc, on the spreadsheet into the future for any period and they can put any mix of log prices from the MAF website. Sensitivity analyses are possible what happens if prices are cut back by 20%, etc?

This gives them figures for the EFGM eg. a figure of $50 means that trees would make $50 for each stock unit that they displaced on the area that you are thinking of planting. If a farmer has been making that amount over the past five years from sheep and beef s/he might decide to continue on, or perhaps decide that erosion/pollution considerations would make trees the better option.

Key factors that affect the results are:

Existing livestock carrying capacity

Wood growth rate

Silviculture how the trees are managed

Harvesting and transport costs depend on terrain and location. A small woodlot in an area where is already extensive forestry means fewer problems.

Land and livestock capital values

Understorey grazing provides revenue early on

Source of labour will the farmer provide his own?

In some areas livestock farming is exporting nitrates into streams and lakes. The eastern side of Lake Taupo has a lot of forest and its contribution of nitrates to Lake is very low. On the western side farming is intensive, and there is a real concern that this is not sustainable.

Planting trees is a good way of reducing the problem but the economics do not stack up against dairying, and even if farmers did plant forests they need to have access to finance so they can survive until the first areas were harvested. Planting stream margins and steep slopes, and providing a substantial and effective buffer between livestock and waterways would certainly improve the situation.

A study of profitability of sheep & beef farming vs trees on hill country in the Taupo basin showed that the return from radiata pine was greater for livestock carrying capacities of up to 14 lsu/ha. Farmers could change from pastoral farming to a mix of pastoral farming and woodlots, particularly on their least productive land, without compromising their long-term profitability.

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