section 4
IMPACT MEASUREMENT AND TECHONOLOGY TRANSFER

Chapter 11
Economic considerations in agroforestry

J.E.M. Arnold
Oxford Forestry Institute
South Parks Road, Oxford United Kingdom
Formerly: Chief, Policy and Planning Service
Forestry Department Food and Agriculture Organization (FAO) of the United Nations, Rome, Italy

Introduction

Agroforestry systems have existed since the very beginnings of plant domestication. As Ninez (1984) has pointed out, the description of the mythical Garden of Eden in Genesis II is that of a homegarden, containing "every tree that is pleasant to sight and good for food". The area from which that description was drawn, the early Mediterranean, is but one region where agroforestry has long formed an important component of agriculture.

The established presence of agroforestry practices in many land-use systems today has perhaps been overshadowed by concerns about particular contemporary problems that underly much of recent interest in it. As a result, we may have been more concerned with developing new or improved agroforestry practices to cope with such issues as fuelwood shortages than with increasing our understanding of how existing activities function, and what economic contributions they make. Yet some of the most dynamic changes that have occurred in the recent past have been in existing agroforestry systems.

The purpose of this paper is, therefore, to examine selected existing agroforestry practices, most with roots deep in the past, in order to try and identify the economic considerations that have caused farmers to adopt them. This is approached by defining the advantages that agroforestry practices appear to offer to farmers as an efficient means of using available resources in order to meet their production goals.

The choice of situations examined here is largely determined by the availability of sufficient information to permit such analyses. This is most heavily concentrated in two agroforestry systems — homegardens and farm woodlots — which are reviewed in the first part of the paper, together with the more limited information relating to more extensive forms of agroforestry. In the second part, a number of general conclusions emerging from this review are brought together and discussed in terms of possible future directions for agroforestry research, projects and policies.

Benefits, costs and production objectives

The literature about farming systems which incorporate agroforestry practices describes a number of related benefits or opportunities and costs and constraints (e.g., FAO, 1978, 1985; Budowski, 1981; Arnold, 1983; Wiersum, 1981; Chambers and Longhurst, 1986). The principal positive and negative economic features and the underlying hypotheses about agroforestry are summarized in Table 1.

One hypothesis is that many agroforestry practices are characteristic of simple resource-poor situations and are not easily adapted to more intensive agricultural practices. Another, in a sense contradictory to the first, is that the competition between trees and food crops, and the priority that they must give to meeting their basic food needs, will exclude poor farmers with very little land from tree growing.

In the following section the results of economic studies of well-established homegarden situations in Java (Indonesia), eastern Nigeria, and Kerala (India) are reviewed. In the subsequent section, situations in which trees planted as farmer cash crops in parts of the Philippines, India and Kenya are examined. In most of these, the cultivation of trees as a share of total farm activity has recently been increasing, in hiost cases at a time of heightening pressures on one or more of the farmer's resources of land, labour or capital. In subsequent sections in the first part of the paper, where less intensive forms of agroforestry are reviewed, the focus is again on changes which farmers are adopting that increase the component of managed tree/crop activities.

Homegardens

Homegardens (also known as homestead and mixed gardens and as compound farms) are usually located, where they exist at all, close to the household as one of the more intensively cultivated parts of the overall farm. They are characterized by a mixture of several or many annual or perennial species grown in association, and commonly exhibiting a layered vertical structure of trees, shrubs and ground-cover plants, which recreates some of the properties of nutrient recycling, soil protection and effective use of space above and below the soil surface to be found in forests (Fernandes and Nair, 1986). Homegardens are widely used to supplement outputs from other parts of the farm through the cultivation of a variety of other subsistence and commercial crops (Ninez, 1984).

In Java, homegardens have long existed as the principal farming system on dry lands, accounting for a substantial proportion of total land use, with irrigated rice cultivation forming the other main component of the farm system. The gardens are traditionally dominated by perennials rather than annuals, and by woody rather than herbaceous growth (see Soemarwoto, this volume).

Table 1 The main benefits and costs of agroforestry

On farms with sufficient rice land to enable the household to meet its basic food needs, priority in labour and capital allocation is given to this. The garden areas in these larger farms are essentially forest gardens, with capital investment in trees of commercial value (Wiersum, 1981; Hunick and Staffers, 1984; Michon et al., 1986; Stoler, 1978).

With growing pressure on the land and decreasing area of crop land per head, the proportion of land under homegardens has been increasing to up to 75 percent of cultivated land (Stoler, 1978). Access to rice land has, in the meanwhile, declined, and a large proportion of the farmers now have no rice land, or not enough to produce their basic rice requirements. As this process occurs, the homegarden areas are cultivated more intensively, becoming mixed rather than forest gardens as annuals are progressively intercropped to provide food and income.

Management is intensified by increasing labour inputs. The scope for increasing productivity is such that labour inputs in small gardens are reported to be, on average, three times as high as those for larger gardens. Returns to labour are high, and intensive garden management produces up to 20 percent of household income and 40 percent of calorific intake (Stoler, 1978).

Another approach to intensification of garden area use has been to increase the value added from homegarden produce. Penny and Singarimbun (1973) describe how some of the poorest farmers shift from producing just fruit from their coconut palms to production of coconut sugar, a highly labour-intensive process, which, though producing only low returns to labour, increases returns to coconut-bearing land. Other farm-related income-earning activities include pit-sawing and fuelwood gathering (Hunink and Stoffers, 1984).

As land-holding size continues to decline, income is increasingly sought from off-farm employment. At this stage, cultivation of annuals is reduced in order to release labour, and trees and other perennials requiring only low labour inputs come to form the main component again (Stoler, 1978).

The shift to greater dependence on tree gardens in Java as land-holding size decreases and farmers' resource endowments and production objectives change, thus appears to be because they permit more productive use of the land than alternative land management options.

In a study of farming practices in south-eastern Nigeria, Lagemann (1977) found similar relationships between population pressure on the land and intensity of tree cultivation. Farms comprise a mixture of fallow, outer and inner fields and permanently cultivated compounds around the household. The latter contain a variety of tree species, including oil palm, raffia palm (Raffia spp.), coconut, and banana and plantains intercropped with cassava, yams and other arable crops.

Growing population pressure is accompanied by decreasing farm size and declining soil fertility. As pressures on the land increase, the proportion of land under compound systems is increased, as is the density of both tree and arable crop cultivation within the compound areas. Lagemann argues that this shift reflects farmers' perceptions that such land use, combined with increased mulching and manuring, offers the most effective way of using their resources to slow down the process of declining soil fertility and thus maintain production. Though labour input per hectare is no higher than in the fields, yields in monetary terms are five to ten times as much per hectare and returns to labour four to eight times as much. Lagemann identifies phasing of planting and harvesting in the compound areas to reduce peak workloads, and the better physical working conditions which the shade of the vegetation provides, as factors contributing to this higher labour productivity.

With increasing population density, compound areas account for up to 59 percent of crop output and a growing proportion of total farm income. The proportion of the latter generated from tree crops rises to a share nearly equal to that from arable crops. Livestock become an increasingly important part of the compound system, both as a source of income and of manure. However, as population density continues to increase, yields and returns to labour eventually decline to the point at which farmers have to turn increasingly to non-farm sources of income. As labour has to move off-farm, a lower input management of the compound areas is adopted, leaving them under a cover in which trees and other perennials predominate.

The overall picture, therefore, as in Java, is one of fanners responding to decreasing land availability by moving to greater dependence on agroforestry systems. Initially this is because these permit more sustainable intensification of land use and higher returns from available labour inputs than alternative land uses. When pressures on the land increase further to the point where income has to be generated mainly from off-farm employments, these agroforestry systems have the added advantage that they can be maintained, in a modified form, as a low-input low-management form of land use.

A study of tree cropping in the homesteads in Kerala, India, records a similar process in a system in which homegardens (where perennial crops such as coconut, areca nut, rubber and pepper are intercropped with seasonal and annual crops such as pulses, bananas, tubers and vegetables) have long existed as part-systems together with more extensively managed areas (Nair and Krishnankutty, 1984; Nair and Sreedharan, 1986). As rising population pressure on the land leads to decreasing land-holding size, uncultivated land is first brought into use resulting in removal of natural tree cover. This is followed by more active management of the homegardens. This includes reducing the range of cultivated trees to those with multiple uses, with priority being given to those species valued for fruit, fodder and mulch and suitable as supporting structures for cultivation of pepper, betel vine and various climbers. In the process, the density of trees and intensity of their cultivation are increased.

As pressure on the land increases further, land-holding size increasingly falls to the point where farming ceases to be the main source of income. As labour inputs into the farm are reduced in order to move to off-farm employment, the tree component increases even further as the vegetation reverts towards a forest condition.

However, in this area of Kerala, capital has become increasingly available, enabling some farmers to intensify land use further through purchased inputs of fertilizer, herbicides, etc. This reduces the importance of multipurpose trees in soil-nutrient maintenance and weed suppression, and they then tend to be removed as an impediment rather than a complement to agriculture. Removal of trees has been accelerated by rapid rises in the prices of timber and land; the latter leading to the shift of land use to cash crops. Trees are then cultivated only where they are competitive as cash crops, for example, Ailanthus triphysa grown to supply wood stock to the match industry.

The Kerala experience, which is summarized in Figure 1, thus broadly parallels that of Java and Nigeria up to the point where farmers were able to inject substantial capital into their systems. The subsequent displacement of agroforestry practices seems to confirm that, in the absence of capital, farmers had been employing trees primarily to provide substitutes for purchased inputs, and as crops requiring lower inputs than agricultural crops.

Farm woodlots

The farm woodlots examined in this section essentially involve the growing of trees as a field cash crop. Farmer decisions could therefore be expected to be governed by the question of whether or not this crop is more profitable than alternative crops or other uses of the land. In all three of the situations discussed below tree growing has recently been spreading rapidly.

One of the most fully documented farm-woodlot experiences has been small-farmer growing of trees to produce pulpwood as a cash crop in the Philippines. In an area of previously low-density extensive agriculture, farmers grow Albizia falcataria on a 6-8 year rotation for sale to a nearby pulp company (PICOP). Average size of landholding is 11 ha, of which a part is devoted to cultivation of food crops. At least part of the land on 45 percent of the farms had been previously used for growing food crops, and other non-food crops had been raised on some parts of 31 percent of them. Credit for tree farming was available but was utilized by only 30 percent of the farmers eligible — generally farmers with above-average woodlot size (Hyman, 1983).

A. Intensive homegarden cultivation

B Changes in intensively managed homegardens

Figure 1 Changes in homegarden management in Kerala, India
Source: Based on Nair and Krishnankutty, 1984.

Ex-post analysis showed that farmers were able to earn an acceptable return from their woodlots in most prevailing circumstances, with internal rate of return (IRR) of 22 percent to 31 percent for successful tree farmers on costs other than those of land. The data do not exist for comparing these returns with returns from alternative land uses, but farmers cite low labour inputs as the principal reason for preferring tree growing (Hyman, 1983). In an area where average land-holdings considerably exceed the size that can be cultivated under food or other crops with family labour, pulpwood production enables farmers to expand the area they can put to productive use (also see Spears, this volume).

Very few other farm-forestry or agroforestry experiences have been evaluated to the same extent. Even in areas with such extensive farmer tree growing as has been occurring in Gujarat and other parts of India, on-farm information sufficient to permit analysis of actual returns to farmers, and of the relative returns from alternative land uses, is still lacking. In an early study of apparent returns in parts of Gujarat, Gupta (1979) estimated that eucalyptus grown on irrigated land to produce poles for sale would give farmers higher net returns to land and capital than alternative crops. It has been widely reported that one element in farmer decisions in favour of tree growing in India has been the relatively low labour inputs required, reducing farmers' dependence on hired labour at a time of rising wages (Noronha, 1982).

Available information about the extensive cash-crop growing of trees in parts of Kenya has been assembled by Dewees in a study for the World Bank (World Bank, 1986). Prominent among the species being grown are eucalyptus for poles and black wattle for poles, charcoal, fuelwood and sticks for "mud-and-wattle" construction. Markets for these wood products — and locally for pulpwood and saw timber — are growing strongly, with farm-level production accounting for a large part of the supply.

Tree growing tends to be practised by poor farmers who are unable to meet their basic food needs, and for whom it is a principal source of farm income. In Vihiga location in Kakamega District of Kenya, for example, average farm size is about 0.6 ha, of which some 25 percent is under eucalyptus woodlots (Gelder and Kerkhof, 1984).

Gross income per hectare in this area is considerably lower from tree growing than from other agricultural crops. Dewees (World Bank, 1986) suggests that farmer preference for tree crops in these circumstances is conditioned by availability of capital and labour, and by attitudes to risk management. Alternative crops often require investments at levels beyond small farmers' access to capital. Trees, by contrast, require very little expenditure. Tree growing is also attractive to farmers in an area where there is a shortage of labour because of widespread out-migration of male members of the farm households to seek off-farm employment. Where markets for tree products are good, returns to labour from pole production have been estimated to be some 50 percent greater than from maize production (World Bank, 1986). Consequently tree growing is a rational use of resources for poor farmers needing to devote a substantial part of their labour to non-farm employment.

In all three of these situations, therefore, a decision to grow trees has been influenced by two main factors. One is the high cost of labour and capital, and the advantages tree cultivation offers in this respect because of its low input requirements. The other is the prominent part that income generation, as distinct from food production, plays in the farmers' production objectives.

The discussion so far suggests that farmers employ agroforestry practices primarily because they perceive these as being the most efficient ways of meeting their production goals using the resources of land, labour and capital available to them. As their resource endowment changes so their strategies are likely to alter. Equally, their assessment of the most efficient farm strategy to employ is likely to be influenced by the broader framework of needs and opportunities linked to off-farm opportunities. Analysis of what is an efficient use of resources, therefore, has to be carried out in terms of the production objectives being pursued in that situation.

Shifting cultivation

It is now generally recognized that, in the situations in which it has traditionally been practised, shifting cultivation (swidden agriculture) is the most efficient use of farmer resources. The resources at the disposal of the shifting cultivator are predominantly in the form of family labour. Where there is sufficient land to support fallow, no other farming practice will produce a higher return to labour without inputs of capital. The fallow vegetation maintains soil productivity, and the process of clearing and burning provides conditions for crop cultivation requiring minimal inputs for soil preparation and weeding. Though cultivation periods could be extended by increased weeding, it is easier, in terms of requiring less inputs of labour, to clear and burn a new area. Similarly, yields per hectare could be increased by more intensive cultivation, but only at the expense of lower output per unit of labour. As long as they can satisfy their production objectives through less labour-intensive methods, farmers will stick to them (Rambo, 1984; Raintree and Warner, 1986).

A sequential process can be identified whereby, as reduced access to land prevents continuation of shifting cultivation, farmers start to intensify agricultural practices (Olofson, 1983; Raintree and Warner, 1986). This usually takes the form of small incremental changes involving increased inputs of labour, and sometimes of capital in the form of fertilizers, herbicides, etc. This evolutionary process may lead to a move away from agroforestry altogether, but agroforestry practices usually form part of the transition from shifting cultivation.

A widespread practice at an early stage in this process is enriching the fallow by encouraging or planting tree species which either accelerate or enhance the regeneration of soil fertility or produce outputs of subsistence or commercial value, or both. The cultivation in the Sudan, and elsewhere in the semi-arid area of Africa, of Acacia senegal as a fallow crop is an example of a species that does both. A leguminous species, it produces gum arabic for sale and fuelwood and fibre and other products for use in the household. Other examples include the planting of rattan as a commercial crop in the swidden cycle in Borneo (Weinstock, 1983), and the multiple-product managed swiddens of the Ifugao in the Philippines (Olofson, 1983). Although quantitative information on inputs and outputs is lacking for these systems, it can be expected that, as they involve only minor increases in labour inputs and minimal changes to the basic swidden system, they will provide fairly high returns to labour (Raintree and Warner, 1986).

At the next step, as pressures on land intensify the transition towards continuous cultivation, various forms of intercropping are encountered. By incorporating soil-enriching species with food crops, these practices introduce the functions of fallow on a continuous basis. Numerous examples of such continuous-fallow strategies are to be found, such as the maintenance of Acacia albida in cultivated areas in much of Africa.

An example of planted mixtures of this nature is the intercropping of Sesbania sesban, a leguminous tree, with maize in areas of western Kenya (see Figure 1, Sanchez, this volume).

When the maize is shaded out after about three years, the sesbania is left as a fallow crop for one or two years, and then cleared and used for fuelwood. The cycle is then repeated. Practised in an area of labour shortages, this method has been estimated to produce less than half the maize per hectare compared to monocropping of the latter over a ten-year cycle, but it requires less than half as much labour and gives higher maize returns per unit of labour input — in addition to the fuelwood and soil-protection benefits (World Bank, 1986).

Alley cropping

Considerable attention has been directed recently to intensification of managed continuous fallow in the form of alley cropping. This involves the growing of field crops between hedgerows of nutrient-cycling trees or shrubs which are periodically pruned during the cropping season to reduce shading and provide green mulch for the food crops (Kang and Wilson, this volume). Data from economic analysis of the results of alley-cropping research at IITA in Nigeria, involving intercropping of maize with Leucaena leucocephala and treatments with nitrogen fertilizer and herbicide, are summarized in Table 2. The intercrop treatment gave the highest economic returns and yields of maize of all the alternatives, but required higher labour inputs than cultivation of maize alone or with fertilizer/herbicide applications. Returns to labour from intercropping, however, were higher than in maize monocropping (Ngambeki, 1985).

Table 2 Evaluation of alley cropping Leucaena with maize*

The potential for improving the efficiency of such low-input agroforestry practices adopted by farmers in order to progressively intensify their farming therefore appears quite high. However, it is not yet clear how well experimental results reflect on-farm conditions. Further work in testing the research results on-farm is needed to ensure that the labour availability and farmer skills assumed are realizable in practice, that the costs and values are consistent with those actually experienced or perceived by farmers, and that the physical input-output relationships and performance are replicable on-farm (Balasubramanian, 1983; D. Hoekstra, personal communication).

Economic information is also available for some other intermediate agroforestry practices. A study of coconut farmers in an area in Sri Lanka, for example, showed that intercropping increases net returns. Labour-intensive crops such as betel, ginger and turmeric were adopted primarily by small farmers with family labour available, and those such as pepper and coffee, which gave higher returns to labour, were preferred by larger farmers dependent on hired labour (Karunanayake, 1982). Once again, therefore, farmers are seen to be responding to interrelationships between resource availability and production objectives.

Discussion

It would be unwise to base too much on analysis of the limited number of situations covered by the studies discussed in this chapter. Apart from being few in number they are based mainly on two broad forms of agroforestry: the homegarden and the farm woodlot. Nevertheless, the information outlined above, the main elements of which are summarized in Table 3, does suggest some of the main economic factors which encourage farmers to adopt tree/crop/livestock management as a major component of their overall farming system.

In most of the situations, farmers lacked access to capital and consequently were unable to increase their land or labour resources by renting or purchasing. In many instances, farmer decisions were clearly also influenced by considerations of risk management. In such conditions of limited resources and high susceptibility to risk, five overlapping farmer strategies involving adoption of agroforestry practices can be discerned:

1. To maintain productivity of land in situations of scarce capital in which the presence of trees can help substitute for purchased inputs of fertilizer and herbicide and for investments in soil and crop protection;

2. To make productive use of land hi situations of scarce capital and labour where trees, as low-input low-management crops, constitute the most effective use of these resources;

3. To increase useable biomass outputs per unit of land area in situations where land and capital are limited, and tree/ crop/ livestock combinations permit fuller use of available labour than alternative uses of the land;

4. To increase income-earning opportunities from use of farm resources as size of landholding and/ or site productivity fall below the level at which the household's basic needs can be met from on-farm production;

5. To strengthen risk management through diversification of outputs, wider seasonal spread of inputs and outputs, and build up of tree stocks which can be sold in order to meet periodic or unforeseen needs for capital.

Such an interpretation of the economic role of agroforestry activities suggests a number of propositions about agroforestry of possible relevance to project and policy analysis and design.

Table 3 Selected situations with agroforestry components in changing farm systems

Resource availability

Land

Agroforestry practices can be seen to be potentially appropriate to a wide range of different land-holding and land-use situations. Given the widespread feeling that tree growing is predominantly an activity for larger farmers, it is worth underlining the extent to which it exists as a viable activity of farmers with little land—often very little land. In certain circumstances, homegardens have proved to be an efficient strategy for capital-poor farmers wishing to intensify land use as land-holding size decreases. Tree crops are equally suitable for those short of capital and labour wishing to put their land under a less intensive form of use. The relationships involved are often complex, but are usually linked partly to the changes in farmer production objectives discussed later.

Labour

The relationship of tree growing to labour availability, and cost of labour, is equally varied. When combined with different land and capital conditions, as well as production objectives, scarce or abundant labour can lead to quite different decisions about agroforestry. However, a number of points seem worth emphasizing.

One is the role that agroforestry may play in helping to even out the peaks and troughs in work which characterize tropical agriculture. Work on tree crops can be scheduled outside the peak periods. The presence of trees can provide the basis for a number of counter-seasonal activities such as fuelwood and charcoal production (Chambers and Longhurst, 1986).

A second is that, as the need to depend on off-farm employment grows among farm families, labour availability has to be assessed not just in terms of other farm activities but also in terms of off-farm opportunities. Attention needs to be paid to the danger that intensifying or rescheduling labour use in on-farm agroforestry activities may prevent farm families from obtaining more remunerative employment off-farm — as may have happened to coconut-sugar farmers in Java (Stoler, 1978).

Thirdly, the growing dependence of rural people on off-farm employment suggests that the potential for linking agroforestry outputs with off-farm employment and income creation probably also deserves more attention. Recent work has shown that small rural processing enterprises based on wood and other raw materials from trees and forests are one of the largest sources of off-farm rural employment (Fisseha, 1987). Their mainly rural markets are themselves largely seasonal, fluctuating with rural income flows so that their peak activities are counter-seasonal with those in agriculture. Most are very small and are operated jointly with agricultural or other enterprise activities. A marked feature of such small-enterprise operations is the high proportion of women involved.

Capital

It is widely argued that the lengthy production period, and the incidence of most of the costs at the time of establishment, create financial problems for farmers in adopting practices involving tree growing. It is this argument that underlies the widespread provision of planting stock, either free or at subsidized prices, in programmes to support tree growing. However, the evidence that tree systems are favoured by farmers when capital is scarce (because trees require less investment than alternative crops and/ or provide substitutes for purchased inputs, e.g., of fertilizer and herbicide), suggests that improved access to capital would not necessarily increase adoption of agroforestry practices. Indeed, as the information from Kerala (India) and Kenya showed, the contrary is likely to be the case; access to capital will frequently enable farmers to adopt alternative higher yielding uses of their land.

Unavailability of capital could, of course, be an impediment to investment in longer rotation timber species grown as cash crops. However, even in this situation the constraint seems to be not the capital cost of establishment but the opportunity cost of locking up land for the lengthy period that elapses before there is any return — and possibly, as in the case of the production of pulpwood in the Philippines, the cost of harvesting (Hyman, 1983).

Production objectives

Much of the discussion of the role of agroforestry in fanning systems has been based on the assumption that staple food production is the principal production objective. In most of the situations reviewed in this chapter, however, farmers were working with a resource base too small to enable them to meet then- basic household food needs and were seeking to generate income as well as — or even instead of — food. The growth in agroforestry in many situations has been largely a response to this change in production objectives.

Recognition of the importance of income generation as the primary production objective for many poor farmers also changes the frame of reference of the debate about fuelwood self-sufficiency. Observers of the rapid expansion of farm-level tree growing in India (Blair, 1983) and Kenya (World Bank, 1986) have pointed out that although meeting subsistence fuelwood needs may seem to have the highest priority from the perspective of the planner, or of the fuelwood-using women members of the household, the rational choice for the household as a whole is to grow tree crops in order to generate income with which to satisfy its overall needs.

Markets and marketing

The presence of income generation as a primary production objective highlights the importance of correctly understanding the markets for the products of agroforestry. The growth in markets for some agroforestry products has recently been very rapid — notably for fuelwood, charcoal and poles. Though much of the intervention that has been taking place has been intended to increase production for the market, there has been remarkably little systematic study of how such markets are structured and function. Imbalances between supply and demand as a result of poor market information could have severe negative impacts on farmers through falling prices.

Particular interest is attached to supplying urban and other commercial markets with fuelwood  understandably, as this is the wood product used most widely and heavily in most countries. However, even where market-oriented tree growing by farmers has expanded rapidly, as in India and Kenya, it has been to supply higher valued building poles and wood for industry, not fuelwood. Prices of the latter have not yet stimulated significant investment in its production as a farmer cash crop.

In a review of energy-price trends in a number of large cities in south Asia, Leach (1986) has shown that though fuelwood prices varied widely from place to place there had been little increase in real prices in most of the markets over the previous 12-14 years (Figure 2). Interfuel substitution is apparently widespread, with fuelwood usage and prices sensitive to prices of alternative fuels. This would suggest that it is unlikely that there would be substantial increases in fuelwood prices in such markets in the foreseeable future.

However, it is the price at the point of origin (the stumpage price), rather than the market price which is of relevance to farmer decisions. In the case of fuelwood this is commonly only a small fraction of the market price. The price of standing wood for sale as fuelwood in two West African situations, for example, was only 1-1.5 percent of the retail price, and that of wood cut and stacked at the farm gate was 11-13 percent (Baah-Dwomoh, 1983). 

Figure 2 Urban retail fuelwood prices in south Asia
Source: Leach, 1986.

Attention has recently been directed to studying the potential for raising stumpage prices of fuelwood as a proportion of market price by reducing transport and distribution costs and/or through subsidies or bonuses to producers financed from levies on these intermediate stages. It is too early to say whether these will be effective. However, as long as low-cost sources of fuelwood remain, in the form of existing wood stocks, and users can turn to alternative fuels or to energy-conservation measures as an alternative to purchasing fuelwood, it is bound to be difficult to raise prices of farmer-grown supplies of the latter.

Risk management

Risk and avoidance of risk loom large in decision-making by poor farmers, often modifying or overriding other economic considerations. Living, as they do, at or close to the margins of existence, poor farmers are concerned to avoid any change which, though it might improve their situation if it functions well, could leave them even worse off if it does not. Equally, there is likely to be a preference for choices that reduce existing risk even if these offer less potential for economic improvement than alternatives.

As has been noted earlier, an important factor in the widespread adoption of homegardens has been their contribution to risk reduction, by spreading output across several products and over the different seasons. However, it is evident that with reduction in land-holding size the more fundamental risk of not being able to meet basic food needs becomes more important than the risk of intermittent shortfalls or failures, and management of garden areas is concentrated on species which can produce food and income in the short term. In other words, where a small homegarden is the only or main source of support for the farm family, the latter cannot risk depending on long-term tree crops — particularly where their tenure of the land may be insecure.

On the other hand, where income from the land has become only a minor or supplementary component of overall income, tree crops can again contribute positively to risk reduction. As a stable low-input low-management form of land use, it enables those who depend primarily on off-farm employment to maintain their land in productive use.

The disadvantage that income is available only periodically may be offset by the value the trees provide as a capital asset to be drawn upon for intermittent payments, such as education (Chavangi, 1984), or to deal with contingencies such as floods, famine or sickness. Chambers and Leach (1987) have pointed out that vulnerability to such contingencies is an important dimension of poverty. Trees apparently often do serve as assets upon which the rural poor draw in emergency. Various instances are cited in which people have had to liquidate trees (even fruit- and cash-crop bearing trees) because they have been their only remaining asset. A tree component in a farming system may therefore be there at least in part to provide a measure of insurance.

Agroforestry practices can therefore mitigate, or aggravate, risk in a number of ways. As the nature of the risks that threaten farmers change with circumstances, so the relevance of agroforestry is likely also to alter. Though lack of data limits the practical application to agroforestry of most of the techniques available for analysing risk, quite a lot can be done to improve our understanding of its existence and nature, and to take it into account in defining agroforestry options (Blandon, 1985).

Economic research

Research of the kind that has been reviewed in part in the present paper—analysis of actual inputs and outputs in existing operational agroforestry practices, and of the economic efficiency of the latter — clearly needs to be extended in order to improve the basis for defining the applicability of such systems more accurately. A related priority area is that of establishing input and output values which correctly reflect costs and benefits to the farmer — as distinct from costs and benefits to the supporting agency or donor, and from values as perceived by the national planner (Gregersen and Contreras, 1979; Magrath, 1984; World Bank, 1987).

Research also needs to continue on exploring usable ways of incorporating some of the more complex dynamic dimensions of agroforestry into the framework of economic analysis. Particular problems in this respect arise from the nature of the relationships within multiple-species cropping systems, and the additional temporal relationships added when trees form part of the latter. Intercropped species may interact to produce supplementary, complementary or competitive impacts on their individual or aggregate performance — or some combination of these effects. The relationships are likely to vary with their spatial arrangement and management, and with soil-moisture and nutrient content and the status of other growth factors. They are also likely to change over time because of the changes that trees create in the micro-environment they inhabit as they grow. Various approaches to the problems of incorporating economic measures of this complex of linkages, in a manner consistent with the likely availability of data, are being explored, based mainly on variants of budgeting and partial budgeting techniques (Raintree, 1983; Etherington and Mathews, 1983; Hoekstra, 1985).

Conclusions

Agroforestry practices contribute to a wide variety of existing farming systems. In a number of these, farmers have been responding to growing pressures on their land and other resources by intensifying or increasing various agroforestry activities. These have proved to be particularly important in enabling them to intensify use of certain types of land as size of land-holding decreases, and to reduce the intensity of management as labour becomes scarcer and more costly. The appropriateness of agroforestry as a response to these changing pressures is often related to the concurrent shift in farmer production objectives towards income generation as farm size falls below the level at which they can meet their basic household food needs. These ongoing changes suggest the need to re-examine the impact of schemes which provide access to land, labour and capital as ways of promoting agroforestry activities. The growing importance of income generation as a production objective of farmers also points to the need to give greater attention to the markets for agroforestry products, and to the intermediate stages between production and the market. Increased economic research has an important role to play in clarifying and extending understanding of these and other economic considerations in agroforestry.

REFERENCES

Arnold, J.E.M. 1983. Economic considerations in agroforestry projects. Agroforestry Systems 1: 299-311.

Baah-Dwomoh, J. 1983. Estimating stumpage value of wood in the Sahel. World Bank, Washington,D.C. (Mimeo.)

Balasubramanian, V. 1983. Alley cropping: Can it be an alternative to chemical fertilizers in Ghana? Paper prepared for the Third National Maize Workshop, Kumasi, Ghana, 1-3 February 1983.

Blair, H.W. 1983. Equity and public policy in natural resource management: Social forestry in Maharashtra State, India. Paper prepared for the Annual Meeting of the Association for Asian Studies, San Francisco, California, 25-27 March 1983.

Blandon, P. 1985. Agroforestry and portfolio theory. Agroforestry Systems 3: 239-245.

Budowski, G. 1981. Applicability of agroforestry systems. In L.H. MacDonald, (ed.), Agro-forestry in the African humid tropics. Tokyo: United Nations University.

Chambers, R. and M. Leach. 1987. Trees to meet contingencies: Savings and security for the rural poor. Discussion Paper 228. IDS, University of Sussex.

Chambers, R. and R. Longhurst. 1986. Trees, seasons and the poor. In R. Longhurst (ed.),Seasonality and poverty. IDS Bulletin 17(3): 44-50.

Chavangi, N. A. 1984. Cultural aspects of fuelwood procurement in Kakamega District. Working Paper No. 4, Kenya Woodfuel Development Programme. Nairobi: Beijer Institute.

Etherington, D.M. and P.J. Matthews. 1983. Approaches to the economic evaluation of agroforestry farming systems. Agroforestry Systems 1: 347-366.

FAO. 1978. Forestry for local community development. Forestry Paper No. 7. Rome: FAO.

——.1985. Tree growing by rural people. Forestry Paper No. 64. Rome: FAO.

Fernandes, E.C.M. and P.K.R. Nair. 1986. An evaluation of the structure and function of some tropical homegardens. Agricultural Systems 21: 179-310.

Fisseha, Y. 1987. Basic features of rural small scale forest based processing enterprises. In Small Scale Forest Based Processing Enterprises. Rome: FAO.

Gregersen, H.M. and A. Contrerars. 1979. Economic analysis of forestry projects. Forestry Paper No. 17. Rome: FAO.

Gelder, B. van and P. Kerkhof. 1984. The agroforestry survey in Kakamega District: Final report. Working Paper No. 6, Kenya Woodfuel Development Programme. Nairobi: BeijerInstitute.

Gupta, T. 1979. Some financial and natural resource management aspects of commercial cultivation of irrigated eucalyptus in Gujarat, India. Indian Journal of Forestry 2(2).

Hoekstra, D. A. 1985. The use of economics in diagnosis and design of agroforestry systems. Working Paper No. 29. ICRAF, Nairobi.

Hunink, R.B.M. and J.W. Stoffers. 1984. Mixed and forest gardens on central Java: An analysis of socio-economic factors influencing the choice between different types of landuse. Department of Developing Countries, University of Utrecht, Utrecht.

Hyman, E.L. 1983. Pulpwood treefarming in the Philippines from the viewpoint of the smallholder: An ex-post evaluation of the PICOP Project. Agricultural Administration 14: 23-49.

Karunanayake, K. 1982. An economic assessment of intercropping under coconuts in Sri Lanka. M.Sc. thesis, Australian National University, Canberra.

Lagemann, J. 1977. Traditional African farming systems in eastern Nigeria: An analysis of reaction to increasing population pressure. Munich: Africa Studien, Weltforum Verlag.

Leach, G. 1986. Household energy in South Asia. London: Institute of International Education and Development (IIED).

Magrath, W. 1984. Microeconomics of agroforestry. In K.H. Shapiro (ed.), Agroforestry in developing countries. Ann Arbor: Center for Research on Economic Development, University of Michigan.

Michon, G., F. Mary and J. Bompard. 1986. Multistoried agroforestry garden system in West Sumatra, Indonesia. Agroforestry Systems 4: 315-338.

Nair, C.T.S. and C.N. Krishnankutty. 1984. Socio-economic factors influencing farm forestry: A case study of tree cropping in the homesteads in Kerala, India. In Community forestry: Socio-economic aspects. Bangkok: FAO/ East-West Center.

Nair, M.A. and C. Sreedharan. 1986. Agroforestry fanning systems in the homesteads of Kerala, southern India. Agroforestry Systems 4: 339-363.

Ngambeki, D.S. 1985. Economic evaluation of alley cropping leucaena with maize-maize and maize-cowpea in southern Nigeria. Agricultural Systems 17: 243-258.

Ninez, V.K. 1984. Household gardens: Theoretical considerations on an old survival strategy. Potatoes in Food Systems Research Series, Report No. 1, International Potato Center, Lima, Peru.

Noronha, R. 1982. Seeing people for the trees: Social issues in forestry. Paper to the Conference on Forestry and Development in Asia, Bangalore, India, 19-23 April 1982.

Olofson, H. 1983. Indigenous agroforestry systems. Philippine Quarterly of Culture and Society 11: 149-174.

Penny, D.H. and M. Singarimbun. 1973. Population and poverty in rural Java: Some economic arithmetic from Sriharjo. Cornell International Agricultural Development Monograph 41, Department of Agricultural Economics, Cornell University, Ithaca, New York.

Raintree, J.B. 1983. Bioeconomic considerations in the design ofagroforestry cropping systems. In P.A. estry. Nairobi: ICRAF.

Raintree, J.B. and K. Warner. 1986. Agroforestry pathways for the intensification of shifting cultivation. Agroforestry Systems 5: 39-54.

Rambo, A.T. 1984. Why shifting cultivators keep shifting: Understanding farmer decision-making in traditional agroforestry systems. In Community forestry: Some aspects. Bangkok: UNDP/East-West Center/FAO.

Stoler, A. 1978. Garden use and household economy in rural Java. Bulletin of Indonesian Studies 14: 85-101.

Weinstock, J.A. 1983. Rattan: A complement to swidden agriculture. Economic Botany 37: 56-68.

Wiersum, K.F. (ed.). 1981. Viewpoints on agroforestry. Department of Forestry, Agricultural University, Wageningen, Netherlands.

Wiersum, K.F. 1982. Tree gardening and taungya on Java: Examples of agroforestry techniques in the humid tropics. Agroforestry Systems 1: 53-70.

World Bank. 1986. Economic issues and farm forestry. Working paper prepared for the Kenya Forestry Sector Study,

World Bank, Washington, D.C. (Mimeo.) World Bank. 1987. An interim review of economic analysis techniques used in appraisal of World Bank-financed forestry projects. Draft staff working paper, World Bank, Washington, D.C. (Mimeo.)