Cost-benefit analysis of alternative forms of hedgerow intercropping in the Philippine uplands PDF

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Agroforestry Systems 39: 241–262, 1998.  1998 Kluwer Academic Publishers. Printed in the Netherlands. Cost-benefit analysis of alternative forms of hedgerow intercropping in the Philippine uplands R. A. NELSON 1, *, R. A. CRAMB2, K. M. MENZ3 and M. A. MAMICPIC4 1 FORTECH, G.P.O. Box 4, Canberra ACT...

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Agroforestry Systems 39: 241–262, 1998.  1998 Kluwer Academic Publishers. Printed in the Netherlands.

Cost-benefit analysis of alternative forms of hedgerow intercropping in the Philippine uplands R. A. NELSON 1, *, R. A. CRAMB2, K. M. MENZ3 and M. A. MAMICPIC4 1

FORTECH, G.P.O. Box 4, Canberra ACT 2601, Australia, E-mail: [email protected]; Department of Agriculture, The University of Queensland, Brisbane; 3 Centre for Resource and Environmental Studies, The Australian National University, Canberra; 4 Asian Institute of Technology, Bangkok (*Author for correspondence) 2

Key words: alley-cropping, credit, erosion, labour, maize Abstract. Considerable resources have been expended promoting hedgerow intercropping with shrub legumes to farmers in the Philippine uplands. Despite the resources committed to research and extension, persistent adoption by farmers has been limited to low cost versions of the technology including natural vegetation and grass strips. In this paper, cost-benefit analysis is used to compare the economic returns from traditional open-field maize farming with returns from intercropping maize between leguminous shrub hedgerows, natural vegetation strips and grass strips. An erosion/productivity model, Soil Changes Under Agroforestry, was used to predict the effect of erosion on maize yields. Key informant surveys with experienced maize farmers were used to derive production budgets for the alternative farming methods. The economic incentives revealed by the cost-benefit analysis help to explain the adoption of maize farming methods in the Philippine uplands. Open-field farming without hedgerows has been by far the most popular method of maize production, often with two or more fields cropped in rotation. There is little persistent adoption of hedgerow intercropping with shrub legumes because sustained maize yields are not realised rapidly enough to compensate farmers for establishment and maintenance costs. Natural vegetation and grass strips are more attractive to farmers because of lower establishment costs, and provide intermediate steps to adoption. Rural finance, commodity pricing and agrarian reform policies influence the incentives for maize farmers in the Philippine uplands to adopt and maintain hedgerow intercropping.

Introduction Hedgerow intercropping is an agroforestry technique which, in its conventional form, involves the cultivation of annual crops between contoured hedgerows of perennial shrub or tree species, usually legumes (Kang and Wilson, 1987). Hedgerow intercropping with leguminous shrubs can significantly reduce soil loss and recycle nitrogen within annual cropping systems. Hedgerow intercropping has precursors in indigenous farming systems, and the technology does not involve concepts that are unfamiliar to upland farmers. Costs of establishment and maintenance are less than those required for structural technologies such as bench terraces that have a similar capacity to reduce soil loss. Significant resources have been committed to research and extension of hedgerow intercropping in the Philippine uplands by domestic and international agencies.1 PURC (1991) lists forty-eight non-government organisations

242 involved in developing agroforestry, land tenure reform and marketing in the Philippine uplands. Many of these organisations have facilitated the adoption of hedgerow intercropping through training and subsidies for establishment and maintenance during the life of extension projects. An example is the Sloping Agricultural Land Technology (SALT) developed and promoted by the Mindanao Baptist Rural Life Center (MBRLC, n.d.). Despite the resources committed to research and extension, adoption of hedgerow intercropping by upland farmers in the Philippines has been sporadic and transient, rarely continuing once external support is withdrawn. Persistent adoption has been limited to modified versions of the technology including natural vegetation and grass strips. By adopting natural vegetation or grass strips, farmers forego the potential nitrogen contribution of leguminous shrubs. However, the modified versions of hedgerow intercropping adopted by farmers require less labour to establish and maintain than hedgerow intercropping with shrub legumes. The evolution of low cost farmer adaptations of hedgerow intercropping demonstrates that economic viability has been an important consideration in deciding whether to adopt. Cost-benefit analysis can be used to assess whether the costs of establishing and maintaining hedgerow intercropping are offset by the higher returns from sustained crop yields compared to traditional open-field farming. Cost-benefit analysis is a technique for comparing the stream of net benefits produced over time by competing investment opportunities. The net present value of farming maize over n years can be calculated from the following equation, where Bt and Ct are the benefits and costs in year t, and r is a discount rate: n

NPV = ∑

t=1

(Bt – Ct) (1 + r)t

Future benefits and costs are discounted to capture the preference that individuals express for present over future consumption. To assess the economic incentives for the adoption of hedgerow intercropping, the appropriate perspective for cost-benefit analysis is that of upland farmers. In this paper, cost-benefit analysis is used to compare the economic returns from traditional open-field maize farming with the returns from intercropping maize between leguminous shrub hedgerows, natural vegetation strips and grass strips. A methodology for field-level cost-benefit analysis of traditional open-field farming and hedgerow intercropping was developed by Nelson et al. (1997). A relatively simple erosion/productivity model, Soil Changes Under Agroforestry (SCUAF) (Young and Muraya, 1990), was used to predict the effect of erosion on maize yields. Key informant surveys with experienced maize farmers were used to derive production budgets for maize farming. Cost-benefit analysis was used to compare the economic returns from the alternative farming methods over 25 years.

243 Methodology Soil Changes Under Agroforestry (SCUAF) The impact of erosion on maize yields under alternative farming methods can be predicted using a computer model, SCUAF. SCUAF is a deterministic model designed to predict the effect of agroforestry systems on soils. Version 2.0 of SCUAF and potential applications are described in Young and Muraya (1990). Nelson et al. (1997) reviewed previous applications of SCUAF and applied the model to conventional hedgerow intercropping with shrub legumes using data from a research station at Tranca, Laguna. For the cost-benefit analysis presented in this paper, SCUAF was parameterised using data from a research trial of hedgerow intercropping at Compact, near Claveria, Mindanao. The trial was established in the late-1980s by the International Rice Research Institute (IRRI), and responsibility for the trial was transferred to the International Center for Research into Agroforestry (ICRAF) in 1994. The Compact trial was a replicated small plot experiment of traditional open-field farming and four variants of hedgerow intercropping, and has been described in detail by Agus (1994). The methods of hedgerow intercropping in the Compact trial included Gliricidia (Gliricidia sepium) hedgerows. A combination of Gliricidia and Carabao grass (Paspalum conjugatum) was used to mimic the mix of shrubs and weeds found in natural vegetation strips. Grass strips were represented with Napier grass (Pennisetum purpureum). Parameterising SCUAF SCUAF was parameterised to model a maize/maize rotation, because maize has been the dominant crop in the Philippine uplands, including Claveria.2 SCUAF’s environment parameters were set to reflect the characteristics of the climate and soil at the Compact research station. The climate at Compact placed it in the lowland humid class of the Köppen climate classification used in SCUAF. The soil was a well drained clay oxisol of relatively low erodibility and a pH of 4.5–5.0. The slope gradient of the Compact trial varied from 20–22.5 per cent between treatments, placing the site in SCUAF’s moderate slope class. Since little information was available on the rates of carbon and nitrogen transformation and movement at this site, most of SCUAF’s default parameters for carbon and nitrogen transformation in this type of environment were accepted. Soil carbon and nitrogen were initialised at the levels measured by Agus (1994) from a profile adjacent to the trial. The default parameters of the MUSLE in SCUAF were modified to predict average rates of soil erosion measured at the Compact trial from 1991 to 1994. High maize yields from the Compact trial were considered unrepresentative of those produced by farmers because of a greater management intensity including cropping of a hybrid variety. Consequently, maize biomass and

244 yields within SCUAF were parameterised using average yields from openfield farming with a local variety of maize reported by farmers in Claveria. Measured hedgerow biomass production and foliar nitrogen content were incorporated in the model. SCUAF simulations Two variants of open-field farming, continuous and fallow, were simulated using SCUAF (Table 1). In densely populated upland areas, most arable land has been under continuous cropping for subsistence and sale. In more remote communities, land is relatively abundant and farmers have been able to rotate maize cropping between two or three fields. For comparison with continuous cropping of a single hectare of land, it was assumed that farmers practising field rotation have two fields, each one hectare in size, and that the availability of labour permits one hectare to be cropped each year. Farmers were assumed to rotate the two fields alternately through two years of maize cropping and two years of fallow. The two years of fallow were assumed to be dominated by Imperata cylindrica (Imperata grass), and provide no direct economic returns to the farmer. Three types of hedgerow intercropping were simulated: Gliricidia hedgerows, natural vegetation strips and grass strips. The simulations of Gliricidia hedgerows and natural vegetation strips closely mimic those treatments in the Compact trial. Hedgerow prunings were retained as mulch in the SCUAF simulations, rather than used as animal fodder, to model the potential of hedgerow intercropping to sustain maize yields. Others, including Grist et al. (1997), have extended the analysis to include livestock. Gliricidia and Napier grass hedgerows were assumed to mature and senesce over a five year lifeTable 1. Description of farming methods simulated using SCUAF, Claveria, Mindanao. Method of farming

Description

Continuous open-field farming (Open-field)

Repeated annual cropping of a maize-maize rotation in a field without hedgerows.

Fallow open-field farming (Fallow)

Annual cropping of a maize/maize crop rotation in a field without hedgerows for two years, followed by two years during which the field was left to revert to shrubby grassland dominated by Imperata grass.

Natural vegetation strips (Natural vegetation)

Repeated annual cropping of a maize-maize rotation between hedgerows formed by contour strips of natural vegetation.

Grass strips (Grass)

Repeated annual cropping of a maize-maize rotation between hedgerows formed by contour strips of Napier grass (Pennisetum purpureum).

Gliricidia hedgerows (Gliricidia)

Repeated annual cropping of a maize-maize rotation between contour hedgerows of Gliricidia (Gliricidia sepium).

245 cycle, and required 50 per cent infill replanting every five years. The amount of prunings returned to the plant/soil system was assumed to vary over a five year hedgerow lifecycle based on measured biomass from the Compact trial. Economic data Economic data to estimate the price of maize and the costs of each farming method were obtained through interviews with farmers in the community of Claveria. Six maize farmers were selected with at least ten years’ experience of traditional open-field maize farming. For hedgerow intercropping, groups of six farmers were selected with three to five years’ experience using Gliricidia hedgerows, natural vegetation strips or grass strips to farm maize. The key informant survey and economic data obtained from the four groups of maize farmers in Claveria have been described in detail by Nelson et al. (1996b). Local farming practices used in the Compact trials and used to parameterise SCUAF were also used to design the Claveria survey. Labour was the most important input reported by farmers, and there were significant differences in the labour required to establish the different kinds of hedgerow (Table 2). The market wage reflects the opportunity cost of labour for adult males during seasonal periods of intense farm activity. Labour was valued at two thirds of the market wage reported by farmers, to reflect the lower opportunity cost of labour in slack periods and for less productive family members. The farm-gate cost of seed and fertiliser was calculated by including the cost of transport and the opportunity cost of travel time to and from the place of purchase. The hourly cost of travel time was estimated by dividing the daily wage in off-farm employment activities across the number of hours worked and the time spent travelling to and from work. Farmers in Claveria sell their maize on-farm as grain at a moisture content of around 18 per cent (Sayre, 1992). Maize yields predicted using SCUAF were converted to 18 per cent moisture content and valued using the real farmgate price of white maize for Northern Mindanao (CRC, 1987–88, 1992–93). Two maize price scenarios were used to assess the effect of relevant policy options on the economic viability of the alternative farming methods: removing trade protection from maize imports, and improving transport and marketing infrastructure. David (1996) demonstrated that tariffs and restrictions on maize imports caused the warehouse price of maize in Manila to exceed the border price by an average of 76 per cent between 1990 and 1994. The adjusted farm-gate price of maize per kilogram after allowing for the effect of trade protection, P′F , is given by: P′F =

PW – CM 1.76

where PW is the warehouse price of maize in Manila, and CM is marketing costs.

Operation

246

Table 2. Median labour estimates from farmer surveys, Claveria, Mindanao. Open-field farming

Gliricidia hedgegrows

Natural vegetation strips

Grass strips

MD ha–1

MAD ha–1

MD ha–1

MAD ha–1

MD ha–1

MAD ha–1

MD ha–1

MAD ha–1

Hedgerow establishment Construct bunds/layout hedgerows Collect and plant cuttings Hedgerow weeding (×5) Hedgerow establishment total

00– 00– 00– 00–

0– 0– 0– 0–

013 035 047 095

02 0– 0– 02

004 00– 00– 004

0– 0– 0– 0–

013 014 00– 027

04 0– 0– 04

Wet season Land preparation Maize sowing and fertilising at planting Replanting Nitrogen fertiliser Interrow weeding Hand weeding Hedgerow pruning* Maize harvesting Post-harvest processing Wet season total

00– 007 002 008 00– 017 00– 008 012 054

15 0– 0– 0– 04 0– 0– 0– 0– 19

00– 007 002 006 00– 015 010 009 016 066

19 0– 0– 0– 04 0– 0– 0– 0– 24

00– 005 002 006 00– 016 008 011 019 068

21 0– 0– 0– 03 0– 0– 0– 0– 25

00– 004 002 004 00– 011 009 005 017 025

22 0– 0– 0– 05 0– 0– 0– 0– 27

Dry season Land preparation Maize sowing and fertilising at planting Replanting Nitrogen fertiliser Interrow weeding Hand weeding Hedgerow pruning* Maize harvesting Post-harvest processing Dry season total

00– 007 002 008 00– 015 00– 006 011 049

10 0– 0– 0– 04 0– 0– 0– 0– 13

00– 007 002 006 00– 011 007 005 012 049

10 0– 0– 0– 04 0– 0– 0– 0– 14

00– 005 002 006 00– 012 008 022 012 055

12 0– 0– 0– 03 0– 0– 0– 0– 15

00– 004 002 004 00– 011 009 004 011 045

13 0– 0– 0– 05 0– 0– 0– 0– 18

Annual total

103

32

210

39

127

40

125

49

* Assumes two prunings per maize crop for Gliricidia hedgerows and natural vegetation strips, and three for grass strips. MD = Man days; MAD = Man animal days.

247 Infrastructure improvements are often advocated as an effective means of improving the farm-gate price of maize (Sayre, 1992). The effect of improving transport and marketing infrastructure was investigated by assuming improvements that halve marketing costs between farm-gate and wholesale prices in Manila. The implications of share-tenancy for the economic viability of hedgerow intercropping were investigated assuming a 50/50 sharing between tenants and landlords of external input costs and maize yields. Share tenants were assumed to bear all the labour costs of maize cropping and hedgerow establishment. Two discount rates were used for this analysis based on the cost of capital reported by farmers in Claveria, and described by Nelson et al. (1996b). Farmers were asked to report the cost of capital based on recent lending or to estimate interest charges for borrowing a nominal amount. Traders supplying inputs to farmers on credit were asked to give details of the price premium, net of marketing costs, that they received on resale of farmers’ produce. A real discount rate of 25 per cent was derived from the cost of interlinked credit from traders. A lower discount rate of ten per cent was used to reflect the potential of government-sponsored farmer cooperatives to reduce the cost of capital to upland farmers. Cost-benefit analysis The cost-benefit analysis was calculated in an Excel spreadsheet (Microsoft Corporation, 1993). Related software, @Risk (Palisade Corporation, 1995), was used to consider uncertainty associated with the quantity and cost of labour and material inputs, and the seasonal variability of maize yields predicted using APSIM. @Risk calculates probability distributions for output variables from repeated random sampling of input variable distributions. Probability distributions for input variables were estimated using Bestfit (Palisade Corporation, 1994). Most of the data produced truncated normal and lognormal distributions, although in some cases triangular distributions were fitted. Probability distributions for the amount of labour required for each farming operation were derived from farmers’ estimates. The median of farmers’ estimates for the cost of urea fertiliser, labour and animal power were accepted as expected values, with probability distributions estimated from published time series data (Intal and Power, 1990; Balisacan, 1993). Published time series data for Northern Mindanao from 1984 to 1992 were used to estimate a probability distribution for white-maize prices (CRC, 1987–88, 1992–93). Maize yields reported by farmers were used to estimate probability distributions for maize yields predicted using SCUAF. =).3 The Net returns from maize farming are e...