Financial and economic evaluation of agroforestry

There are many reasons for planting trees and managing them for wood and non-wood products. Large-scale commercial forestry enterprises focus on financial returns. Publicly owned companies are bound to inform investors of their strategies and financial positions. However, in agroforestry situations, the financial return may be an important but not a primary driver for a farmer to invest in tree planting or the management of native forests. With the changing expectations of society and the development of non-wood markets, there are new incentives for increasing the area and management of trees on farms. Changing societal expectations and their implications for forestry management involve the need to better understand and manage our natural resources. Despite the willingness of many land managers to adjust their practices to improve natural resource outcomes, there are few markets that allow for the trading of these services, to give a monetary return to the manager. There is, however, a role for planted or existing forests to deliver not only wood products, but also non-wood products such as improved agricultural production from stock shelter and environmental services including improved biodiversity, better water quality and carbon sequestration. There is a relatively clear understanding of the value of wood products via markets but there is still much work to be done in quantifying the full range of benefits, and in some cases the costs, of establishing forestry enterprises on farms and in determining a monetary value which allows economic and financial comparisons with alternative land uses.