Does money grow on trees? 'A case study on the long-term financial and socio-economic performance of silvopastoral agroforestry practices in the Netherlands.'
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Agriculture has a large environmental impact and contributes to various ecological problems and therefore farmers are increasingly looking for more eco-friendly agricultural models. A promising example of such a model is agroforestry, which is based on the re-introduction of trees into the agricultural landscape. In previous research, the ecological benefits of agroforestry have already been demonstrated, but little is known about the financial aspects of agroforestry. This makes the transition towards agroforestry uncertain for many farmers, hampering its adoption. In this research, the financial aspects of agroforestry are studied in more detail, answering the following research question: ‘What is the long-term financial and socio-economic performance of silvopastoral agroforestry practices in the Netherlands?’ To get insights into the profitability of agroforestry in the Netherlands, six case studies were performed. Interviews were held with the farmers to get an overview of the costs associated with agroforestry. As the farm only recently implemented agroforestry, future revenues had to be estimated based on desk research. By combining the two data sources, the Net Present Value (NPV), Internal Rate of Return (IRR), Discounted Payback Time (DPBT) and the first year of positive cash flow were calculated for the six projects. Additionally, a socio-economic analysis was performed in which the value of the ecosystem services provided by agroforestry were economically valued. In this research the carbon sequestration, and the reduction in ammonia emission and nitrogen runoff as a result of the implementation of agroforestry were valued. The results indicate that agroforestry projects are in general profitable and resistant to fluctuations in fruit and nut yield and sales. Especially the farms that implemented walnut trees seem to be highly profitable based on their NPV, mainly as a consequence of the high value of walnut timber. The projects that involved fruit trees were also financially attractive as the DPBT was lower and a positive cash flow was reached earlier compared to the walnut farms as fruit trees reach their potential yield earlier than walnut trees. Combining these two business models leads to an optimal financial performance with a high NPV, a low DPBT and an early positive cash flow. Furthermore, this research shows that the ecosystem services provided by agroforestry have substantial economic value and that financially valuing these ecosystem services would be a viable alternative to the current subsidies. Together, this thesis showed that agroforestry not only has a promising ecological future, but also a financial one.