Earlier this week we published an article advocating for funds mixing timberland and agriculture. For both LPs and GPs, we found, the concept made financial sense.
Yet the rationale also stacks up from an agronomical point of view – in a very concrete way: mixing crops and trees on arable land generally yields better results than sticking to monoculture, experts argue.
The concept, which bears the name of agroforestry, is not new. Indeed we’ve covered it in our pages before, through reporting on the efforts of US timber companies, the Moringa fund or development financiers.
But its acceptance among industry backers has been slow to pick up. There is one main reason for it: “The idea runs contrary to what many farmers, agronomists and investors have been taught since the 70s,” says Patrick Worms, a senior science policy advisor at the World Agroforestry Centre. “Today’s technology works so well that we’ve forgotten about the role of ecosystems.”
And yet, he tells Agri Investor, embracing agroforestry more widely could do much to boost investors’ returns.
The economics of ecosystemics
To be able to use land for single-cropping, Worms explains, you essentially need to turn it into a blank sheet by eliminating its native ecosystem. Biological activity, however, brings durability to farmland.
Mixing trees and crops allows land to capture a greater amount of solar energy, and smooths out consumption of water resources. Competition between crops and trees forces roots to go deeper, making both more resilient to future storms or droughts. And revenues derived from ag and forestry are generally complementary, says Worms.
“A farmer works on six-month cycles, while a tree grower will only harvest after a few decades. If you blend both, then you smooth out financial gains: you can collect an annual revenue while seeing your capital accumulate.”
A number of established projects use agroforestry successfully in Europe, where rotating crops and wood grown for pellets can be sold into standardized value chains. But in more tropical regions, Worms argues, the approach can have even stronger effects.
In research he shared with Agri Investor, monoculture is assessed against intercropping using the Land Equivalency Ratio, a measure of how yields obtained from the latter compare with yields generated from growing a single crop.
A maize/cowpea plantation in Mali achieves an LER of 1.47, the document says; a project mixing teak and maize in West Java produces an LER of 1.9. Intercropping tested at a UK farm produces an LER of 1.43.
“It works very well in tropical areas, because the growth cycle lasts all year long,” Worms notes.