In the past five years, most agricultural producers in the United States have suffered from depressed conditions in the commodity markets. The supplies of basic food commodities have burgeoned, demand has fallen, and price levels have declined, despite $55 billion in U.S. Department of Agriculture (USDA) commodity support program expenditures since 1983 (FAPRI, 1988). Since the early 1980's, farm income and asset balances have declined and debt has risen, increasing the financial stress for many producers. The financial strain could be more acute for those operators with a significant proportion of marginal land in production. Conversely, the USDA Forest Service recently projected that during the next 30-to-40 years softwood forest product demand will increase, available supplies will decrease, and real price levels will increase (USDA Forest Service, 1987). These conditions create the option of converting marginal agricultural lands to forestry investments. A technique was developed to compare possible financial returns between prevalent cropping systems and forestry investments on marginal soil series throughout Virginia. Crops and tree species used in the study include the following: corn (Mays L.), soybeans (Glycine max), soft red winter wheat (Triticum L.), orchard grass (Festuca L.), clover (Trifolium L.), fescue (Festuca L.) pasture, and loblolly pine (Pinus taeda L.), and eastern white pine (Pinus strobus). With state-of-the-art management regimen for agricultural production, annual profit or loss estimates were computed for a variety of soil productivity classes and market price levels. Intensive management was also prescribed for the forestry investment analysis. Using current inputs and projected market price levels, a cash flow analysis program computed equal annual equivalent (EAE's) values for the investment analyses to derive results comparable to those for agriculture. Under the "base" assumptions and current and foreseen markets, forestry investment was determined to be competitive with agricultural production on the marginal soil series. However, government subsidies, benefiting both forest products and agricultural production, complicate the results. Further, the dependency of both markets on macroeconomic and other exogenous variables precludes any guarantee of investment performance over the 35-to-45 year investment horizon for either alternative. The study does provide a foundation for financial comparison, to which a landowner might add individual, subjective evaluations of land use (and financial criteria and assumptions) to reach a decision about the utilization of marginal agricultural lands. / Master of Science
| Identifer | oai:union.ndltd.org:VTETD/oai:vtechworks.lib.vt.edu:10919/43747 |
| Date | 15 July 2010 |
| Creators | Deaton, Stuart A. |
| Contributors | Forestry and Forest Products, Haney, Harry L. Jr., Wisdom, Harold W., Scrivani, John A. |
| Publisher | Virginia Tech |
| Source Sets | Virginia Tech Theses and Dissertation |
| Detected Language | English |
| Type | Thesis, Text |
| Format | x, 124 leaves, BTD, application/pdf, application/pdf |
| Rights | In Copyright, http://rightsstatements.org/vocab/InC/1.0/ |
| Relation | OCLC# 18706358, LD5655.V855_1988.D427.pdf |
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