Comparative Profitability Analysis of Monoculture and Intercropping Land-Use Systems: The Case of Smallholder Farmers in North-Western Ethiopia

Abstract

Tree plantations have become a common economic activity in the Ethiopian Highlands, particularly in our study areas. This is mainly due to the degradation and restrictions of natural forests, the introduction and expansion of fast-growing tree species, and the potential short-term economic benefits of woodlot plantations. Our research was conducted in Dangila and the nearby Adiskedam Woreda in North-western Ethiopia to evaluate the profitability of monoculture and intercropping land-use systems. We used the land expectation value (LEV) model developed by Faustmann to assess the profitability of the different land-use systems in the study area. We obtained production costs and benefits of the land-use system from the farmers through questionnaires and key informant interviews. Data analysis was carried out using Excel (2016) and SPSS statistical software. The findings revealed that the Acacia decurrens (Ad) farming practice showed the highest LEV at all interest levels, followed by intercropping land use. At a 15% interest rate, the eucalyptus with maize (E + M) land-use system was the second most profitable with a value of 3677.5 USD. However, at 5% and 2% interest rates, the Ad with maize (Ad + M) land-use system demonstrated the second highest LEV of 14,585.6 and 39,695.1 USD, respectively. The M land-use system had the lowest LEV at all interest rates except at a 15% interest rate. The sensitivity analysis showed that fluctuations in product prices significantly impacted all land use systems, except M. In addition, changes in interest rates were the secondary factor affecting the Ad, E, and Ad + M land-use systems. The LEV of M monoculture was notably influenced by the wage rate; however, it had the least impact on the other land-use systems. Taking into account the interests of farmers, the profitability of land-use systems, and the perception of farmers concerning adjacent land productivity, Ad and Ad intercropping with the M farming systems are recommended, and identifying the optimal mix of intercropping and optimum tree rotation age is fundamental in the future, which could increase productivity and make the farmer more profitable.