Net Present Value Analysis to Assess the Economic Consequences of Changing Farming Systems in the Upper Catchment of the River Njoro Watershed.
2006
Krupnik, T. | Jenkins, M.W. | Mooney, S. | Bett, E.K.
A spreadsheet model applying net present value analysis has been developed to estimate long-term economic returns to labor and land of alternative small-holder cropping systems in the upper River Njoro watershed. Production expenditures and income over a 15 year time horizon associated with current cropping practices of a typical farm household cultivating 2.6 hectares of maize-bean intercrop, pyrethrum, and potato mix were characterized based on field work conducted in 2003. Results indicate annual net present value returns to cropped land under the current system average Ksh 3,488/acre ($46/acre) in 2003 values and net farm income to the household (net returns to labor) average Ksh 25,646 (US $342) per year. Net returns are particularly sensitive to maize yield and price, cost of seeds, and discount rate. As part of efforts to identify improved environmental land management practices in the River Njoro watershed, the model can be adapted to examine the economic viability of adopting alternative agronomic practices and cropping systems, and evaluate changes in farm income and any need for economic incentives. Data from farmer field trials, research experiments, and other settings provide sources for characterizing proposed practices such as agroforestry, riparian tree planting, and soil conservation in the model.
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