Profitability and household income contribution of growing Eucalyptus globules (Labill.) to smallholder farmers : the case of the central highlands of Oromiya, Ethiopia

Currently, growing Eucalyptus at the farm level has become very popular among some farmers. As a result, it partially or completely replaced annual crops. Tree growing for the sake of profit on well-protected and relatively fertile land competes with agricultural crops and livestock for the same resources. The objective of the study was to assess and analyze the economic importance of growing eucalyptus globulus in the farming system by smallholder farmers.The study was conducted in west Shoa, Welmera woreda. The data for the study was both primary and secondary data. The data collection covers agricultural crops, livestock sizes and growing Eucalyptus. Semi-structured and structured types of questionnaires were developed to undertake an interview for data collection. The major analytical tools for data analysis were descriptive statistics, enterprise budgeting and linear programming.The result of the study showed that farmers set aside 9% of agricultural land under Eucalyptus. The net present value and land expectation value of growing Eucalyptus globulus from the first rotation and successive coppice stands at a discount rate of 10% were 9628 and 35179 ETB per ha, respectively. The annualized returns from growing Eucalyptus globulus was 6, 9, 14 and 23 times the returns of tef, wheat, barely and livestock, respectively. The contribution of growing Eucalyptus to household income was 50% relative to agricultural crops and livestock. Sensitivity analyses showed that growing Eucalyptus was profitable under a wider range of discount rates and prices. A 75% price reduction resulted in annual return of 758 ETB, which is still more than what was obtained from agricultural crops and livestock.The output of linear programming indicated that it is possible to attain a maximum profit of 1697 ETB using Eucalyptus as land use option fulfilling farmers preferences for food self-sufficiency and draught power, whereas only 895 ETB can be obtained under agriculture. The total land that could be used for Eucalyptus as an alternative land use option was 12%. It can be concluded that growing Eucalyptus globulus is a complementary land use option.