Evaluating the Profitability of Brush Management and Oak Tree Thinning for Range Improvement

the improvement at 1 AUM per acre is Evaluating the profitability $20 per acre. This expected benefit from grazing, $20, is greater than the equivalent annuity for tree treatment costs, of brush management $6.43, but not for brush treatment costs, $20.16. Hence, it appears the range should be improved by tree thinning. and oak tree thinning Other benefits, such as decreased fire danger, improved wildlife habitat, value of fuel wood, and hunting leases, need for range improvement to be evaluated and used in this comparison also. These factors may make Kent D. Olson 0 Theodore E. Adams, Jr. 0 Alfred H. Murphy both improvements profitable. Variations in these benefits also should be evaluated before a final deci- Clearing rangeland of dense brush benefits per year and variations in bene- sion is made. Table 3 shows different thickets or stands of oak trees produces fits per year. If the benefits outweigh the benefits per acre for variation in the obvious benefits on the better soils: annual cost, the investment is sound value of an AUM and in the yield in- more and better feed for domestic and (provided that the money is available crease. wild animals; improved water yield in and there are not other, more profitable Without yield information. When an the watershed; and reduced fire hazard. investments). estimate of the physical yield is not But there are also costs, which need to An annuity is an amount received or available, the breakeven yield can be be weighed against potential returns be- paid each period, usually annually. An estimated for different values of that fore the decision is made to improve the equivalent annuity is calculated from a yield. These breakeven yields are then land. series of values over time, and it is used compared with the amount the rancher Weather and market conditions cause because the costs usually are concen- estimates to be possible. In this exam- both physical production and product trated in the first years of the life of the ple, if the value of an AUM is $20, the price to vary, but the costs of an im- improvement. An equivalent annuity breakeven yield for the tree treatment is provement vary little, especially after expresses this uneven distribution as an 0.32 AUM per improved acre ($6.43 per they are incurred. This study estimates annual cost spread over the life of the acre divided by $20 per AUM); for brush the annual costs of two range improve- improvement. treatment, the breakeven yield is 1.01 ment practices, brush management and AUM per improved acre ($20.16 per acre oak tree thinning, and discusses the Hopland example divided by $20 per AUM). This annual comparison of these costs with potential Costs for range improvements at the breakeven yield can be compared with returns when the returns are not known Hopland Field Station are used as exam- the yield estimates, and the improve- with certainty. ples (table 1).We have taken the actual ment decision made. inputs and applied 1982 prices. The Effect of yield deterioration. The val- Improvement costs after-tax equivalent annuities are esti- ue of the yield increase from a range At the University of California Hop- mated to be $6.43 per acre for thinning improvement usually decreases over land Field Station in Mendocino Coun- trees and $20.16 per acre for brush man- the life of the improvement (see exam- ty, workers began clearing brush and agement with a 20-year life for both ple in graph). This effect could be evalu- thinning oaks in the 1960s to improve improvements (table 2). ated by quantifying the expected yields the carrying capacity of part of a 387- The equivalent annuity of the costs in each year and estimating the net acre pasture for livestock and wildlife. needs to be compared with the expected present value of the improvement. Dif- The brush was crushed, burned, and benefits of the improvement. For the ferent prices and yields need to be used later sprayed to discourage regrowth, comparison, the annual values of in- in the analysis so that the sensitivity of and the cleared area was seeded with creased forage and other benefits need the improvement decision to changes in grass and clover, and fertilized. Over a to be estimated. Different price and both yield and price can be evaluated. seven-year period, 107 acres (28 per- yield assumptions need to be used so To evaluate the effect of yield deterio- cent) of the pasture were treated. that the stability or sensitivity of the ration using an equivalent annuity, the The trees were thinned using the cut- decision in relation to uncertain prices breakeven yields for different prices surface method, in which the herbicide, and yields can be judged. need to be estimated and then compared 2-4-D was placed in cuts on the tree With yield information. In unpub- with expectations of how the initial trunk near the ground. Oaks with good lished data from the 1960s, the Hopland yield increase and the subsequent dete- potential for acorn production were re- Field Station showed an average yield riorations compare with the breakeven tained. The area under treated trees also increase of 0.36 animal unit month yields. If the breakeven yields are ex- was seeded. Tree treatment began in the (AUM) per acre per year in the entire pected to be exceeded by expected fall of 1961 on 47 acres, or 12 percent, of 387-acre pasture. This is assumed to be yields in enough years to counteract any the pasture. the result of the brush and tree treat- poor years, the improvement is deemed The usual analysis of investments in- ments on 154 acres, which means that profitable. volves estimating and comparing after- each treated acre contributes, on aver- As an example, the graph shows the tax costs and benefits over the life of the age, about 1 additional AUM per year estimated value of the yield increase in investment by taking into account the when compared with untreated acreage. each year and an equivalent annuity of time value of money. However, because (However, brush clearing and tree thin- $20 per acre for brush control. With the benefits of range improvements are ning may produce different effects.) We such information, the magnitude of the more uncertain than the costs, we chose are basing this example on the mea- return in years when the value of the another approach - transforming the sured increase of 1 AUM per improved yield increase is above the equivalent after-tax costs over time into an equiv- acre. annuity of costs can be compared with alent annuity. This equivalent annuity If the value of an AUM is expected to the magnitude when the value is below was then compared with expected be $20 on range, the expected value of Continued on page 22 6 CALIFORNIAAGRICULTURE, SEPTEMBER-OCTOBER 1983 Range improvement, cont’d the annuity. If the yield increase cannot The advantage of the equivalent an- be quantified, this will be a subjective nuity approach is the ease of adjusting evaluation. the benefits to evaluate potential values The possible sale of firewood, now a of conversion, production, and livestock profitable product for many ranchers, prices. Estimation of the net present will affect the method of improving value of these improvements and the wooded ranges. After the wood is har- subsequent sensitivity should give the vested, the area can be seeded for im- same answer. The annuity method is proved range capacity. The Hopland suggested only in those instances where Field Station has had a one-time yield of the yields and prices are not known and 12% cords per acre with a conservative estimates of the benefits are very uncer- stumpage price of $5 per cord. Although tain. In these cases subjective evalua- the money from selling firewood may tion will be assisted by the relatively finance the seeding costs, the firewood easy, equivalent annuity method. and seeding should be evaluated sepa- rately for profitability. Costs of seeding after firewood harvest convert to an Kent D. Olson is Economist, and Theodore E. equivalent annuity of $1.09 per acre Adorns, Jr.. is Wildlands Specialist, Cooperative (table 2), which should be compared Extension, University of California, Davis; and Alfred H. Murphy is Superintendent, Hopland with expected benefits and variations as Field Station, and Specialist, Agronomy and described. Range Science. Field Bindweed, cont’d Flower and seed feeders. The bru- Further tests conducted with the leaf chid beetle Megacerus impiger Horn fre- beetle in the quarantine facility at Alba- quently attacks seeds of all the Califor- ny, however, indicated that this beetle nia Calystegia spp. but only rarely is could feed and reproduce on several found in field bindweed seeds. The North American sweet potato varieties. smut found in Greece also occurs in The gall mite Aceria convolvuli Na- northern North America but is not lepa, from Greece, which attacks field found in California. bindweed buds and leaves, did not feed Stem and root feeders. No California on American sweet potato varieties in organisms are associated with field laboratory tests, but tests on American bindweed stems, but the cecidomyid morning glories are not complete. The fly, Lasioptera convolvuli Felt, forms powdery mildew appears to attack Con- stem galls on western morning glory, volvulus and Calystegia spp. Neither Calystegia occidentalis (Gray) Brum- natural enemy has been thoroughly mitt. The sweet potato flea beetle, studied yet, but both organisms, or at Chaetocnerna confinis Crotch, like its least some closely related organisms, European counterpart, Longitarsus offer promise of being specific. pellucidus, feeds on roots in its larval In conclusion, because some Ameri- stage and on leaves in its adult stage.

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