Introduction

Having concluded our assessment of the monetary value of land under forestry we now turn to consider the prime opportunity cost of such a decision, namely the value of the major land use in Wales: agriculture. This chapter presents models of net agricultural income received by farmers (referred to as the ‘farm-gate’ value) and its social or ‘shadow price’ equivalent which adjusts for the various subsidies and other transfer payments which characterise UK agriculture. As before, a GIS-based approach is used to generate maps of such values for the entire study area. This permits subsequent comparison of total woodland values with those for agriculture (see Chapter 9).

The following section presents the necessary policy background. This establishes the broad and progressively strengthening economic case for the transfer of at least some land out of conventional agriculture and into alternative land uses and overviews the theoretical and methodological basis of our analysis. An overview of developments since our 1990 study period is also presented, showing that there has been a clear worsening of the economic situation for farmers in our study area, which means that our analysis will provide a conservative estimate of the potential for land use change from farming to forestry.

The following two sections outline the GIS-based methodology employed and discuss the data. For modelling purposes, farms in the sample were clustered into distinct groups as explained in the next section, which also reviews definitions of farm-gate and shadow value of production.