Teak–cattle production tradeoffs for Panama Canal Watershed small scale producers

• We estimate teak yield from real, small scale, farms in the Panama Canal Watershed.
• We compute profit maximizing rotations for teak in the Panama Canal Watershed.
• We compare the net present value of land in teak plantation to land in cattle ranching in the Panama Canal Watershed.
• Cattle ranching is financially competitive with, and likely outperforms, teak for small farms in the watershed.

Reforestation and forest conservation are important issues in the Panama Canal Watershed (PCW). Uncertainty remains about relative net benefits of profit-maximizing timber rotations compared to the net present value of incumbent land uses such as cattle ranching. The scientific and popular literatures have displayed enthusiasm for teak (Tectona grandis) and native species plantations. We estimate a realistic yield model for teak, an exotic tree species, based on growth data from actual small scale landholders who were incentivized to convert lands to teak plantations. We use a suite of well fit yield models to solve for the optimal Faustmann rotation and compute the net present value (NPV) of a teak plantation to a private land manager as a starting point for understanding land-use patterns. We compare the NPV from forestry to cattle and find that site characteristics, discount rates, and market prices are all important factors in influencing the land manager's decision to switch from cattle ranching to plantation forestry. We find that traditional cattle ranching is economically competitive, in terms of NPV, with and may often outperform teak plantations within the PCW. This result is robust to the teak yield model selected.