ABSTRACT
Net returns to forestry and dairy fanning depend on the prices received by farmers for timber and milk, physical yields of these outputs, and inputs costs. Time-series data are available on timber prices by species and average milk prices across grades. Consistent yield data are unavailable, particularly for timber and forage yields on lower-quality land. It is hypothesized that the yield of timber relative to milk declines as land quality im proves. H ow ever, on the poorest-quality land the magnitude of the relative yield is uncertain since timber and milk yields are very low or even zero. Input costs are likely to vary greatly across lands of different quality. On lower-quality land used for pasture and forestry, input costs are negligible. Seeding and other improvements are typically uneconomical on low-quality pasture and trees tend to be established through natural regeneration (Spencer et al.). On higher-quality land, there are considerable costs associated with growing feed crops (fertilizer, energy, etc.). However, since crop returns tend to be much larger than forestry returns on high-quality land, these costs are not likely to have a significant effect on decisions to put land in forest.7 *Finally, the conversion of forest to agricultural uses is assumed to be uneconomical since forests in the region tend to be found on lower-quality land (Hexem and Krupa). Thus, land use changes in the region involve only shifts from agricultural land to forest.8
