Increasing rotation periods during a time of decreasing profitability of forestry — a paradox?

The profitability of forestry in Germany decreased during recent decades because of more or less constant prices for forest products, increasing input prices and limited success in rationalisation. However, the volume of growing stock increased significantly during this period since forest enterprises have chosen longer rotation periods. This is especially true for state owned and community owned forests but also at least partly for private forests. It is normally not an alternative for the owners of forest enterprises in Germany to sell the forests completely, but on a first glance increasing investments in standing timber during a time of decreasing profitability of forestry seems to be inconsistent with economic theory. On the one hand this observation could be explained as the result of non-timber values. However, this paper is focused on another approach, which is an expanded Faustmann model in line with soil rent theory and focused on timber production. Profitable rotations in the future have the effect of shortening the optimal rotation period because an investment in standing timber causes opportunity costs by delaying the establishment of the next generation of the forest. Unprofitable future rotations have the opposite effect, if the landowner is forced to reforest. In case investments in reforestations are not profitable decision-makers have good reasons not to cut the mature stands, in spite of the fact that the internal rates of return of investments in standing timber are low in comparison with investments on the financial market. Empirical data for the period 1954–1998 mostly from guidelines for forest valuation are used together with inflation corrected interest rates to show that optimal rotation length increased over time. Nevertheless we have to recognise that the observed rotation periods are distinctly longer than the calculated optimal rotation lengths. Other factors which may also explain the investments in forestry are discussed later.     

The Faustmann model as a model for a forestry of prices

The relation between the Faustmann model and “a forestry of prices” as a concept of thought was examined. At first, the meaning of the Faustmann model in economic sciences is the explanation of allocation and distribution by prices. The rotation age determination plays a secondary role only. Secondly, “a forestry of prices” as an application of the “free to choose” way of thinking is explained. The concept allows us to understand how individuals of anonymous groups achieve forest sustainability and provide forest environmental goods. Thirdly, the relation between the Faustmann model and “a forestry of prices” is discussed. For this purpose, the Faustmann model is described as a scientific laboratory. It helps us to observe how equilibrium arises as a non-intended result of individual welfare maximization in anonymous interactions. And conversely with the help of “a forestry of prices”, we understand also that the individual maximization approach of the Faustmann model re-enacts the unintended interaction situations in anonymous group. With help of the Faustmann model, we can understand deep aspects of “a forestry of prices”. Vice versa, “a forestry of prices” shows the meaning of the formal solutions of the Faustmann model.     

Do the Risk Attitudes of Smallholder Forest Managers Drive Their Forest Carbon Supply: A Risk Experiment in China

It is widely recognized that enhancing forest carbon sequestration (FCS) can be an effective approach for mitigating climate change. Given the uncertainty about carbon pricing and the outcomes of FCS management, household perceptions of FCS management will be heavily dependent upon their risk attitudes, especially in developing countries with rich forest resources. Using a survey of 200 smallholder forest managers in Zhejiang Province in China and a risk experiment, this paper analyzes how the risk attitudes of households drive their FCS supply. We simulated the carbon supply with different risk attitudes of households based on a revised Faustmann model and a sensitivity analysis. A key finding is that compared with a timber benefit only, FCS management will generate more investment value. However, households have little incentive to change their harvest decision-making when the carbon price is low. Among the three identified risk attitude groups, although they have the same optimal rotation age when the carbon value is considered, their carbon supply per hectare is different due to difference in their planting densities. Also, the rotation age with FCS management and the FCS supply per hectare do not change significantly unless there is a substantial change in the carbon price, the management costs and the discount rate for all three risk attitude groups completely.     

Assessing natural hazards in forestry for risk management: a review

We address the problem of how to integrate risk assessment into forest management and therefore provide a comprehensive review of recent and past literature on risk analysis and modeling and, moreover, an evaluation and summary on these papers. We provide a general scheme on how to integrate concepts of risk into forest management decisions. After an overview of the risk management process and the main hazards in forests (storm, snow, insects, fire), the paper focuses on the principal methods used to assess risks from these hazards for commercial forestry. We review mechanistic models, empirical models, and expert systems and consider the needs for different spatial scales of risk assessment, from the regional to the single-tree level. In addition to natural hazards and their secondary effects, we deal with economic aspects of risk analysis. Monte Carlo simulations to deal with volatile timber prices and ways to include risk in classical Faustmann approaches are briefly discussed along with the integration of portfolio theory into forest management decision making and attitude toward risk. Special attention is paid to the implications for risk modeling under climate change.     

From 1849 back to 1788: reconciling the Faustmann formula with the principle of maximum sustainable yield

In 1849, Martin Faustmann published a formula for determining the claim on an insurer if fallow woodland has been definitely destroyed. His evaluation is based on an even-aged plantation and a given logging time. The calculation has later been used to derive an allegedly optimal rotation period which nowadays predominates in forestry economics. In fact, the utilized objective function does not engender the superior harvesting strategy but the highest compensation for the damaged ground. However, Faustmann’s approach can be generalized in order to maximize the expected value of a timber company’s total assets comprising soil and existing stumpage. The best felling practice turns out to be the principle of maximum sustainable yield already decreed by Austria’s emperor Joseph II in 1788. As a result, the difference between profitability and efficiency is resolved.     

Investment Potential of Private Forests in Croatia

This paper presents a comprehensive financial analysis of the investment potential of seven private forest categories in the Republic of Croatia (total study area of 268,072 ha). It covers the period from 2018 to 2048 and includes forest purchase costs, management simulation, timber transport to mills, timber processing and veneer production, and finally the selling of sawmill, veneer and forest products. Data from the Croatian National Forest Inventory and forest habitats map were used as a basis for analyses. Spatial data on private forests, roads and timber process plants at the national level were also integrated into the analyses. For the forest management simulation, the MOSES 3.0 simulator was used, and the QGis 3.4 software was used for spatial analyses of forests, roads and mils. Based on data from several world stock exchanges that cover companies of the forestry sector, a real (inflation-free) discount rates were used. The financial analyses showed which forest categories have positive investment potential and under which conditions. Results pointed out that multi-aged European beech forests have the highest internal rate of return (8.45%) and are the only one which would meet the expectations of a financially rational investor using criteria of a risk-adjusted inflation-free discount rate of 8%.     

1973～2003年中国林业生态足迹的研究

生态足迹是评价可持续发展能力重要指标之一,该方法自提出以来得到广泛关注和迅速应用。首先,本文分析了中国1973-2003年木材生产、进口和出口情况,结果表明,中国在1973-1995年期间木材生产呈明显波动变化趋势,1995年后呈现连续下降趋势;木材进口在1995年后特别是天然林保护工程实施后呈增长趋势,而木材出口在1995年后呈逐年下降趋势。然后,采用改进的生态足迹方法(即森林可持续产量法与森林实际生产法)计算了中国1973-2003年间的林业生态足迹(包括进口与出口林业生态足迹),分析表明,1978-1988年期间,实际生产法计算林地真实面积小于可持续产量法计算结果,而1989-2003年正相反,上述两种方法的计算结果均大于用全球产量计算的林业生态足迹。说明中国在1978-1988年间森林资源消耗量大于生长量,林业发展是不可持续的;1989年后森林资源消耗出现长大于消的局面,林业朝着可持续的方向发展,但同林业发达国家相比仍有较大的差距。最后,讨论了林业生态足迹与国家重要政策(包括外贸、经济与森林保护政策)的关系,并提出了减少林业生态足迹与增强林业可持续发展能力的几点建议。图3表1参31。     

加蓬林业发展现状及中加两国林业合作展望

加蓬已经成为中国林业企业走出去的重要国家之一。中国企业不仅在加蓬林业领域开展投资合作,还积极参与当地基础设施建设,推动了当地经济社会的发展。中国企业在加蓬投资林业合作的机遇与挑战并存,现阶段迫切需要引导两国林业合作向着绿色、可持续的方向发展。文中介绍了加蓬森林资源、林业管理体系、森林采伐、木材加工与贸易等发展现状,提出了促进中加两国林业合作可持续发展的建议,以期为稳步推进中加林业全面合作提供决策参考。     

Visions and realities for a Wik Forestry Industry on Cape York Peninsula,Australia

The large and unutilised native forest timber resource on traditional Wik land on Cape York Peninsula, Australia, could be managed for timber production to contribute to Wik socio-economic objectives. Wik elders have a set of forestry objectives and envisage that these will be best achieved by a timber industry selling unprocessed logs and woodchips. On the other hand, Balkanu Cape York Development Corporation, a government-funded indigenous community development organisation, anticipate that an industry utilising high-technology equipment and producing dried and dressed finished products including strip-flooring will best satisfy Wik forestry objectives. The Wilderness Society envisages small-scale ‘community development’ activities such as protable sawmilling and niche market furniture manufacture as being appropriate types of forestry activities on Wik land. Goal programming analysis of forest use opportunities indicates that Wik forestry objectives are unlikely to be best satisfied by adopting the timber utilisation options espoused by any one of the stakeholder groups.     

Faustmann in an uncertain policy environment

This paper deals with optimal forest rotation age and silvicultural investment under policy or regulatory uncertainty to which wasteful deforestation and lack of reforestation and afforestation efforts in the developing countries and loss of old growth forests and biodiversity in the developed countries are attributed. Incorporating a stochastic uncertainty factor into the familiar deterministic Faustmann formula yields a result that confirms with casual observations — when policy uncertainty is present, forest stands are harvested earlier and silvicultural investment is smaller than otherwise. The policy implication is that, in order to promote forest resource conservation, encourage afforestation and reforestation, and attack other forest-related problems effectively, the pervasive nature of policy uncertainty needs to be curbed.     

“一带一路”背景下利比里亚林业发展状况及中利两国林业合作探析

利比里亚森林资源丰富,但由于内战以及林业管理水平不高等原因,林业开发缓慢,迫切需要外资介入以增强发展动力,改善发展模式,以实现林业产业的可持续发展。近年来我国经济发展迅速,国内木材生产量远低于木材需求量,与利比里亚开展良好的林业合作将是缓解国内木材需求紧张局面的可行途径。文中介绍了利比里亚森林资源概况、林业法规、林业管理机构、林产品生产与贸易和林业开发面临的主要问题,提出了中利两国开展林业合作的领域和建议,以期为两国林业合作提供决策参考。     

福建省人工用材林收益与风险分析

对福建省人工用材林的投资风险进行实证分析,得出结论:1993-2002年,福建省人工用材林自然灾害风险所造成的平均风险损失较低,这与木材税费下降和人工林优惠政策出台有关;然而,对私人而言,其森林一旦发生火灾或病虫害,将造成投资损失,因此,政府必须建立分散风险的制度.     

3-level MCGP: an efficient algorithm for MCGP in solving multi-forest management problems

The efficiency gains when harvests are determined using the Faustmann approach instead of Maximum Sustained Yield (MSY), Forest Rent or some silvicultural rules were studies. The analysis was based on a variable-density stand growth model and computations over all admissible combinations of initial stand age and basal area for Finnish Norway spruce and Scots pine sites. Following MSY or Forest Rent led to a major reduction in the economic value of especially highly stocked stands. Finnish silvicultural recommendations (an example of silvicultural rules) encouraged production of higher than optimal quality timber. Applying Forest Rent, MSY or silvicultural recommendations led to respective reductions of 63%, 30% and 13% in the value of a typical conifer forest at a 4% rate of interest. The results also showed that an increase in the rate of interest may lengthen the ongoing rotation if the initial state falls outside the optimal path initiated at bare land.     

The Economic Factors which Influence the Type of Timber Grown and the Methods of Growing it

The most important decision to be taken is the decision whichleads to the initial investment. In private forestry, deathduties continue a powerful factor in economics. In the ForestryCommission it could be argued that, after abandonment of theneed to form a strategic reserve, interest-earning capacitywas the main reason for investment and that the Faustmann testshould be applicable but this would imply that afforestationwas competing freely with other new investments which is notso. The specifications of firm buyers are likely to determinethe type of timber grown and the technical rotation to takeprecedence over all others. As buyers' specifications change,management must be flexible with, the writer considers, a biasin favour of high quality rather than low.     

Understanding the timber value chain in community-based forestry in Indonesia: Analysis of sengon in central Java

The commercial opportunities for sengon (Paraserianthes falcataria L. Nielsen) are expanding rapidly in Indonesia, but there remains a lack of supply for the processing industry of the desired volume and quality of timber for processing from this fast-grown tree. This article discusses recent analysis of the value chain of sengon in Indonesia to determine (i) who the stakeholders were and how each added value, and (ii) how the benefits were distributed among stakeholders. Information was collected from a mix of farmers (as tree growers) and other actors involved in the value chain. The research revealed two broad types of value chains for sengon–‘direct’ and ‘traditional’, with the potential increased income for farmers being as high as 35% when they use the direct approach, compared to the traditional approach. As expected, the further ‘downstream’ the position of the stakeholder in the value chain, the greater the monetary value added to the sengon timber and subsequent products. If farmers were to acquire a greater understanding of the market dynamics for sengon, they could better target the sale of their forest products to specific market segments and make forestry a more profitable enterprise. While village traders in the traditional value chain play an important role connecting small-scale tree growers to commercial markets, the sustained viability of their role is uncertain if more farmers adopt the ‘direct’ approach.     

Discount rate and harvest policy: implications for Baltic forestry

The free market economy, to which East European countries are increasingly being exposed, implies that classical budgeting techniques in the form of the Faustmann approach present themselves as the tools of choice for forest investment analysis. One implication is that the choice of a proper discount rate (r) must be made as part of the basis for formulating a harvest policy. The paper discusses this choice in the light of practice as well as theory, and, using Lithuania as a case, examines the potential economic and political impact of softening the current restrictions on forest management. A review of the debate on discounting in forestry is provided. A statistical analysis of the relation between reported r values and internal rates of return (IRR) from numerous studies on forestry investments reveals a strong correlation between r and IRR. Possible explanations are provided. Analysis reveals that application of any positive r will significantly change forestry practice in Lithuania. Setting r=3%, slow growing species are to be replaced by fast growing species, and rotation periods should be substantially shortened. The standing volume of (over-)mature forests is approximately 160 million m³, as compared with the currently harvestable volume of approximately 40 million m³ according to the minimum allowable rotation age. The macroeconomic perspectives of cashing some of the mature forest for the small transition economy are discussed, taking into account the effects of externalities of forests. Consequently we suggest an alternative formulation of the normal forest. Finally, based on these considerations, a real r of 0–2% is suggested for State forestry in Lithuania. A post-tax r of 2% is advocated for private forestry, with potential project specific deviations downward to 0 or upward to 4%. It is stressed that discount rate is viewed as one of the important decision parameters and due regard should be given to non-timber forest outputs, social and institutional settings and other factors.     

莫桑比克林业发展现状及中莫两国林业合作探析

莫桑比克森林资源丰富,是中国在非洲的主要热带木材及原木来源地。在利于两国共同发展的基础上,中莫两国林业建立了广泛的合作。由于莫桑比克毁林和森林质量下降的问题,中国企业林业投资又面临国际上的质疑和批评,迫切需要改进两国林业合作与发展方式和策略。文中介绍了莫桑比克森林资源、林业管理体系、森林采伐、木材加工、流通与贸易等发展现状,提出了促进中莫两国林业国际合作可持续发展的建议。     

The German struggle between the ‘Bodenreinertragslehre’ (land rent theory) and ‘Waldreinertragslehre’ (theory of the highest revenue) belongs to the past — but what is left?

The beginning of the land rent theory is closely related to the German forest economists Friedrich Wilhelm Leopold Pfeil and Johann Christian Hundeshagen (1828). It was further developed by Gottlob König (1864), Johann Heinrich v. Thünen, Max Robert Preßler, Gustav Heyer, Max Endres and in particular by Martin Faustmann (1849). His 1849 published and well known formula may be seen as the center of the land rent theory. However, the application of this concept demanded a considerable change of forest management practice due to the reduction of usual rotations and stocking density. Eventually, the land rent theory conflicted with the principle of sustained yield which had become the central idea of forestry in Germany in the 19th century. Since forestry under German conditions did not start as an investment on bare forest land, but had to manage existing forests under the principle of sustainability, the theory of the highest revenue seemed to be a more appropriate guideline for forestry. However, the maximization of the highest revenue assumed a marginal interest rate of 0% because the time span between input and output was not considered. Besides that, this principle also conflicted with the reality of forestry, because the scarcity of financial funds was not regarded. So far, both theories have not delivered solutions useful to real forest economic decision problems in Germany. Using an example from Lower Saxony, it is demonstrated that considering the objective of sustainability leads to results which are in accordance with the reality and the economic theory.     

关于大兴安岭林区功能定位及产业结构调整的思考

通过对大兴安岭林区40年的开发建设的分析,认为其已经由以木材生产为主实现向生态林区建设转变。当前为适应这一历史性的转变,林业和林区经济正在进行大幅度调整,探索适合本林区发展的林业建设之路。在分析大兴安岭林区功能定位及产业结构调整的基础上,针对产业结构现存问题及调整方向,对如何认识生产性林业、如何真正实现特色经济等问题提出了看法,并指出人才的转变是实现林区“三大转变”的根本保障。     

澳大利亚林区道路发展及启示

澳大利亚森林资源丰富,林区道路建设历史悠久,密集而发达的林区道路及其现有林道改进方案保证了澳大利亚森林道路的良性有序发展,保障了森林和木材资源的可持续、综合和有效利用。文中概述了澳大利亚林区道路发展现状,包括林区道路“用者自付”原则下的多元化投融资机制,以及林区道路的管理体制和机制、建设规划及建设规范等;分析了中国林业道路建设和发展的现状及问题;提出了我国林区道路建设需要促进投融资渠道多元化、重视林道规划和规程的规范化建设、注重维护生态社会与经济效益的统一等启示和建议。