An Economic Analysis to Aid the Marginal Decision on Rotation Length: II Development of the Technique

The economic principle, which was presented in an earlier paper(Forestry, 37, 161), is developed into a flexible techniqueof economic analysis for use in forest management. The techniqueprovides a rapid method for analysis of the marginal decisionon financial rotation length; whether to fell now, or in fiveyears or so. The developments include incorporation of a price-sizegradient, different product prices, various costs of operation,reductions in volume yield, and various establishment and maintenancecosts. Now in its final form, it can incorporate these changesin stand conditions without any laborious calculation. The techniqueis used to analyse the effect of financial factors on the marginaldecision, i.e. prices, costs, and productivity. It is suggestedthat financial rotations are fundamentally dependent on therelation between physical production and the interest rate.Second, establishment and annual maintenance costs have no effecton the decision. Third, prices, or more specifically the ratioof pulpwood price:sawtimber price, are not of major importance,because they influence the decision within the limits alreadyimposed by production and interest rates. The justificationfor pulpwood rotations is also examined. This paper has developeda basic technique for projects of forest economics. It is partof the research work into the economics of timber production,which is being undertaken by the author at the Forestry Department,University College of North Wales, Bangor.     

Applying portfolio optimisation to the harvesting decisions of non-industrial private forest owners

The non-industrial private forest owner's optimal harvesting and investment strategies are studied at forest holding level by including individual forest stands in an asset class portfolio. The forest owner can either clearcut mature stands and invest the capital in financial or real asset classes (bank deposits, government bonds, stocks, apartments) or postpone clearcutting and retain capital in standing trees. Forest inventory data from actual forest holdings in Southwest Finland, the simulation–optimisation software MELA, and statistics on timber prices are utilised to compute the return series for forest stands. The numerical results show that the optimal level of clearcutting decreases markedly with initial non-forest wealth, especially at low risk-free rates of interest. It may therefore be rational for non-industrial private forest owners to consider shorter rotation periods than those of investors with diversified portfolios. The correlations between returns from forest stands are high, implying that increasing the variety of stand structures achieved by planting different species is not likely to bring substantial diversification benefits. The favoured investment outlet for harvesting revenues (apartments, government bonds or stocks) is sensitive to the period of historical data used to compute the return series and risk-free rate of interest. The value growth of forest stand can be used to estimate annual returns only for those stands that are readily mature. An alternative method of computing returns on stands in any development phase is proposed, based on net present value of stand adjusted for fluctuations in forest land prices. This method applies if selling forest land is considered an option. If selling is not an option, the ratio of maximised net present value to value at immediate harvest can be used as a ‘maturity index’ for ranking the stands for portfolio optimisation.     

树种各疏密度条件下密度与直径的关系

本文以杉木人工林和落叶松天然林标准地数据为材料,应用D=aN~bP~cS~dH~e数学模型进行计算分析,并从理论上证明,当同一树种的树高一定时,疏密度和株数相同,各地位指数(级)林分平均直径一致。为森林的抚育间伐,林分直径生长的预测、预报,确定林分工艺成熟龄及森林调查设计等提供了理论依据和重要参数。     

Estimation of the Gentan probability using the price of logs in private plantation forests

The Gentan probability is defined as the probability that a newly planted forest stand will be harvested at a certain age. In this study, the Gentan probability was estimated using the price of logs, in accordance with the notion that the probability is influenced by economic factors. In order to estimate the Gentan probability, we adopted a probability density function based on the forest owners’ decision-making process, which consisted of a decision criterion, a decision criterion function and a criterion threshold. The price of logs was employed for the criterion, and the decision criterion function was defined as the value of the forest stand based on the price of logs. Moreover, the mechanism of changes in the threshold was formulated based on the random walk concept. The parameters of the suggested Gentan probability were calibrated to fit the harvesting tendencies observed in the past. Finally, the Gentan probability distributions estimated using the prices of logs over the past 20 years were compared with those estimated using felling age means and variances. The two distributions were closely correlated during most years. The proposed Gentan probability model takes advantage of short-term yield predictions such as an analysis of forest owners’ reactions to the current price changes.     

Financial performance of using genetically improved regeneration material of Scots pine (<Emphasis Type="Italic">Pinus sylvestris</Emphasis> L.) in Finland

The financial viability of using improved seed material of Scots pine was assessed in Finnish conditions. Based on a few dozen field trials, a range of genetic gains for height growth was incorporated into a stand simulator. Technically genetic gain was modelled into individual growth models by applying the Chapman-Richards type function and using genetic gain estimates as asymptotic scaling parameters. Stand projections, including the effect of genetic gain, were further converted into monetary terms by calculating bare land values, i.e. BLVs according to the Faustman rotation model. Following this, the financial attractiveness of using improved seed material from Scots pine was determined by comparing the BLVs between stands with and without genetic gain. The study focused on the private forest owner’s point of view, reflecting the primary demand conditions for improved seed material. Comparisons between BLVs indicated that using improved seed material of Scots pine would be financially viable for private forest owners in most parts of Finland, the discount rate being 3%. The main results were robust, with pertinent changes in silvicultural costs and stumpage prices. This study demonstrates the need for financial analysis in decision-making in the context of regeneration material.     

ROTATION

The computer model ROTATION was developed to calculate and compare optimal rotation ages for even-aged forest stands according to mean annual increment, money yield table, forest rent, land expectation value, present net worth, internal rate of return, and financial maturity criteria. The program was written in Microsoft QuickBasic and h e input variables consist of volume yield data, stumpage price, land cost, stand establishment cost, stand management cost, and the rate of interest. Results are displayed in tabular format and values indicating the optimal rotation age based on each of the seven criteria are presented. A representative example is included which incorporates normal yield data for ponderosa pine (Pinus oonderosa Doual. ex Laws.) and commercial timber management revenues and expenditures approximating those currently countered in the Sierra Nevada and southern Cascades, USA. Potential users of ROTATION include forest managers and natural resource educators.     

郁闭后杨树林下不同间作模式效益分析

研究了郁闭后杨树林下间作麦冬、百合和生姜对林木生长、土壤肥力的影响及经济效益。结果表明：郁闭后杨树林下间作麦冬和百合对林木生长均有一定的促进作用。间作麦冬、百合第1年,杨树胸径连年生长量均比对照提高15.8％,树高连年生长量分别比对照提高31.6％和26.3％;间作麦冬第3年,杨树胸径和树高连年生长量分别比对照提高33.3％、13.3％。间作麦冬0～40em土层土壤有机质及N、P、K主要养分含量均比间作前有所下降。研究出郁闭后的杨树林下最适宜间作麦冬,年均利润高达12776元／hm^2,并且一个轮伐期至少增加木材收益5800元／hm^2。     

不伺更新方式的米槠林经营效果评价

对福建三明不同更新方式的米槠林经营效果进行定量评估。结果表明:林分蓄积连年生长量、林分生产力:人促更新>人工造林>天然更新;林分生物量:人促更新>天然更新>人工造林。营林生产每hm2、每年投资:人工造林>人促更新>天然更新。活立木蓄积年增长经济价值和间接经济价值:人促更新>人工造林>天然更新。3种更新方式的林分间接经济价值远大于直接经济价值。     

Financial feasibility of increasing carbon sequestration in harvested wood products in Mississippi

Longer forest rotation ages can potentially increase accumulation of carbon in harvested wood products due to a larger proportion of sawlogs that can be used for manufacturing durable wood products such as lumber and plywood. This study quantified amounts of carbon accumulated in wood products harvested from loblolly pine (Pinus taeda L.) stands grown in Mississippi by extending rotation ages traditionally used to manage these stands for timber. The financial viability of this approach was examined based on carbon payments received by landowners for sequestering carbon in standing trees and harvested wood products. Results indicated a potential to increase carbon accumulated in wood products by 16.11 metric tons (t) of carbon dioxide equivalent (CO₂e) per hectare (ha) for a rotation increase of 5 years and 67.07 tCO₂e/ha for a rotation increase of 65 years. Carbon prices of $50/tCO₂e and $110/tCO₂e would be required to provide a sufficient incentive to forest landowners to extend rotations by 5 and 10 years, respectively. With 2.8 million ha of loblolly pine stands in Mississippi, this translates to a possible increase in wood products carbon of 45 million tCO₂e and 80 million tCO₂e for harvest ages increased by 5 and 10 years, respectively. Higher carbon prices lengthened rotation ages modestly due to low present values of carbon accumulated with long rotations.     

A method for stochastic multiobjective optimization of stand management

The paper describes a way of simultaneously optimizing several stand management objectives differing in measurement units and character. The simulation-optimization system accommodates, besides multiple objectives, the time and risk preferences of the decision maker. Multiple objectives are integrated in optimization through an additive utility function. Time preferences are dealt with by discounting, and the discounting rate is specified separately for each objective. Objectives related to products are described by the sum of the discounted values while objectives related to the status of the forest are described by the integral of the discounted value of a state variable. Different units are made commensurable via subutility functions that scale all objective variables between zero and one. Risks associated with the future growth level and timber prices, and with the preferences of the decision maker, are taken into account by stochastic optimization based on the scenario technique. With this technique, each management alternative produces a distribution of utility indices. This distribution is used to compute a utility index corrected by risk preferences; different parts of the distribution are weighted in a manner that reflects the decision maker's attitude toward risk. A case simulation-optimization system is described, based on the above techniques, to deal with multiple objectives, time preferences, risks and risk preferences. Calculations using this system indicated that security and recreational amenities lengthen the optimal rotation of mixtures of Scots pine and Norway spruce, compared to a situation in which the maximal soil expectation value is the only objective. In a multiobjective case, stochastic growth, timber price and preferences increased the rotation length by 15 years (17%) from the deterministic optimum. Attitude toward risk also affected the optimal stand management.     

马尾松林火灾后生态效益损失动态评估

依据林分生长规律和经营模式,建立生态效益损失动态评估模型;对广州从化30年生马尾松林分森林火灾后,经过人工更新的林分45年内所产生的生态效益进行模拟,认为该林分若未遭受森林火灾,封山育林模式的生态效益最大;灾后更新林分需要30年才能恢复相当于灾前林分的生态效益;其间生态效益的损失量为传统静态定量估算的25.92倍.如果林分采取30年轮伐的经营模式,在第19年左右时轮伐林分和灾后更新林分所产生的生态效益平衡;此后人工更新林分的生态效益渐高,而受灾林分经人工更新后第17年时的生态效益近似于轮伐林分的稳定值.轮伐型所带来的总效益在前6年大于封育型的总效益,但第7年以后其总效益开始小于封育型经营模式的生态效益.     

The impact of landscape design planning on the timber production and financial outputs of a forest plantation in Ireland

Significant expansion has occurred in Ireland's forest estate since the 1950s. However, the design of the monocultural plantations established in the 1950s and 60s is now considered insensitive to local landscapes and re-design intervention and transformation is needed to improve integration into the environment. This case study was carried out in Laracus forest, Co. Donegal. The rotation of all stands in this 581-ha property has reached the final production phase, with coupes scheduled for clearfelling from 2003 to 2015. The implications of forest re-design for both the volume production in the current rotation and the financial return of the current and subsequent rotations were examined. Results indicated a volume loss due to design planning for the current rotation of 5.6% compared to the volume produced under the standard regime. In financial terms, this represents a loss of 4.6%. For the subsequent rotation, a significant financial gain of 22% in net present value was achieved as a result of redesigning the plantation. The overall financial out-turn for the property, when both the current and subsequent rotations were considered, was a 3.4% lower net present value for the design plan than for the standard regime. This result represents a lower impact of design planning in Laracus than most other forest restructuring studies have reported.     

Determination of optimal rotation period for management of lumbering forests in Kenya

This study estimates the optimal rotation period of various tree species in Kenya and applies it in the management of lumbering forests through optimal synchronization of forest plantations to achieve a steady supply to lumbering firms. The optimal rotation period of three tree species, pine, cypress, and eucalyptus, was estimated using data from Kenya Forest Service. A combined application of Chang simple production model and ? Faustmann? model? reveals the optimal biological harvest age is 25 years for pine, 25 years for cypress, and 14 years for eucalyptus. However, introducing the prices and using the Faustmann optimal rotation model at the current market interest rate of 10.5%, the Faustmann rotation age for pine stand will be maximized at 12.67 years, cypress at 23.5 years, and eucalyptus at 38.4 years. The research further indicates significant variability in land expectation value and soil rent of various species and proposes an inclusion of “species” as a variable in forest land valuation. In the conclusion, nonmarket factors affecting the optimal yield were further explained and recommendations on sustainable yield production were suggested.     

On the effect of volatile stumpage prices on the economic attractiveness of a silvicultural transformation strategy

This paper evaluates the economic attractiveness of a silvicultural transformation strategy, focussing on risk, as a result of the volatility of stumpage prices. Based on a situation of a 58-year-old spruce stand [Picea abies (L.) Karst.], which can be found near Freising (Upper Bavaria, Germany), a growth model (silva 2.2) was used to project the stand development. Growth simulations were conducted for a specific transformation strategy, from regular to irregular age structure on the one hand, and for a conservative silvicultural strategy (thinning, clear-cut, reforestation), on the other hand. The transformation strategy was aimed at achieving an uneven-aged stand structure. It was based on early initiation, small-scale regeneration cuts carried out frequently and periodically. The harvests were, therefore, more evenly distributed over the time period analysed. Unlike transformation, even-aged silviculture consisted of relatively strong thinning up to age 68, followed by weak or no interventions up to age 98, the rotation age, aiming to maximise mean value increment. Both strategies were modelled over a time period of 198 years. Based on the growth data, a Monte Carlo model was used to estimate the financial results of both strategies. The stumpage price was assumed as a random variable with a probability density which follows a normal distribution. From the results of 1000 simulations for each strategy, distributions of the net present value (NPV) were calculated. Due to the complexity of the growth model silva, the calculations, being valid not for a forest enterprise but for one single stand, were restricted so that the time for every intervention was fixed, regardless of the stumpage price. Since the revenues produced by transformation were more evenly distributed over time than those achieved by the conservative even-aged strategy, the latter was far more influenced by very low or very high prices at the time of the clear-cuts. This fact caused a much smaller variation in NPV of the transformation. Parallel to this result, the probability of producing a deficit (that is to achieve a negative NPV) was lower for the transformation. The financial effect shown in this study in favour of transformation certainly compensates for a potentially higher risk of storm damage during the transformation treatment.     

Changes in aboveground and belowground properties during secondary natural succession of a cool-temperate forest in Japan

Forest development in temperate regions is considered to be a global carbon sink. Many studies have examined forest development after harvesting or fire from aboveground (e.g., biomass) or belowground (e.g., soil nutrient) perspectives. However, few studies have explored forest development from both perspectives simultaneously in cool-temperate forests in Japan. In this study, we examined changes over 105 years in both aboveground and belowground components during secondary natural succession. The aboveground biomass increased for 50 years and reached a plateau in a 105-year-old stand. The N mineralization rate increased during succession for 50 years, but showed a decline in the 105-year-old stand due to the decrease in the nitrification rate in late succession. The percent nitrification (i.e., relative contribution of nitrification to N mineralization) decreased significantly with increasing forest stand age. The N mineralization rates had significant relationships with N concentrations of the dominant tree foliage and litter fall and with the amount of litter fall N. Meanwhile, other belowground properties (i.e., soil pH, phenol concentration, soil microbial respiration, and litter mass loss) did not show any significant relationship with forest stand age. This may be because the soil at the study sites was heterogeneous and consisted of Cambisols and Andosols, the latter of which originally has high organic matter content, and thus may have buffered the effect of the aboveground development. These results indicate that belowground N dynamics are more closely associated with aboveground development than other belowground properties in these forests.     

Interactive Method for Supporting Forest Owners in Biodiversity Protection Decisions

Voluntary biodiversity protection tools have been adopted for practical use in many countries where non-industrial private forest ownership includes invaluable biodiversity resources. This has created a new kind of decision problem for individual forest owners: they should be able to define their conditions for entering into a biodiversity protection contract including sometimes a predetermined subsidy. This study presents a holding-level method for examining this decision problem. The method is based on utilization of interactive optimization where the possible subsidy has been included in the protection (no treatment) alternative of the examined stand. Generally, interactive optimization means that the landowner pinpoints the best plan by interactively studying and learning the production possibilities of his/her forest holding. Following changes made to the objective function by the forest owner, new solutions are presented for forest owners’ evaluation. If the “No treatments” option is selected in optimization for these areas, the forest owner would benefit more—in the current location of the production frontier and with the current subsidy—from entering into the protection contract than from cutting the specific forest area. In the case study, we demonstrate that the values of the holding-level goals, production possibilities of the planning area and the levels of the subsidy have a significant effect on the optimal decisions relating to biodiversity protection on the stand level.     

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.     

An approach for examining the effects of preferential uncertainty on the contents of forest management plan at stand and holding level

A proper forest planning process includes the assessment of the decision-makers’ preferences concerning the future forest use. For some owners, it may be a difficult task to express their preferences exactly and in the form that is required for planning calculations. This study presents a new kind of approach for analyzing the effects of preferential uncertainty. The approach consists of examination of the differences in the actual decision variables in forest planning, i.e. selected treatments for stands between holding-level forest plans. In example calculations, the preferential uncertainty was examined from three different viewpoints: the uncertainty in the weights of the objective variables; the uncertainty in the partial utility function; and the combination of these two uncertainty sources. One thousand preference realizations were generated for each of these uncertainty sources. More than one treatment schedules are proposed for stands that are affected by preferential uncertainty. These stands were detected from among the resulting set of 1,000 forest plans. With this done, two potential decision-making strategies, an adaptive behavior strategy and a threshold proportion strategy, were applied as guides in decision-making for stands, which have more than one treatment alternative selected in the produced optimal forest plans. The adaptive behavior technique required that the forest owner select one treatment alternative for at least one stand that has more than one proposed treatment alternative. The treatment alternatives having frequencies exceeding the given threshold frequency were all accepted simultaneously in the threshold strategy. The main benefit of the approach is to present the effects of uncertainties in a way that can be easily understood by the actual decision-makers. It is a promising tool for practical decision-making situations because at least Finnish non-industrial private forest owners quite often focus on making stand-level forest management decisions. It is also suitable for examinations of other uncertainty sources such as timber prices or inventory data.     

Planning timber harvest of residual forest stands without compromising bird and small mammal communities in boreal landscapes

Numerous efforts have been invested in designing and configuring residual forest stands in Canadian boreal forest to preserve their overall biodiversity. Now that several landscapes have been partially logged, the next issue in forest management involves the planning of residual forest stand harvesting without compromising wildlife populations. Residual stands can be cut when adjacent regeneration reaches 3 m in height according to current regulations in several Canadian provinces (e.g., Québec, Ontario, Alberta, and British-Columbia). However, little is known on whether such regenerating habitat (RE-3m) can maintain wildlife communities similar to those found in unharvested mature forest (CO). We estimated the relative abundance of small mammals and forest birds in RE-3m and CO habitats and characterized landscape and stand structures. These variables were then compared between the two contrasting successional stages and were used to build habitat use models (HUMs) for 21 species. CO and RE-3m differed with regard to several landscape characteristics and stand structure variables as a result of logging. Snowshoe Hare, Northern Flicker, Alder Flycatcher, Ruby-crowned Kinglet, White-throated Sparrow and Magnolia Warbler were more abundant in RE-3m than CO, while Red-backed Vole, Brown Creeper and Golden-crowned Kinglet exhibited lower abundances in RE-3m. No significant differences in abundance were observed for the 12 other species. Species HUMs were highly significant and explained between 64.3 and 99.1% of the total variability in abundance. Following variance partitioning, stand structure variables accounted for most of the explained variability (54.2%) while landscape characteristics accounted for only 28.7%. No difference in species richness was observed but community evenness was greater in CO than RE-3m. Our results suggest that current regulations may threaten the maintenance of 3 out of 21 censused species for which abundances were significantly lower in regenerating 3 m tall stands. As stand structure explained a large amount of variability in abundance, it should be considered during timber harvest planning in both mature and regenerating stands. Until we know more on whether the current regulations are suitable for maintaining overall biodiversity, our results suggest that some mature forest stands should be maintained within managed landscapes for a complete logging rotation period.