Economic Wood Availability and Profitability of Small-Scale Forests in Wanganui District
Degree GrantorUniversity of Canterbury
Degree NameMaster of Forestry Science
New Zealand wood availability forecasts indicate that increases in the future wood availability significantly relies on small-scale forest owners' resources. This "small-scale" resource is poorly understood and comprises a large number of owners. It is questionable how many of these forests are established with consideration of the cost and practicality of harvesting. An improved understanding of the likelihood of this resource ever being harvested is important for understanding future wood supply. The main objective of this study is to answer a fundamental question on how much small scale forest area is economic to harvest. The study aims to estimate the basic stumpage value of the forests at modelled costs and different log price levels, and to analyse the profitability of the small scale forests by looking at the historic rate of return, as well as the net present value (NPV) and internal rate of return on existing and future forest land. The emission trading scheme (ETS) was also taken into account during the analyses and the effects of the ETS on the profitability, optimum age and future wood availability were investigated. The methodology developed for this study uses a forest growth model (Radiata Pine Calculator), Geographic Information Systems, the Visser harvest cost model, and Microsoft Excel. The growth model enables the analysis to be customised to a specific region of interest, while spatial characteristics such as slope and transportation distance of individual forests were taken into account by using GIS. The cost model allows the analysis to be customised to individual forests to some extent although a number of assumptions are made generalising the forests as whole. Developing the overall framework within Excel allows easy analysis of the results and changes to the underlying assumptions. Harvesting and transportation costs are the main drivers in determining the profitability of small scale forests. A significant increase in log prices is required for the existing forests to obtain substantial profit from log production. At current log prices 90% of small-scale forests in the Wanganui District are economically available. The other 10% small blocks on steep sites, have negative stumpage revenues because of high harvesting costs. Additional cashflows from entering the ETS have the potential to generate significant revenue for post-89 forests. However the substantial increases in optimal rotation age are likely to delay the increase in harvest volumes forecast from the small-scale estate.