Influence of Forestry Practices Cost on Financial Performance of Forestry Investments

• Main Authors: Daniel W. Callaghan, Puskar N. Khanal, Thomas J. Straka, Donald L. Hagan
• Format: Article
• Language: English
• Published: MDPI AG 2019-01-01
• Series: Resources
• Subjects: forestry costs; forestry practices; forestry investments; timberland investments
• Online Access: https://www.mdpi.com/2079-9276/8/1/28

Understanding forestry practices cost is important for predicting the financial outcome of forest management activities. Assessing costs of practices that will be used in the future can be difficult and may result in over or underestimations of financial returns depending on the values used. We used historic real average rates of cost change for the southern United States to assess changes in the values of several loblolly pine plantation management scenarios over time through the use of discounted cash flow (DCF) analysis. Additionally, we analyzed the impact of certain practices cost changes on the financially optimal number of thinnings and rotation age. Findings indicated that declining costs for herbicide site preparation could all but offset the increasing costs of other practices and that a relatively slight increase in timber prices would more than compensate for increasing costs. Also, increasing thinning costs could exacerbate the effects of low sawtimber prices, further decreasing the viability of regimes with multiple thinnings. In the face of stagnant timber prices, the use of operator-select thinnings, and herbicide site preparation could stabilize the long-term financial value of plantation management.