Future crop tree release treatments in neotropical forests – an empirical study on the sensitivity of the economic profitability

Sebastian Gräfe, Claus-Martin Eckelmann, Maureen Playfair, Mike P. Oatham, Ramon Pacheco, Quacy Bremner and Michael Köhl

Forest Policy and Economics, 2020, vol. 121, issue C

Abstract: Silvicultural treatments are a common tool for increasing commercial timber production. Their impact on the growth or mortality of the remaining stand is well researched. This study focuses on the economic aspects of silvicultural treatments in neotropical forests. We have selected liberation treatments and consider them to be investments that are expected to pay for themselves through the additional growth of released trees and corresponding timber prices following a 30-year rotation period. The study is based on empirical data collected on experimental sites of 10 km2 in Belize, Guyana, Suriname, Trinidad and Tobago. To determine the timber price or additional growth required to cover the treatment costs, we used a reverse approach based on net present values. The treatment costs range between US$4.5 and US$8.9 per released tree. The additional growth required per released tree to cover the expenses for silvicultural treatments depends on treatment costs and achievable timber prices and varies from 0.02 to 3.5 m3. Conversely, if a potential increase in growth is assumed, timber prices must be between 34 and 578 US$ m-3 to at least cover the cost of treatments. We found a high sensitivity of profitability related to the additional growth, the timber prices to be achieved, and the discount rate chosen, which significantly increases the financial risk of silvicultural treatments as an investment tool. The decision whether to use silvicultural treatments or not is often solely guided by the expected improvement in tree growth. We, however, show that growth alone is insufficient as a decision criterion. While treatment costs are known when the decision to implement the measures is made, future timber prices and harvesting costs as well as the additional growth actually achieved are subject to uncertainties. These uncertainties have a decisive influence on the economic risk assessment, which is reflected in the choice of the internal interest rate. Our study demonstrates that investments in silvicultural treatments involve a considerable financial risk and that the decision to carry out silvicultural treatments should always be the subject of a thorough investment calculation.

Keywords: Silvicultural treatments; Future crop tree release; Economic analysis; Time study; Liberation fellings; Required additional growth (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:121:y:2020:i:c:s1389934120306559

DOI: 10.1016/j.forpol.2020.102329

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