Forestry, Part 1

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AGEC/FNR 406
LECTURE 29
30-year old Loblolly Pine plantation
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Forests - characteristics

• 1. Renewable
• 2. Interactive
• 3. Common, private, or public property
• 4. Benefits include
• Private goods
• Public goods

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Economic Analysis

• Same principles as fishery
• Efficiency achieved where MC MB
  IFproperty rights are structured to allow
  markets to capture ALL costs benefits
  (including social) This assumption is
  rarely met.
• TR P Q
• Q determined from growth function
• Price determined by market for some outputs

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Growth Function (logistic) output (Q) wood
input (X) time (waiting)
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MP and AP - definitions

• Marginal Product (MP) periodic annual increment
  (PAI) marginal change in volume ?Q/?X
• Average Product (AP) mean annual increment
  (MAI)
• total volume/total input Q/X
• (If managing for perpetual physical volume only,
  then find maximum MAI)

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Growth output as a function of time
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(No Transcript)
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Rotation length - definition

• Period of time a given area of timber (stand or
  individual tree) is held, i.e. time between
  planting or natural regeneration, and harvesting

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Sequence of timber rotations (Rt) from given
tract of land
Time line
R1
R2
Rn
Harvest R1
Harvest R2
Harvest plant
Harvest plant
Harvest plant
Plant R2
Plant R1
Plant R3
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Optimal rotation varies by owner category

• Households - utility maximizers
• Forest products firms - profit maximizers
• Public - multiple uses, utility maximizers
• Single age/species stand vs. multiage,
  multispecies stand very different analysis
  required.

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Rotation based on physical product only two
choices

• 1. Choose rotation length to maximize volume over
  one rotation
• optimal length where Q is at maximum
• 2. Choose rotation to maximize volume in
  perpetuity optimal length is where MAI is at
  its maximum (see Table11.2 in text, referred to
  as culmination of MAI)

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Economic efficiency criteria

• 1. Static efficiency
• Maximize net benefits of one optimal rotation
• 2. Dynamic efficiency
• Maximize net benefits from continuous series of
  rotations, where the net benefits from future
  rotations are discounted back to present value
  terms.

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Key economic insightnet benefits are maximized
where

• NB is maximized, i.e.
• where TB - TC is greatest
• where MC MB (same thing!)
• Economic criteriamaximize net benefit
  (static)maximize present value of NB (dynamic)