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Solid timber recovery and economics of short-rotation small-diameter eucalypt forestry

This report was prepared for Future Forests Research Ltd (FFR) by Scion.

Authors:

Dean Satchell, Sustainable Forest Solutions, R.D. 1 Kerikeri, Northland 0294. +64 9 4075525

James Turner, Scion, Private Bag 3020 Rotorua 3010. +64 7 3435899

Date: June 2010

Appendix 1: Assumptions in Discounted Cash Flow Analysis
Appendix 2: Prices and values of timber in New Zealand used for estimating board prices
Appendix 3: Timber grading
Appendix 4: Sawmilling methodology
Appendix 5: Glossary of terms
Spreadsheet 1: Kaingaroa Compartment 1194 E. regnans economic value (Microsoft Excel macro-enabled workbook 3.6 MB)
Spreadsheet 2: Optimal rotation and stocking for E. regnans (Microsoft Excel macro-enabled workbook 864 KB)

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Appendix 1: Assumptions in Discounted Cash Flow Analysis

All prices are G.S.T. exclusive.

Two spreadsheets are available:

  1. Kaingaroa Compartment 1194 E. regnans economic value
  2. Optimal rotation length and stocking for E. regnans

Economic Assumptions

The discounted cash flow (DCF) analysis of (i) the stand used in the sawing study and (ii) hypothetical stands thinned to different stockings was prepared using the following data:

  1. Discount rate of 8.0% per year.
  2. Establishment cost of $1.80/ tree3.
  3. Thinning cost of $0.70/ tree4.
  4. Harvesting, de-barking and truck loading costs of $28 / t for pulp logs.
  5. Harvesting, de-barking and truck loading costs of $57/ m3 for sawlogs.
  6. Cartage costs of $15/ t for pulp logs.
  7. Cartage costs of $37/ m3 for saw logs transported to the sawmiller/wholesaler5.
  8. Sawmilling cost of $80/ hour, which includes a sawmill operator and one helper.
  9. Eucalypt pulpwood price $62/ t gross at mill gate6.
  10. A tonne to m3 conversion of 1.09 t/ m3 based on stand data.
  11. An annual land rental of $150/ha/yr. This was based on the average land value in Kaingaroa, expressed as an annuity.
  12. An annual cost of $80/ha/yr. This includes forest health, property maintenance, security, insurance, forest management, administration and rates costs for typical forest stands.

3 Based on an estimated cost for eucalypt plantation establishment of $2000 per ha, from land preparation until the end of the second year, planted at 1100 SPH (B. Poole pers. comm.).
4 Turner et al. (2008).
5 Agrifax "Regional Log Price and Cost Report May-2010" North Island log cartage cost for 100 km to sawmill on flat terrain.
6 Mark Self, Timberlands Ltd., pers. comm.

Table A 1.1: Estimated board prices for sawn timber at wholesaler gate7.

Size Grade Price ($/lm)
air-dry
Price ($/lm)
kiln-dry
Price ($/lm)
profiled
150 mm × 25 mm Select 3.50 4.06 5.56
150 mm × 25 mm Standard 3.00 3.56 5.06
150 mm × 25 mm High-feature 2.85 3.41 4.91
150 mm × 25 mm Clear cuttings 30-59 cm 2.25 2.81 4.31
150 mm × 25 mm Clear cuttings 60-89 cm 2.50 3.06 4.56
100 mm × 25 mm Select 2.30 2.67 4.17
100 mm × 25 mm Standard 2.00 2.37 3.87
100 mm × 25 mm High-feature 1.90 2.27 3.77
100 mm × 25 mm Clear cuttings 30-59 cm 1.50 1.87 3.37
100 mm × 25 mm Clear cuttings 60-89 cm 1.70 2.07 3.57
75 mm × 25 mm Select 1.70 1.98 3.48
75 mm × 25 mm Standard 1.50 1.78 3.28
75 mm × 25 mm High-feature 1.40 1.68 3.18
75 mm × 25 mm Clear cuttings 30-59 cm 1.10 1.38 2.88
75 mm × 25 mm Clear cuttings 60-89 cm 1.30 1.58 3.08
50 mm × 50 mm Select 2.30 2.67 4.17
50 mm × 50 mm Standard 2.00 2.37 3.67
50 mm × 50 mm High-feature 1.90 2.27 3.77
50 mm × 50 mm Clear cuttings 30-59 cm 1.50 1.87 3.37
50 mm × 50 mm Clear cuttings 60-89 cm 1.70 2.07 3.57

Fillets $800 per m3, cut to length.

7 Values given for air-dry timber (Table A1.1) are based on equivalent timber available in the New Zealand market. Cost for kiln drying is $150 /m3, assuming there is no transport costs of air-dry timber to kiln. Machining to profile, docking and grading cost is $1.50/ l m.

Regime Assumptions

For the economic analysis of the stand used in the sawing study we assumed that the stand was planted at 1100 stems per ha and thinned at age 10 to 440 stems per ha to give a final crop stocking at age 18 of 400 stems per ha.

For the economic analysis of the hypothetical stands thinned to different stockings we assumed the stands were planted at 1130 stems per ha and thinned at age 10 to their final crop stocking.

Volume, Taper and Growth Model Assumptions

For economic analysis of the stand used in the sawing study:

  1. DBH for all trees measured at age 16 were increased by 8.8% to give estimated DBH at age 18.
  2. Tree heights at age 18 were estimated using the age 18 DBH and an estimated relationship between tree DBH and height from 31 plot trees.
  3. Tree volume at age 18 was estimated using DBH and height data in E. regnans volume equation V464.
  4. Log SED for 3.3 m log lengths from a 0.3 m stump were estimated using E. regnans taper equation T464.
  5. Log volume was estimated using the integrated form of the E. regnans taper equation T464.
  6. Logs were assigned to waste, pulp or sawlog grade based on minimum log SED and the level of tree malformation and sweep assessed at age 16: (i) Waste logs had an SED less than 5 cm; (ii) Pulp logs had an SED less than 25 cm, and a sweep score of 1 or 2, or a malformation score of 18; (iii) Sawlogs had an SED of 25 cm or greater, a sweep score of 3 or more and a malformation score of 2 or more.

8 The sweep and malformation scores are from 1 to 9 with 1 being worst.

For economic analysis of the hypothetical stands thinned to different stockings:

  1. Stand mean top height (MTH), stocking, basal area (BA) and volume were estimated using the E. fastigata growth model calibrated with data from a Central North Island E. regnans stand; stocking of 1078 stems per ha, BA of 11.05 m2/ ha and mean top height of 11.8 m. An E. fastigata growth model was used because of two limitations with the E. regnans growth model9: (i) it was developed using data from stands less than 15 years old; (ii) it did not include a mortality function.
  2. Because a diameter distribution equation was not developed for E. regnans we carried out the hypothetical stand analysis using the stand average tree. The stand average tree height and DBH were calculated from the E. fastigata growth model MTH, and BA and stocking, respectively.
  3. Stand average tree volume was estimated using E. fastigata volume equation V276.
  4. Stand average tree SED at 3.3 m intervals up the stem from a 0.3 m stump height were estimated using E. fastigata taper equation T276.
  5. The volume of logs in the stand average tree were estimated using the integrated form of the E. fastigata taper equation T276.
  6. Logs were assigned to waste, pulp or sawlog based on minimum log SED: (i) Waste logs had an SED less than 5 cm; (ii) Pulp logs had an SED less than 25 cm; (iii) Sawlogs had an SED of 25 cm or greater.
  7. Waste logs had no value and pulp logs were valued as above.
  8. Sawlog value per m3 was estimated based on the established relationship between log SED and value of timber in the log from the sawing study (conversion return); log value = -49.5 + 833.7*SED, where SED is in m. For logs greater than 43 cm SED we assumed the log value was constant; $309 per m3.

9 The DOS implementation of the E. regnans growth model (Hayward 1988) was kindly made available by Kevin Maloney.


Disclaimer: This report has been prepared by New Zealand Forest Research Institute Limited (Scion) for Future Forests Research Limited (FFR) subject to the terms and conditions of a Services Agreement dated 1 October 2008.The opinions and information provided in this report have been provided in good faith and on the basis that every endeavor has been made to be accurate and not misleading and to exercise reasonable care, skill and judgement in providing such opinions and information. Under the terms of the Services Agreement, Scion's liability to FFR in relation to the services provided to produce this report is limited to the value of those services. Neither Scion nor any of its employees, contractors, agents or other persons acting on its behalf or under its control accept any responsibility to any person or organisation in respect of any information or opinion provided in this report in excess of that amount.

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