Comparative economic evaluation of different regimes

The NZDFI has developed growth models for selected species based on permanent sample plots in our trial network. This has enabled us to model outputs from three of our different proposed growing regimes, and make a comparative economic appraisal of the three regimes.

 

The approach taken

The approach used to evaluate a conventional radiata pine forestry investment is to discount cashflows to calculate a Net Present Value (NPV) and a projected internal rate of return (IRR) over a rotation. This technique relies on well-established regional radiata pine growth models, plus good long-run market information (log prices).

In the case of durable eucalypts, we have only limited growth models and it is too soon for any market information to be available, so we have taken an alternative approach. We have calculated the required stumpage values per cubic metre (i.e. net returns at harvest) to achieve an 8% internal rate of return (IRR) for each growing scenario.

Evaluation of three NZDFI regimes

The potential economic feasibility of three NZDFI regimes has been evaluated:

(i) peeler poles – 15-25 year rotation (depending on site type)

(ii) peeler/sawlogs – 30-40 year rotation

(iii) permanent forest – no harvest involved.

Data from NZDFI trials on a high and a low productivity site have been used to model potential productivity (total recoverable volumes and average piece size over time) under each regime for both sites. See our Strategic Plan (Section 5) for more details of these parameters under different scenarios.

The economic feasibility for high and low productivity scenarios for each of the three regimes is shown in the table below.

Stumpage values were calculated by estimating forest growing costs against the total recoverable volume predicted by the models across a range of harvest ages.

The table also shows the effect of the Te Uru Rākau ‘One Billion Trees’ (1BT) establishment grant on long-term economic outcomes.