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How
to estimate the returns
An important reason why farmers invest in
revegetation and forest management is for financial reward.
Financial rewards may come in many forms and some are difficult
to measure, or have ill-defined market values.
Estimating the effect of trees on the
agricultural return
When planting out a block or belt of forest,
an estimate of grazing returns from the site can be included
in the analysis. Grazing under a forest might provide valuable
off-shears shelter or act as a nursery paddock for calving cows.
The areas between belts of trees may benefit from shelter and
yield greater grazing revenue. These are direct returns from
the trees to the grazing enterprise. A grazing gross margin
can be used if grazing under the trees is still considered part
of the overall property’s enterprise.
In southern Australia, grazing returns under trees can be estimated
from the crown cover of the trees, and therefore from the amount
of light reaching the pasture (see the graph below). Other agricultural
returns might include cropping or hay production in the early
years. The value of a good shelter block might be accounted
for as an increase in lambing percentages or a reduction in
stock losses. Most farmers could put a reasonable value on these
returns. It is more difficult to try and predict the affect
of shelter on wool, milk or meat production.
The relative carrying capacity of pastures growing under a canopy
of pine in southern Australia is shown in the graph below.
Source: The Farmer’s Forestry,
Multipurpose forestry on Australian farms. Reid and Stephen
(2001)
Estimating the value of other benefits
from trees
There have been many attempts at estimating
the economic value of the environmental benefits of trees. One
report from the Murray Darling Basin titled, Cost-sharing for
on-ground works, estimated the returns farmers could expect
from planting trees on one hectare on the Liverspool Plains
where dryland salinity is an important issue. The estimated
returns are:
• $10.00 per hectare per year from increased production
• $5.00 per hectare per year from lowered water table benefits
• $2.00 per hectare per year from reduced soil erosion
• $5.00 per hectare per year from increased land values
• $4.00 per hectare per year from increased amenity values.
The environmental benefits provided by trees include salinity
and erosion control, improved wildlife habitats, aesthetic improvements
and land values. These might be difficult for a farmer to value,
unless there are buyers who are prepared to fund revegetation
for these benefits. A project that is eligible for up-front
funding because of its environmental values will be cheaper
to establish. By using this lower cost in the analysis, the
farmer is effectively accounting for the sale of environmental
values. Any products sold from the site in later years would
be more profitable because of the grant received at the start.
Estimating timber returns
Estimating the returns from timber is difficult
due to production and market uncertainties. But any information
gained from measuring trees and talking to possible purchasers
is extremely helpful in making a good guesstimate.
Timber is sold by volume and its measurement is expressed in
cubic metres (m3)—1 metre x 1 metre x 1 metre = 1 m3. In
any market, there will be quality grades that have different
values and possibly different risks. A high quality sawlog might
be valued at $80.00 per cubic metre as it stands in the forest,
whereas a pulp log may be worth only $5.00 per cubic metre.
A sawlog can always be sold for pulp if the sawlog market evaporates,
but pulp cannot be converted back to sawlogs.
Timber prices are quoted as mill door prices or as stumpages.
The mill door price accounts for the costs of harvesting and
transporting the log to the mill but the stumpage price does
not—it represents the return to the grower.
To calculate stumpage prices from a mill
door price
1. Deduct haulage costs from the mill door
to the stump for each product. Different products go to different
mills—for example, pulp logs to the pulp mill and sawlogs
to a sawmill. Average haulage costs are:
• $0.10 per kilometre per cubic metre on good sealed roads
• $0.20 per kilometre per cubic metre on good gravel roads
• $0.40 per kilometre per cubic metre on farm tracks.
2. Deduct harvesting and other related costs. Some average figures
for harvesting are:
• Pine $14.00–$18.00 per cubic metre
• Eucalypts $17.00–$20.00 per cubic metre
An additional cost of $10.00–$20.00 is required to cover
snigging, sorting and loading.
Harvesting costs increase as volumes decrease, access becomes
more difficult and the slope increases.
3. Calculate the stumpage value for each product type
Example
If:
• The mill door price for pruned butt logs is $100.00 per
cubic metre.
• The haulage costs for 50 kilometres on good sealed road
is $0.10 per kilometre
• The haulage costs for 15 kilometres of gravel road is
$0.20 per kilometre
• The harvesting and loading costs are $25.00 per cubic
metre
Then:
The stumpage price = 100 – (50 x 0.10)
– (15 x 0.2) – 25 = $67 per cubic metre
To determine the value of an individual tree or forest, it is
necessary to know, or estimate, the volume of product that can
be sold into each product category.
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