|
|
|
How
to estimate the costs
Costing a farm forestry operation is relatively
simple. All that is needed is a good estimate of the likely
present day costs of doing the job. However, farmers thinking
about establishing a farm forestry operation need to remember
to include all the costs. Establishment costs include ripping,
mounding, planting and seedlings. Once the forest or plantation
is established, money needs to be available for pruning, thinning
and pest control. Finally there are the end costs, including
harvesting and building roads. Farm forestry analyses don’t
usually include land costs, especially when trees are being
integrated into the existing farming landscape. It is assumed
that the landowner owns the land. If land needs to be bought,
the purchase price should be included at the start of the project
and offset at the end by estimating a sale price for it.
Labour inputs and costs are often overlooked but they are very
important because many tasks—for example, pruning—require
labour but little capital. It is important to estimate labour
costs as accurately as possible, or, if that isn’t possible,
to record how much labour will be required. Farmers might not
want to cost their labour, which could be valued at around $15
per hour but including an estimate will allow a farmer to cover
the cost of any unforeseen contract labour that might be needed
during the life of the farm forestry project. Farmers should
also remember to allocate money for buying and maintaining equipment
and machinery. Using farm labour and existing machinery gives
farmers an advantage that might make forestry more profitable
than it would be for other investors. It also saves money. However,
associated costs, however small, should be included in the farm
forestry analysis.
Another cost that is often ignored is the time and resources
taken to access information and gain new farm forestry skills.
Although these costs, known as transaction costs, are sometimes
difficult to value they can have a large effect on the economics
of the project. An obvious transaction cost is that of sourcing
accurate, reliable and up-to-date market information for farm
forestry products and services.
Back to top
|
|
