PowerPoint-esitys

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Threshold values for profitable tree breeding in
Finland, societys, private forest
owners and seed producers viewpoints
A MULTILEVEL ANALYSIS
government subsidy
orchard seed producers
So-called practical tree breeding via seed
orchards

• Practical in the sense that basic
  research (incl. e.g. provenance testing) was
  excluded from the assessments
• Practical tree breeding covers app. 83-88 of the
  annual subsidy directed into tree breeding in
  Finland

private forest owners (demanding the orchard seed)
direct relation between the activity and agent
direct interaction between agents
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A MULTILEVEL ANALYSIS can the profitability
conditions be met simultaneously by each agent ?
Main variables to be examined for each agent
government Discount rate (under which the net
present value, NPV is positive) Annual
regeneration area Genetic gain establishment
area for the next-generation seed
orchards Stumpage prices
private forest owner Discount rate Sowing cost
difference (FIM/ha) between orchard and stand
seed Genetic gain Stumpage prices
seed producer Discount rate Establishment
costs Annual management costs collecting costs
of the cones average annual seed crop selling
price of the orchard seed production age
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Theoretical framework
where

• Economic analyses (society)
• cost-benefit analysis, CBA
• a specific shadow pricing procedure

A general profitability formula with NPV set as
decision criterion
Cost data annual book-keepings (between
1973-1996) of the former Foundation for Forest
Tree Breeding and the Forest and Park Service
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Theoretical framework
Financial analysis (private forest owner)
According to neo-classical economics utility
maximization by maximizing net benefit A
specific formula with profitability criterion set
to NPV
Financial analysis (seed producer)
Profitability conditions for a single firm
, where Psf profitability for a single firm q
labour input x other inputs used in
production f(q,x) production function p price
for orchard seed produced according to f() c, z
given prices for inputs q and x, respectively
,
The main focus was to examine the overall
conditions for positive P, and to estimate
whether there are possible economies to scale
still to be exploited (at present generation)
ptb net benefit, FIM/hectare JTtfinancial
value, FIM/ha (assessed by using trend stumpage
price as a unit of measure) of a thinning or
final cut in an improved stand NSn financial
valueof a thinning or final cut in a normal stand
without genetic gains Dp discount factor t1
time (in years) of the first commercial thinning
in an improved stand n1 time of the first
commercial thinning in a natural stand tt time
of the final cut in an improved stand nn time of
the final cut in a natural stand Cg(S) initial
sowing cost (FIM/ha) when using orchard
seed C0(S) initial sowing cost (FIM/ha) when
using stand seed
Cost data direct production costs (incl. e.g.
cone collection, transportation, extraction
costs) between 1993-1997 (Scots pine), and
1992-1996 (Silver birch) totally over 700 cost
observations for Scots pine and over 150 for
Silver birch
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Conclusions present generation, Scots pine seed
orchards
Southern, central and northern Finland
Seed producer Prevailing threshold values for
each variable are attainable, provided that the
government subsidizes the years from the
establishment to the first seed crop
(establishment and annual management)
Society 3 discount rate 8 genetic gain 24
000 ha annual cultivation area (incl. direct
sowing and planting area)
Generates the following environment (i.e. through
financing) for orchard seed production
Through government subsidy orchard seed
production enables
attainable
Private forest owner Especially in southern
Finland direct sowing with Scots pine orchard
seed was profitable with eight per cent discount
rate and seven per cent genetic gain, or with
five per cent discount rate and three per cent
genetic gain (in the latter, sowing cost
difference can be as much as FIM 500/ha)
attainable
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Conclusions next generation, Scots pine seed
orchards
Southern and central Finland
Seed producer E.g. lowest average seed crop (6
kg/ha/year), collection costs of FIM 10 and
discount rate between six1 and eight per cent
resulted in a positive NPV, provided that
government subsidizes the early years (b)
Society 5 discount rate 8 genetic gain 32 000
ha annual cultivation area 500 ha of seed
orchards to be established
attainable (with low risk)
(1 in real terms)
Private forest owner Even better profitability
than in the present generation due to the higher
obtainable genetic gains, provided that the
sowing cost difference (between orchard and stand
seed) does not increase faster than anticipated
attainable (with low risk)
Low risk element refers to the results of
sensitivity analyses
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Conclusions Silver birch, present generation
Southern and central Finland
Seed producer market demand clearly exceeds the
long-run average costs, LAC ? very profitable
production
Society 3 discount rate 15 (South), 12
(Central Finland) genetic gain 1700 ha annual
cultivation area
Private forest owner not relevant due to the
fact that no genuine decision between orchard
and stand seed
attainable
Conclusions Silver birch, next generation
Seed producer profitable seed production
attainable even without government subsidy
Southern and central Finland
Society 4 discount rate 15 (South), 12
(Central Finland) genetic gain 1 700 ha annual
cultivation area
Private forest owner The same as with present
generation
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The End
P.S The original thesis can be copied (an
electronic version, PDF file of 1.52 MB) from
http//ethesis.helsinki.fi/?väitöskirjat
Doctoral dissertations ? Ahtikoski, Anssi. The
profitability of Scots pine (Pinus sylvestris L.)
and Silver birch (Betula pendula Roth)
next-generation seed orchards in Finland