Land Expectation Value to Profit Maximization: Re-Examination of the Faustmann Formula

2013 ◽  
pp. 277-287
Author(s):  
Yaoqi Zhang ◽  
Suman Majumdar
Keyword(s):  
Profit Maximization ◽  
Expectation Value ◽  
Land Expectation Value ◽  
Faustmann Formula

A simple generalization of the Faustmann formula to tree level

2009 ◽  
Vol 39 (4) ◽  
pp. 699-711 ◽  
Author(s):  
S.M. Heshmatol Vaezin ◽  
J.-L. Peyron ◽  
F. Lecocq
Keyword(s):  
Decision Model ◽  
Decision Models ◽  
Tree Level ◽  
Forest Economics ◽  
Expectation Value ◽  
First Order ◽  
Land Expectation Value ◽  
Optimal Harvest ◽  
Northeastern France ◽  
Faustmann Formula

The economic decision model serving as an objective function in forest economics was conceived originally by Faustmann at the stand level. Nevertheless, the tree level seems to be an appropriate scale for analysis, especially for harvesting decisions and certain estimations both at tree and stand levels. However, the Faustmann formula cannot be directly applied to the tree level. The present research has provided certain tree-level formulations of the Faustmann formula, including, in particular, tree expectation value (TEV) and land expectation value (LEV). TEV and tree-level LEV formulas were developed by analyzing the Faustmann formula under deterministic conditions. Unlike previous tree-level decision models presented in the forest economics literature, TEV and tree-level LEV formulas incorporate the expectation value of the land occupied by trees and its variability over time as well as the interaction between trees and their trajectories (cutting age). The proposed formulas were then compared with the Faustmann formula using the first-order condition of optimal harvest age. The TEV and tree-level LEV formulas appeared to be absolutely compatible with the Faustmann formula. The utility of the proposed formulas was then illustrated with application examples, including target diameter, stand expectation value, TEV, LEV, and the value of damage to beech trees or stands in northeastern France.

scholarly journals ECONOMIC PERFORMANCE OF LOBLOLLY PINE STANDS IN SOUTHERN BRAZIL AS A RESULT OF DIFFERENT CROWN THINNING INTENSITIES1

2019 ◽  
Vol 43 (2) ◽  
Author(s):  
Mário Dobner Jr ◽  
Dagoberto Stein de Quadros
Keyword(s):  
Loblolly Pine ◽  
Economic Performance ◽  
Southern Brazil ◽  
Expectation Value ◽  
Economic Output ◽  
Land Expectation Value ◽  
Pine Trees ◽  
Crown Thinning ◽  
Log Price ◽  
Pinus Taeda L

ABSTRACT Approximately 1.6 million hectares of southern Brazil are cultivated with pines, and mainly with the loblolly pine (Pinus taeda L.). More than one third of the stands belong to independent log producers, whose aim is to maximize their economic results. In this study, a thinning experiment was evaluated over a production period of 30 years. The stands evaluated were submitted to three different crown thinning intensities, with an unthinned stand used as a control. The aim of the study was to evaluate economic criteria regarding realistic discount rates and production periods varying between 16-30 years. For the circumstances that were evaluated, 'extreme' and early release from competition of pruned loblolly pine trees lead to the best economic performance (land expectation value = ~36,000 US$ ha-1, i = 3% yr-1). Stands subjected to crown thinnings, independently of intensity, produced three times the economic output of unthinned and unpruned stands. Although the optimal harvest ages, according to the internal rate of return, are between 18-22 years for thinned and unthinned stands, from a long-term perspective (land expectation value) and for the current relationship between log price and size, the optimal economic performance requires that production periods are extended (to 24-26 years) from those currently practised in southern Brazil (15-20 years).

scholarly journals Estimating Land Expectation Value of Smallholder Farmers’ Eucalyptus Woodlot Products in Wogera District, Northern Ethiopia

2021 ◽  
Author(s):  
yordanos sete deresse ◽  
Getahun Abreham Assefa
Keyword(s):  
Smallholder Farmers ◽  
Structured Interview ◽  
Land Allocation ◽  
Urban Landscapes ◽  
Northern Ethiopia ◽  
Cross Sectional ◽  
Expectation Value ◽  
Eucalyptus Plantation ◽  
Crop Land ◽  
Land Expectation Value

Abstract Background: The area of Eucalyptus plantations has expanded greatly and the species dominates many rural and urban landscapes as it suits the limited resources of smallholder farmers, yields higher income than other tree crops and increasing demand for woodlot products. The study conducted in Wogera District within three purposively selected kebele administrations. Smallholder farmers at the study area are converting their crop land to Eucalyptus plantation. Therefore there should need to deal the pushing factors for the allocation of Eucalyptus. This study aims at identifying the factors influencing decision of land allocation for eucalyptus woodlot production, and estimating the land expectation value. Method: Cross sectional data was collected through semi-structured interview schedule. Data analysis employed descriptive statistics and Faustman formula. Results: The results of the household survey revealed that land degradation and neighbor influence are the main factors for smallholders’ land allocation decision for Eucalyptus plantation. Therefore, as per the results, most of the crop land has been converted to Eucalyptus plantation. However, this a rapid land conversion issue made a threat on most farmers in related to losing of indigenous crops so as it leads them to be food insecured. Conclusion: Farmers in the study area are rational in their land allocation for production of either annual or perennial crops including Eucalyptus woodlots. Finally the study recommends government intervention in the separate land management issue is mandatory to make balance in production of both Eucalyptus and crops.

scholarly journals What is the Value of an Existing Forest Stand?

EDIS ◽  
2019 ◽  
Vol 2019 (6) ◽  
pp. 3
Author(s):  
Andres Susaeta ◽  
Chris Demers
Keyword(s):  
Forest Resources ◽  
Forest Stand ◽  
Present Value ◽  
Expectation Value ◽  
Fact Sheet ◽  
Land Expectation Value ◽  
Main Indicator ◽  
Bare Land ◽  
Value Of Cash

Traditionally, the land expectation value (LEV) formula, the present value of perpetual cash inflows of timber revenues minus the present value of cash outflows of costs, has been employed as the main indicator of the value of a forest investment. However, when a forest stand is already established, the LEV approach is incomplete because it applies only to bare land. Thus, it is necessary to determine the value of a property with an existing forest stand. This 3-page fact sheet written by Andres Susaeta and Chris Demers and published by the UF/IFAS School of Forest Resources and Conservation provides the formula to determine the value of an already established forest stand at any stage of its development. This approach, known as the forest value formula, includes the value of the timber and the land. It can be used to compare the value of the stand when it is immediately harvested or when it is economically immature. http://edis.ifas.ufl.edu/fr423

scholarly journals Evaluating the Most Suitable Tree Species Using Land Expectation Value: A Case Study from Plantation in North of Iran

2019 ◽  
pp. 1-8
Author(s):  
Zohreh Mohammadi ◽  
Soleiman Mohammadi Limaei ◽  
Teymoor Rostami Shahraji
Keyword(s):  
Net Present Value ◽  
Timber Production ◽  
Timber Species ◽  
Annual Increment ◽  
Forest Road ◽  
Expectation Value ◽  
Bald Cypress ◽  
Land Expectation Value ◽  
Stumpage Price ◽  
North Of Iran

Plantation in north of Iran is rapidly increasing by local farmers and state but it is not clear which species is most suitable for perpetual timber production. Thus, this study is carried out to evaluate the most suitable timber species among ash (Fraxinus excelsior), elm (Alnus glutinosa), maple (Acer velutinum), oak (Quercus castanifolia), bald cypress (Taxodium distichumin) in north of Iran for evaluation of most suitability using Land Expectation Value (LEV). Data such as wood price at forest road side and variable harvesting cost was collected from secondary souce especially General Office of Natural Resources in Guilan province for a period of 20 years. Average annual increment of different species derived from previous researches. Consumer Price Index (CPI) was used for deflation of stumpage price. Regression analysis was used to predict the stumpage price of different species. Then, the mean price process was determined for different species. Faustmann's formula was used to determine the LEV or Net Present Value (NPV) for a perpetual timber production of different species.  The results showed that the LEV of ash, elm, maple, oak and bald cypress were 2623.883, 4653.042, 4319.9644, 2206.8788, 8064.667 (0.33 US dollar/ m3), respectively. The LEV of bald cypress was the highest, so it can be concluded that this species is the most suitable for timber production.

scholarly journals Evaluating the effects of risk on the economics of juvenile spacing and commercial thinning

1991 ◽  
Vol 21 (9) ◽  
pp. 1390-1400 ◽  
Author(s):  
William J. Reed ◽  
Joseph Apaloo
Keyword(s):  
Net Present Value ◽  
Fire Hazard ◽  
Fire Risk ◽  
Economic Benefits ◽  
Present Value ◽  
Expectation Value ◽  
Commercial Thinning ◽  
Land Expectation Value ◽  
Optimal Rotation ◽  
Rotation Age

The temporarily increased fire hazard that is believed to result from the process of thinning is included in a single-stand model for assessing the economic benefits of juvenile spacing. Formulas for the expected net present value and the land expectation value are given along with methods for determining the age of financial maturity and the optimal rotation age. A numerical example is given to illustrate the degree of loss due to the increased fire risk. The problem of commercial thinning when the risk of fire is present is addressed using continuous-time models. It is shown how, when the fire hazard is exogenous to the thinning activity, the problem reduces to one of deterministic optimal control with the discount rate adjusted upward by an amount equal to the fire hazard rate. In the case when the fire hazard increases whenever thinning is taking place, it is shown that in general the optimal thinning policy is qualitatively different from that which is optimal in the no-risk case and involves periods of thinning at the maximum rate interspersed with periods of no thinning activity.

A method to evaluate the option of storing carbon in your forest

2010 ◽  
Vol 40 (11) ◽  
pp. 2243-2247 ◽  
Author(s):  
Paul C. Van Deusen
Keyword(s):  
Forest Management ◽  
Financial Incentives ◽  
Forest Products ◽  
Decision Tool ◽  
Management Options ◽  
Simple Method ◽  
Expectation Value ◽  
Land Expectation Value ◽  
Financial Decision ◽  
Business As Usual

Managing the forest to store carbon is a relatively new concept. Various regional greenhouse gas initiatives and new Federal legislation are providing financial incentives for forest owners to manage for carbon in addition to other forest products. These incentives are intended for landowners who engage in activities that go beyond business as usual practices. Managing for carbon will likely involve foregoing other investment alternatives and increasing rotation lengths. The analysis approach demonstrated here provides a relatively simple method for an owner to compare traditional forest management and regular harvests with letting the trees grow to accumulate more carbon in the forest. Several financial decision statistics are considered and demonstrated with examples. A derivative of land expectation value, called rotation equivalent value, is shown to be a useful decision tool for comparing carbon storage with other management options having different rotation lengths.

Economic Aspects of the Forest Regeneration Delay Decision

1985 ◽  
Vol 9 (2) ◽  
pp. 91-94 ◽  
Author(s):  
Thomas J. Straka ◽  
James E. Hotvedt
Keyword(s):  
Real World ◽  
Forest Regeneration ◽  
Forest Stand ◽  
Economic Aspects ◽  
Expectation Value ◽  
Land Expectation Value ◽  
Bare Land ◽  
Bare Land Value ◽  
The Cost ◽  
Delay Decision

Abstract Regeneration lag, the cost resulting from a delay in reestablishment of a forest stand, represents an important opportunity cost̶the cost of the foregone opportunity to grow timber over the period of the delay. The land expectation value (Le) criterion is used to evaluate the costs associated with one-time-only and perpetual lags. Significant decreases in wealth, or bare land value, were found using a simplified example with real-world cost and price data. Changes in required land bases resulting from regeneration delays were also reviewed. The additional land requirements resulting from scheduled delays in regeneration can be costly.

Sign in / Sign up

Export Citation Format

Share Document