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Author Topic: Rotation age in the pnw  (Read 553 times)

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Offline WDH

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Re: Rotation age in the pnw
« Reply #20 on: January 09, 2019, 08:07:54 PM »
Sorry Sir, but determining the ideal rotation age has nothing to do with the region you are from.  It has to do with the cash flows and the economics of what you are growing.  I worked for Weyerhaeuser for 3 decades.  Calculating the target rotation age is not about tree size, but about the highest net present value of the anticipated cash flows.  Tree size is taken into account to determine yield, but is only one factor of several.  It is about bottomline economics and the markets that you are dealing with.  Does not matter what area of the world that you are in, this is how the large forest products companies determine their target rotation age. 
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Offline quilbilly

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Re: Rotation age in the pnw
« Reply #21 on: January 09, 2019, 10:31:12 PM »
Maybe you can explain why region has absolutely nothing to do with it? Pretty sure the region you're in determines what markets you're selling to and what trees you're growing and how fast they grow.

  I understand money is the bottom line, that's not what I am trying to understand. I'll ask the Forester next time I see him or another Forester who used work for em if I bump into them. They may have a market I don't know or explain it in a way that makes sense to me other than, everybody is going small.
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Offline Ianab

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Re: Rotation age in the pnw
« Reply #22 on: January 10, 2019, 02:50:39 AM »
The region will determine what actual numbers get put into the harvesting equation. Along with potential markets, predicted interest rates, taxation considerations etc. 

But the basic equations they use are the same. Now if you punch in different initial variables, you will end up with different rotation schedules, so Doug Fir in the PNW comes out with different numbers to Radiata Pine in NZ, or Teak in Central America. Even a different soil type, or altitude changes things. 

Now early in the harvest window the value of the logs will be increasing rapidly, from basically zero, to "worth harvesting" in just a few years. Wait one more year, and get 10% more value? That's a sound investment. You certainly don't want to harvest too early, and miss out on the good gains you should be making. But if you end up waiting 10 more years to get a 30% increase, that's only ~3% return on investment per year, and for financial investment, it basically sucks. 
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Offline quilbilly

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Re: Rotation age in the pnw
« Reply #23 on: January 10, 2019, 04:02:29 PM »
The region will determine what actual numbers get put into the harvesting equation. Along with potential markets, predicted interest rates, taxation considerations etc.

But the basic equations they use are the same. Now if you punch in different initial variables, you will end up with different rotation schedules, so Doug Fir in the PNW comes out with different numbers to Radiata Pine in NZ, or Teak in Central America. Even a different soil type, or altitude changes things.

Now early in the harvest window the value of the logs will be increasing rapidly, from basically zero, to "worth harvesting" in just a few years. Wait one more year, and get 10% more value? That's a sound investment. You certainly don't want to harvest too early, and miss out on the good gains you should be making. But if you end up waiting 10 more years to get a 30% increase, that's only ~3% return on investment per year, and for financial investment, it basically sucks.

Right I agree %3 is bad, but you're not just getting a 3% return, you're getting that on all your BD ft with an increase in bf of the ten years of growth with no extra labor or permit costs.
 So if you were a Forester is there a specific formula you used or did it change depending on what markets were paying etc? I guess that's what I'd really like to see are hard #'s from someone who might be in the area rather than just hey it makes more money. I just want to see how. For example 38 years = x size.   X= 1 c log at 650mbf and 1 cns at 500mbf for a gross profit of z .
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Offline Ianab

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Re: Rotation age in the pnw
« Reply #24 on: January 10, 2019, 05:26:12 PM »
The foresters involved will have computer models that can take into account as many variables as they can reasonably predict. The modeling tools I've seen are down to the level of seedling grades / soil / climate zone etc, initial and final planting density, pruning regime etc. And from there can estimate not just the predicted volume of wood, but the actual percentage of the various grades, which can then be compared against the value of each specific grade in the available markets. 

So once you have your spreadsheet set up, it's easy enough to run 20 simulations and get predicted returns for each year. (add in the harvest and replant costs of course). Now you have allowed for having both higher value and larger logs. AND you know if the extra wait was worth it. 

Then show those numbers to the accounting types who understand the Present Value and Discount Rate stuff. 

Once they have done those calculations, you will find that it's certainly possible to harvest too early. You get your profit quickest, but it's small due to low volume / low value.  And you will also find that there is a point where you are waiting too long. The value of the trees stops increasing at more than the "Discount Rate". It's not that the trees aren't still putting on value, it's just less value you would gain by selling the trees and investing the money in something else. 

The trick is to have those accurate models of how a stand of trees is going to behave, and that's what the research foresters are collecting with their trial stands, measuring sticks and laptops. 
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Offline BradMarks

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Re: Rotation age in the pnw
« Reply #25 on: January 10, 2019, 05:51:33 PM »
It's about the money, best return, stated many times so far.  Look at the current log market in the PNW, WAY down from this past summer. Why?  One reason for the high prices this summer were from fears that a severe fire season would shut down the woods, making logs hard to come by. It was severe in spots - Southern Oregon, Northern California, but there was not any prolonged closure in most areas. So all the mills bought lots of logs at high prices, and they are still working through that glut, so the current market sucks in comparison. This is mostly opposite of normal as winter logs usually bring higher prices as only those on rock can haul out, decreasing supply. The price swing illustrated is not about rotation age at all, but markets.  Those that can afford to wait right now and feel optimistic that price will rebound will log when it does. One or two years in a rotation age has less impact than market swings.


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