Optimum Plantation Planting Density and Rotation Age Based on Financial Risk and Return

Authors: Taylor, Randy G.; Fortson, James C.

Source: Forest Science, Volume 37, Number 3, 1 August 1991 , pp. 886-902(17)

Publisher: Society of American Foresters

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Abstract:

A stochastic simulation model was developed to estimate the impacts of site index, planting density, and rotation age on the return and risk of unthinned loblolly pine plantations. Return was estimated as the average present value of an infinite series of rotations for each site, density, and age combination. Risk was approximated as the standard deviation of the present value for each combination. Sources of risk were stumpage rate risk, survival risk, and yield risk. Variability in yield estimates (i.e., yield risk), was the major source of financial risk associated with investments in loblolly pine plantations. Volatility in stumpage rates (i.e., stumpage rate risk), had the least impact on the risk of the investment. For average sites (site index 60 base age 25 years), short rotations are less risky than long rotations. But, as expected, short rotations also tend to have lower returns. Risk averse investors should prefer high planting densities and short rotations. Investors who wish to maximize return alone should select high planting densities with longer rotation ages. Low planting densities (less than 600 stems/ac) are not efficient for sites with site index 50 base 25. For. Sci. 37(3):886-902.

Keywords: Risk analysis; simulation; optimal management regimes

Document Type: Journal article

Affiliations: 1: Professor of Forest Resources/Business Administration, School of Forest Resources, University of Georgia, Athens, GA 30602

Publication date: 1991-08-01

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