Incorporating financial analysis into timber harvest scheduling models

A financial analysis was developed and adapted to a forest products firm’s timber harvest scheduling model in an attempt to increase its net present value of harvest returns, using alternative harvest criteria. The firm’s original harvest scheduling model was used as a control model for the study. A net present value financial analysis was developed for this model that represented the firm’s current financial management and taxation policies. A second model was developed that utilized the same model structure and solution technique, but a different harvest criterion consistent wit the simple financial maturity concept. A third model was also developed that utilized the same financial maturity harvest criterion, while simultaneously considering intermediate harvests in the form of one commercial thinning over the life of a stand.

A series of eight management alternatives representing different combinations of allowable cut levels and harvest flow constraints was developed and tested using each of the scheduling models. The use of the second and third scheduling models resulted in an increase in net present value of harvest returns over a fixed planning horizon for each management alternative considered. In addition, the use of these two models eliminated any severe depletion of economically mature timer inventories, while maintaining a sustained flow of harvests. Thus, by using a marginal value approach to the scheduling of timber harvests, the firm’s timber capital was used more efficiently in comparison to its original harvest criterion.