Stochastic Log Price, Land Value, and Adaptive Stand Management: Numerical Results for California White Fir

Abstract

Abstract This paper presents an adaptive management formulation for determining the timing and intensity of thinning and the time of clearcut for stands with any age structure and with stochastic log prices. In contrast to previous timber management studies with stochastic prices, the formulation allows the determination of the best time to switch from forestry to another land use or from selection harvesting to plantation forestry. Harvests are determined with a piecewise linear function that relates harvest intensity and stand value. The parameters of the function include its slope, location, and length. Optimal parameter values are determined using stochastic simulation. Delivered log price is a stationary process that is the sum of a deterministic constant and a normally distributed random error. Numerical results are presented for young and mature stands of California white fir [Abies concolor (Gord. & Glend.) Lindl. (Iowiana [Gord.])]. The results include when to terminate forestry and switch land use. The expected time of clearcut is inversely related to the bare land value. The effect of price variation on the time of clearcut depends on land value. For low land values, increasing price variation decreases the expected time of clearcut; for high land values, the effect of price variation is reversed. The results include estimates of the relative economic efficiency of plantation versus uneven-age forestry. The size of trees in the initial stand rather than price variation phys the critical role in determining the relative economic returns. Because the results are dependent on the assumption that the price process is stationary, caution should be used in extending the results beyond the case presented here. For. Sci. 37(5):1224-1238.