The economics of growing short rotation coppice in the uplands of mid-Wales and an economic comparison with sheep production

Abstract

There are over 900 000 ha of upland agricultural land in Wales that might be used for growing short rotation willow coppice (SRC). Current land-use is primarily sheep production, and there is much uncertainty surrounding future livestock subsidies in these areas. Recent proposals have indicated a potentially large market for wood chip in the form of a wood powered electricity plant proposed for mid-Wales. Using a spreadsheet model this paper evaluates the economics of growing short rotation coppice in the uplands and compares the returns (in the form of Net Present Values) with sheep farming, over 25 years. Various options are considered: liming at establishment, chip price, yield of SRC and influence of discount rate. Currently sheep farming produces far greater profits than SRC (NPV £848 ha −1 compared to £5155 ha −1). This is based solely on subsidy, and when all subsides are removed SRC becomes more profitable than sheep farming at a chip price of £40 odt −1 and a yield of at least 6 odt ha −1 yr −1. At lower chip prices, £35 odt −1, a yield of 8 odt ha −1 yr −1 is needed to give greater incomes than that available from sheep. Proposed discounted subsidies for SRC have been calculated based on chip price and yield, and vary from £2199 ha −1 to £4858 ha −1, compared to the current sheep subsidy of £4190 ha −1. We conclude that the future of SRC in the uplands is dependent on future sheep subsidy levels and the wood chip market, but a yield of at least 8 odt ha −1 yr −1 is acceptable within these other constraints.