Using Residual Values to Analyze the Economics of Southern Pine Thinning

Abstract

Abstract Thinning options on southern pine plantations are often evaluated under the implicit assumption that forestland is treated as a profit center, with stumpage as the final product. Stumpage values might not adequately reflect the end-product content and value of trees, however. An indirectmethod, the residual value approach, is an alternative stumpage valuation technique and is illustrated in this paper. This approach values an end product of stumpage (e.g., lumber, sawlogs, or chips) and subtracts conversion and handling costs to arrive at an estimate of stumpage value. Consequently,residual values tend to be directly related to piece size. When timber management regimes are evaluated using residual values, optimal regimes are consistent with results using traditional, direct valuation approaches. Optimal management regimes will tend to have at least one thinning anda rotation age of around 30 years. Since the residual value approach employed in this study recognizes manufacturing, transportation, and harvesting costs, it may provide a more realistic valuation of thinning options, particularly as end products or processing and handling technologies andcosts change. South. J. Appl. For. 11(2): 99-106