Evaluation of an integrated plantation forestry and beef production system

Abstract

The profitability of timber plantations and combined timber and grazing enterprises were compared to conventional grazing. Scenarios were considered at two sites (one near Kingaroy and one near Nambour) where hardwood plantation forests have been established. At each site a number of contrasting variables were considered. These were: (1) plantation rotation lengths (20, 25 and 30 years); (2) plantation establishment costs (high and low); and (3) prices paid for the timber at harvest (high and low stumpage price). A spreadsheet-based investment analysis tool was used to compare these scenarios. The marginal NPV (net present value) and marginal IRR (internal rate of return) were calculated to indicate the difference in return between the traditional land use of grazing and the introduction of plantation hardwood trees into the traditional just grazing system.
Marginal internal rate of return, which is a measure of the marginal return to the extra funds invested, ranged from 0.46% under the most pessimistic option without cattle, to 10.7% under the most optimistic option with cattle, at the Kingaroy site, and from 2.8% to 13.3% under contrasting options at the Nambour site. The more profitable scenarios occurred when planted forests were coupled with cattle grazing systems. The internal rate of return and net present value were particularly sensitive to the price received for the final product when the trees are harvested. Engineered wood products may provide a future high-value option for the hardwood plantation resource and revenues from commercial thinning may be brought forward if an existing technology (i.e. spindle-less lathe technology) is taken up by industry. Expansion of hardwood plantation forests could help meet the increasing demand for hardwood products in Australia if investments in plantation forests are made. The scenarios considered here demonstrate that there is potential for profitable agroforestry systems in the two regions where plantation forests have been successfully established.