Integrating Timber Price Scenario Modeling with Tactical Management Planning of Private Forestry at Forest Holding Level

In forest management planning, deterministic timber prices are typically assumed. However, real-life timber prices vary in the course of time, and also price peaks, i.e. exceptionally high timber prices, might occur. If land-owners can utilise the price variation by selling timber with the high prices, they are able to increase their net revenues correspondingly. In this study, an approach is presented to study the timber price variation and its significance in the optimization of forest management. The approach utilizes stochastic timber price scenario modelling, simulation of forest development, and optimization of forest management. The approach is presented and illustrated by means of a case study. It is shown how the degree of uncertainty due to variation in timber prices can be analyzed in tactical forest planning of private forestry, and how the potential benefits of adaptive timber-selling behaviour for a forest landowner can be computed by using the approach. The effects of stochastic timber prices on the choice of forest plan are studied at the forest holding level considering also the spacing and type of cuttings and the optimal cutting order. A forest plan prepared under the assumption of constant timber price very seldom results in optimal forest management. Through studying the effects of stochastic timber prices, forest landowners and other decision makers obtain valuable information about the significance of adaptive timber selling behaviour. The presented methodology can also be used in analysing the land-owners’ economic risks as a function of time-price structure.