Potential for Koa improvement in Hawaii · Financial analysis of a koa plantation • Started with...
Transcript of Potential for Koa improvement in Hawaii · Financial analysis of a koa plantation • Started with...
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Potential for Koa improvement in Hawaii
Nick Koch
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Why is there little private investment in koa in Hawaii today ?
• Reasons for lack of investment
• Market forces in Hawaii wood supply
• Economic aspects of koa planting
• Example of koa planting cost
• Opportunities for koa forestry based on research
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Lack of investment arises from:• UNCERTAINTY coupled with
– Long term crop 50-60? year rotation– Unknown merchantable productivity– High startup cost
• Lack of incentive to invest in forestry – Some tax incentives– Some cost share programs (with strings)
• Availability of existing material– Existing old koa wood is of high quality– Alternatives are attractive outside Hawai’i
• Strong demand within state– Demand is relatively inelastic – price independent
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Current RETAIL prices
Koa: GreenDry
Select: 4/4 $13/bf $14/bfSelect 8/4 $15/bf $17/bfPremium selects 8/4 $18/bf $20/bf
Qtr Sawn add $2.00 $20/bf $22/bfShorts, narrows and commons 3’-5’ $9/bf $10/bf
Upper grade 8/4 3’-6’ 7’+ DryingSelect and better slabs (16” & Wider) $25/bf $35/bf $2/bfSelect and light curl 2A $25 $30 $1/bfMedium Curl 3A $30 $35 $1/bfPremium curl/instrument4A $41 $50 $1/bfPremium curl/instrument 5A $57 $70
$1/bfFor 4/4 deduct 20%
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Current RETAIL prices
Koa: GreenDry
Select: 4/4 $13/bf $14/bfSelect 8/4 $15/bf $17/bfPremium selects 8/4 $18/bf $20/bf
Qtr Sawn add $2.00 $20/bf $22/bfShorts, narrows and commons 3’-5’ $9/bf $10/bf
Upper grade 8/4 3’-6’ 7’+ DryingSelect and better slabs (16” & Wider) $25/bf $35/bf $2/bfSelect and light curl 2A $25 $30 $1/bfMedium Curl 3A $30 $35 $1/bfPremium curl/instrument4A $41 $50 $1/bfPremium curl/instrument 5A $57 $70
$1/bfFor 4/4 deduct 20%
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Koa log price comparison
Source: ITTO ANNUAL REVIEW AND ASSESSMENT OF THE WORLD TIMBER SITUATION 2009
• Koa vs. teak (FOB – harbor)– Koa = $ 4.5 / bf c. 1990’s & $ 5 in 2009
– Conversion: 200 bdft/m3
Koa
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Big leaf mahogany & African mahogany vs. Koa
Source: ITTO ANNUAL REVIEW AND ASSESSMENT OF THE WORLD TIMBER SITUATION 2009
Koa
Koa
Cites App II listing Nov/03
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Macro: North American wood balance 1990-2006
Source: FAO State of the World’s Forests 2009
• American consumption dependent on imports since 1992
• North America net importer since 2003
• American demand has outpaced supply for last 15+ years
• Continued dependence on imports in spite of economic downturn
• As emerging markets increase domestic use of raw materials, we will need to find local sources of wood to satisfy our needs
Spotted owl controversy
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Uncertainty
Genetic variability of heartwood from 15 year old scarified koa stand
- There is still a long way to go in research!
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Financial analysis of a koa plantation
• Started with a known cost of establishment– $ 2,300 / ac – everything included
• Added several productivity values– Calculated NPV of future harvest
– Focus on merchantable wood volume
– Used current koa stumpage values + 1% real price appreciation/annum
• Included cattle land values for comparison
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
40 50 60 70 80
NPV
(USD
)
Rotation (years)
NPV of planted koa forest in former pasture based on rotation length and productivity
Planting cost
MAI 2 m3/ac
MAI 3 m3/ac
MAI 4 m3/ac
MAI 5 m3/ac
cattle @ $15
cattle @ $ 20
Cattle @ $25
MAI = 5m3 /ac/yr1000 bdft/ac/yr
MAI = 4 m3 /ac/yr800 bdft/ac/yr
MAI = 3 m3 /ac/yr600 bdft/ac/yr
MAI = 2 m3 /ac/yr600 bdft/ac/yr <Establishment to yr 2 cost>
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How can research help?
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
40 50 60 70 80
NPV
(USD
)
Rotation (years)
NPV of planted koa forest in former pasture based on rotation length and productivity
Planting cost
MAI 2 m3/ac
MAI 3 m3/ac
MAI 4 m3/ac
MAI 5 m3/ac
cattle @ $15
cattle @ $ 20
Cattle @ $25
MAI = 5m3 /ac/yr1000 bdft/ac/yr
MAI = 4 m3 /ac/yr800 bdft/ac/yr
MAI = 3 m3 /ac/yr600 bdft/ac/yr
MAI = 2 m3 /ac/yr600 bdft/ac/yr <Establishment to yr 2 cost>
Shorten rotation
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
40 50 60 70 80
NPV
(USD
)
Rotation (years)
NPV of planted koa forest in former pasture based on rotation length and productivity
Planting cost
MAI 2 m3/ac
MAI 3 m3/ac
MAI 4 m3/ac
MAI 5 m3/ac
cattle @ $15
cattle @ $ 20
Cattle @ $25
MAI = 5m3 /ac/yr1000 bdft/ac/yr
MAI = 4 m3 /ac/yr800 bdft/ac/yr
MAI = 3 m3 /ac/yr600 bdft/ac/yr
MAI = 2 m3 /ac/yr600 bdft/ac/yr <Establishment to yr 2 cost>
Incr
ease
pro
duct
ivit
y
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
40 50 60 70 80
NPV
(USD
)
Rotation (years)
NPV of planted koa forest in former pasture based on rotation length and productivity
Planting cost
MAI 2 m3/ac
MAI 3 m3/ac
MAI 4 m3/ac
MAI 5 m3/ac
cattle @ $15
cattle @ $ 20
Cattle @ $25
MAI = 5m3 /ac/yr1000 bdft/ac/yr
MAI = 4 m3 /ac/yr800 bdft/ac/yr
MAI = 3 m3 /ac/yr600 bdft/ac/yr
MAI = 2 m3 /ac/yr600 bdft/ac/yr <Establishment to yr 2 cost>
Decrease startup costs (or increase incentives)
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0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
40 50 60 70 80
NPV
(USD
)
Rotation (years)
NPV of planted koa forest in former pasture based on rotation length and productivity
Planting cost
MAI 2 m3/ac
MAI 3 m3/ac
MAI 4 m3/ac
MAI 5 m3/ac
cattle @ $15
cattle @ $ 20
Cattle @ $25
MAI = 5m3 /ac/yr1000 bdft/ac/yr
MAI = 4 m3 /ac/yr800 bdft/ac/yr
MAI = 3 m3 /ac/yr600 bdft/ac/yr
MAI = 2 m3 /ac/yr600 bdft/ac/yr <Establishment to yr 2 cost>
Decrease startup costs (or increase incentives)
Eucalyptus grandis on sugar land
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Wait where did that $ 2,300 come from?
• 6 years of planting koa in Volcano on behalf of Kamehameha Schools
• Approximately 350 acres of koa plantation to date
• Known problems– Acacia psyllid
– Stem form
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Establishment costs – Koa to 1.5 yrActivity $/hour trees/hour $/tree $/acre $ / project
Spot cultivator $175 360 $ 0.49 $211.46 $ 21,145.83
Mech pp spray $115 870 $ 0.13 $57.50 $5,750.00Chem 0.6 42 $25.20 $2,520.00
$82.70 $8,270.00
Planting $35 60 $ 0.58 $253.75 $ 25,375.00 kilo/hr
Seed collection $35 0.25 $0.03 $ 12.18 $ 1,218.00 cost per kilo $ 140.00
Seedlings $1.20 $522.00 $ 52,200.00
$/oz oz/treeFertilizer 1 $35.00 133 $ 0.26 $114.47 $ 11,447.37
10-30-10 @ $ 21 $0.026 4 $ 0.11 $45.68 $ 4,567.50 $ 0.37 $160.15 $16,014.87
Fertilizer 2 $35.00 133 $ 0.26 $114.47 $ 11,447.37 11-52-00 @ 6 oz/tr $0.03 4 $ 0.13 $55.68 $ 5,568.00 $ 25.6/bag $ 0.39 $170.15 $17,015.37Fertilizer $ 0.76 $ 330.30 $ 33,030.24
Spray 1 $35 87 0.40 $175.00 $ 17,500.00 Chem $ 42.00 0.25 $ 0.02 $10.50 $1,050.00
$ 0.43 $185.50 $18,550.00Spray 2 $35 87 0.40 $175.00 $ 17,500.00
Chem $ 42.00 0.25 $ 0.02 $10.50 $1,050.00$ 0.43 $185.50 $18,550.00
Spray 3 $35 87 0.40 $175.00 $ 17,500.00 Chem $ 42.00 0.25 $ 0.02 $10.50 $1,050.00
$ 0.43 $185.50 $18,550.00Spray 4 $0 87 0.00 $0.00 $ -
Chem $ - 0.25 $ - $0.00 $0.00$ - $0.00 $0.00
Post Competition control $ 1.28 $ 556.50 $ 55,650.00
Singling 1 $35.00 109 $0.32 $139.68 $13,967.89Singling 2 $35.00 109 $0.32 $139.68 $13,967.89Singling 3 $35.00 109 $0.32 $139.68 $13,967.89Singling $0.96 $419.04 $41,903.67
Grand totals $5.30 $2,387.93 $238,792.74
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Establishment costs – site & plants
Activity $/hour trees/hour $/tree $/acre $ / project
Spot cultivator $175 360 $ 0.49 $211.46 $ 21,145.83
Mech pp spray $115 870 $ 0.13 $57.50 $5,750.00
Chem 0.6 42 $0.06 $25.20 $2,520.00
$82.70 $8,270.00
Planting $35 60 $ 0.58 $253.75 $ 25,375.00
kilo/hr
Seed collection $35 0.25 $0.03 $ 12.18 $ 1,218.00
cost per kilo $ 140.00
Seedlings $1.20 $522.00 $ 52,200.00
$2.36 $1,024.59 $ 102,458.83
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Establishment costs – fertilizer
Activity $/hour trees/hour $/tree $/acre $ / project
$/oz oz/tree
Fertilizer 1 $35.00 133 $ 0.26 $114.47 $ 11,447.37
10-30-10 @ $ 21 $0.026 4 $ 0.11 $45.68 $ 4,567.50
$ 0.37 $160.15 $16,014.87
Fertilizer 2 $35.00 133 $ 0.26 $114.47 $ 11,447.37
11-52-00 @ 6 oz/tr $0.03 4 $ 0.13 $55.68 $ 5,568.00
$ 25.6/bag $ 0.39 $170.15 $17,015.37
Fertilizer $ 0.76 $ 330.30 $ 33,030.24
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Establishment costs – weed control
Activity $/hour trees/hour $/tree $/acre $ / project
Spray 1 $35 87 0.40 $175.00 $ 17,500.00
Chem $ 42.00 0.25 $ 0.02 $10.50 $1,050.00
$ 0.43 $185.50 $18,550.00
Spray 2 $35 87 0.40 $175.00 $ 17,500.00
Chem $ 42.00 0.25 $ 0.02 $10.50 $1,050.00
$ 0.43 $185.50 $18,550.00
Spray 3 $35 87 0.40 $175.00 $ 17,500.00
Chem $ 42.00 0.25 $ 0.02 $10.50 $1,050.00
$ 0.43 $185.50 $18,550.00
Spray 4 $0 87 0.00 $0.00 $ -
Chem $ - 0.25 $ - $0.00 $0.00
$ - $0.00 $0.00
Post Competition control $ 1.28 $ 556.50 $ 55,650.00
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Establishment costs – stem form
Activity $/hour trees/hour $/tree $/acre $ / project
Singling 1 $35.00 109 $0.32 $139.68 $13,967.89
Singling 2 $35.00 109 $0.32 $139.68 $13,967.89
Singling 3 $35.00 109 $0.32 $139.68 $13,967.89
Singling $0.96 $419.04 $41,903.67
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Spot cultivator, $211.46 , 8.9%
Preplant spray, $82.70 , 3.5%
Planting, $253.75 , 10.6%
Seed collection, $12.18 , 0.5%
Seedlings, $522.00 , 21.9%
Fertilizer , $330.30 , 13.8%
Weed control, $556.50 , 23.3%
Singling, $419.04 , 17.5%
Koa planting cost distribution
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Components of successful forest business development
• Known costs / risks / outcomes• Land availability• Favorable regulatory & political structure
– Taxes– Incentives– Ability to harvest wood
• Availability of tools to manage forest– Specialized machines– People capital – know how– Genetic material -available-
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Specialized equipment: spot cultivator
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Opportunity for koa improvement• Decrease UNCERTAINTY
– Known growth potential• How much merchantable wood will land produce?• How long will it take?• What are the SOPs for the development of a koa stand?
• Mitigate threats– Koa wilt– Acacia psyllid– Rust– Politics!
• Improve information availability– Manual for koa planting / development – much work done
• Pictures – demonstration plots• How to videos• Financial returns based on reality
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Mahalo