Threshold values for profitable tree breeding in Finland: society’s, private forest owner’s and seed producer’s viewpoints
Anssi Ahtikoski
Finnish Forest Research Institute, Muhos Research Station
Summary
The profitability of Scots pine (Pinus sylvestris L.) and Silver birch (Betula pendula Roth) breeding was evaluated for three a priori chosen agents, namely the government (here the same as society), seed producer and private forest owner. The main purpose of the study was to determine the threshold values for profitability, and further, to examine these values with respect to prevailing biological and economic conditions of each agent. Both the present and next-generation seed orchards were included in the assessment. Further, so-called differential approach was applied. In this approach, differential benefits and costs of tree breeding were obtained by comparing the benefits and costs of tree breeding to the corresponding of stand seed acquisition. Differential benefits were evaluated, for example, by incorporating genetic gains (based on the latest progeny test results) into widely-used growth and yield models. Both economic (a cost-benefit analysis with a specific shadow pricing procedure) and financial analyses were applied, and the net present value (NPV) was chosen as the investment criterium.
The results indicated that, in general, it is possible to attain the threshold values for profitability with respect to each agent. For example, an analysis using 8% genetic gain from the present Scots pine seed orchards, the discount rate of 3% (in real terms) and an annual regeneration area corresponding to the past 15-year-average, resulted in a positive NPV for society. Furthermore, with 20% genetic gain from the next-generation Silver birch seed orchards in southern Finland and a 14% genetic gain in central Finland, the discount rate of 5 % and an annual regeneration area of the past 20-year-average, resulted a positive NPV for society. For a private forest owner in southern Finland it was profitable to sow with improved seed from Scots pine seed orchards (rather than with unimproved stand seed) even using as high as 5% discount rate, and with genetic gain as low as 3% . However, some caution should be exercised when interpreting some of the results. For instance, the profitability for Scots pine seed producer was very sensitive to changes in annual seed crop (kg/hectare). The profitability of Scots pine seed orchards with northern clones was dependent on labour costs. As expected, all the results (regardless of the agent ) distinctively indicated that the most critical factors to the profitability are: 1) the demand for seed orchard seed (in the form of the annual regeneration area) and 2) the attainable genetic gains. To summarise, without a sufficient demand for orchard seed the achievements of tree breeding activities cannot be converted into economic benefits.
Nordic Group for Management of Genetic Resources of Trees Meeting in Finland, March 23-27, 2001