Technological advancements continue along at a rapid pace, and the practice of forest management has certainly benefitted from those advancements in a variety of ways. From field data collection to data processing to data analysis, FORECON has continued to pursue opportunities to bring the value afforded by these expanding technologies to our clients.
One of the biggest challenges, particularly in the hardwood forests of the eastern United States, is effectively modelling these species-diverse forests given all of the species-specific silvical complexities. Dozens of tree species, each with its own biological characteristics as well as market value, have tested forest managers for years in managing these forests in an efficient, effective and financially beneficial manner.
Growth simulation models have been developed and used with some success, but one of the biggest challenges has been to effectively predict the changes in financial return given the number of different silvicultural options that must be considered due to the wide range of hardwood species that exist. The dynamics of maximizing biological growth coupled with the ever-changing financial parameters that forest managers and their investment clients are faced with create complex situations that have been very difficult to effectively sort out and analyze.
Until now.
FORECON has developed a system to accommodate the silvical complexities of the hardwood forest, while allowing the flexibility forest managers need when analyzing the financial effects of their decisions. We call this system ForestSim™.
ForestSim™ is a simulation system that models a number of interactive conditions and circumstances within a forest over time (up to 30 years), helping forest managers optimize sound management decisions to maximize financial returns. The underlying platform is a complex Monte Carlo simulation product that has been integrated with two customized interactive models operated through user-friendly dashboards, providing the user with the ability to easily change a variety of parameters and conditions and quickly see their effects on the development of the forest and the bottom line of their investment. Analyses can be done on a stand, tract, stratum or ownership level.
ForestSim™ is driven by forest stand tables which provide the number of trees by species and diameter class. From this information, basal area calculations and the corresponding stand stocking densities are processed providing the underlying growth modelling system (USFS TWIGS) with the necessary information to project growth and mortality over a period of thirty (30) years. Species composition and stand density are just a few of the variables that drive the growth projections. This information is then integrated into the simulation model that provides either probabilistic results (there are multiple outcomes because the inputs have a user defined degree of variability), or deterministic results (there is no variability in inputs) for a variety of circumstances selected by the user.
Whether a harvest simulation is selected or not, ForestSim™ models the changes in the forest based on the user’s parameters, and calculates the impacts on the development of the forest stand and its related net present value. Each run of the model provides a wealth of information in a variety of reports, which are available on the stand, tract, stratum, ownership or year of peak NPV level.
User Inputs:
- Stumpage value by species by diameter (grade appreciation)
- Stumpage annual price appreciation rates (up to 30 years), by species
- Discount rate
- Other income and management costs
- A growing condition index at the species level, if desired
- Inflation rate, if desired
Harvest routines, all years, any year or multiple times over 30 years, which include:
- No harvest
- Cut all species by % per year
- Cut some species by % per year
- Cut based on user defined table (species/diameter/year)
- Cut growth or percent of growth
- Cut based on desired Q-Ratio
Model Outputs
Tabular and Chart Data (with uncertainty if selected) – Includes Thirty Year Projections of:
- Total sawtimber volumes and values, standing and harvested
- Total pulpwood volumes and values, standing and harvested
- Sawtimber volume principal species
- Basal area sawtimber and pulpwood
- Cash flow
- Net Present Value
Excel Outputs Include:
- A restatement of the inputs used
- Annual projections (30 years) of standing sawtimber – volume, trees, values and unit values.
- Annual projections of sawtimber harvest – volume, trees, values and unit values.
- Annual projections of standing pulpwood – volume, trees, values and unit values.
- Annual projections of pulpwood harvest – volume, trees, values and unit values.
- Projected Net Present Value
- Projected Cash Flow
- Summary of Annual Projected Volumes and Values
- Internal Rates of Return, Volume and Values
Below is one of several examples of the flexibility ForestSim has in providing complex analyses of diverse hardwood forest stands (we will highlight additional capabilities in future Woodland News posts).
ForestSim™ Example #1 – Year of Sawtimber Peak Net Present Value (NPV)
As discussed above, ForestSim™ can calculate the annual net present value (NPV) of sawtimber for each stand in a forestland ownership and the year in which the peak NPV is projected to occur. The following is a summary of results for a large hardwood ownership that we analyzed using this system.
Model Parameters/Inputs
- Ownership Size: Approximately 34,500 acres
- Number of Tracts: 32
- Number of Stands: Approximately 600
- Growing Condition Index: 90
- Financial Discount Rate: 5.75%
- Stumpage Grade Appreciation: Diameter Pricing by Species
- Harvest Option: No harvest
- Annual Sawtimber Stumpage Price Appreciation Rate: varied by species (from 2% to 4%) and staggered in time frame during the 30 year projection period
ForestSim™ projected the year of Sawtimber Peak Net Present Value for each stand of the ownership over the thirty (30) year projection period. The results of the Sawtimber Peak NPV calculations for each stand were sorted and summed by year and can be readily depicted on GIS maps for easy visual reference. Because of the large number of stands in this example ownership, we have grouped the output for this example into the indicated timeline ranges for ease in illustration.
Below is an example of how ForestSim™ can spatially display complex Peak NPV analyses in a map format for a smaller forested tract that we manage:
This is just one illustration of the powerful analysis capabilities of ForestSim™. We feel that its flexibility, ease of use, and variety and quality of output are very valuable features that can help forest managers make the key decisions they are faced with on a daily basis.