Evaluation of Financial Returns for Different Seed Orchard Establishment Options

Abstract

The loblolly pine (Pinus taeda L.) seed orchard managers of the North Carolina State University-Industry Cooperative Tree Improvement Program (NCSU-ICTIP) are faced with a choice of roguing existing 2nd generation orchard, establishing 2.5 generation seed orchards, establishing 3rd cycle mixed orchard (with both 2nd generation clones and their offspring) or 3rd cycle offspring seed orchards. The 3rd cycle orchards may be established immediately in 1999 or delayed to 2004 when all the progeny test information and selections are available.

Using both the genetic gains and the economic factors, the Net Present Value were examined for each of the above seed orchard establishment options, establishment time, and roguing options for the Piedmont and Coastal Plain regions of the Southeastern USA. The genetic gains for parent clone selections were based on 2nd generation breeding values of the loblolly pine breeding program. The genetic gain for 3rd cycle selections was predicated with the variance components, heritability and selection intensity. Cost and other information were collected from both state and private members of the cooperative. This information was used to calculate the Net Present Value for each option on the Piedmont and Coastal plain for both private and state members of the cooperative. The sensitivity of each option to changes in the interest rate, annual change in timber prices, seed yield, and accuracy of genetic gain estimates was also examined.

The results from this study showed that genetic improvement of loblolly pine was very profitable. The financial benefits were high and overwhelming in certain cases, for example, exceeding $100 million for merchandized timber from a state agency on the Coastal plain region. The Net Present Values (NPVs) of the two 3rd cycle options were higher than unrogued 2nd generation orchard. Additionally, it was more profitable to wait to establish the 3rd cycle orchards in 2004 to take advantage of all 3rd cycle selections available. The sensitivity analyses showed that financial returns from all the options were quite robust. The NPVs stayed positive in all cases except when all timber was used for pulpwood only and double digits discount rates were used for the rogued 2nd generation orchard in the Piedmont region. Merchandising the timber was in every case more profitable than harvesting all the volume for pulpwood, due to the premium market price for saw timber versus the low market price for the additional pulpwood volume. In conclusion, the 3rd cycle mixed orchard was recommended to seed orchard managers because NPVs were similar to the 3rd cycle offspring orchard, but it has the added advantage of known and tested clones that could provide operational efficiency and reliable gain in an applied tree improvement program.