Timber Production Cost and Profit Functions for Co

Authors: Frederick Cubbage Robert Davis Diana Rodríguez Paredes Yoanna Kraus Elsin Ramon Mollenhauer Gregory Frey

Publish Date: 2015

Volume: , Issue: , Pages: 1-19

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Abstract

Tropical forestry has few studies of economics but this chapter reviews one detailed case in Mexico of 30 community forestry enterprises CFEs throughout Mexico that provide an excellent example of natural forest management The CFEs were surveyed in 2012 to determine their production cost and return information for timber growing harvesting and lumber production at sawmills Factors influencing costs such as the type of CFE size of the forest region of the country forest certification status use of computer equipment and planning and monitoring systems were examined All of the 30 CFEs except 1 made profits in forest management and timber growing For timber harvesting 22 of 30 CFEs made profits but the losses were small for the other CFEs For the 23 CFEs with sawmills 18 made profits and 5 had losses The greatest total returns for the CFEs accrued to those with sawmills for lumber production Very few of the factors hypothesized to influence CFE costs were statistically different but this may be due to the large variation in costs Regressions found that timber harvesting costs per unit were inversely related to timber sales volume per ha profits increased with sales volume per ha Sawmilling costs were inversely related with lumber production and profits increased with lumber production volume The CFEs also offered substantial employment opportunities at an average of 110 employees per CFE While most CFEs made positive returns on their operations their costs for every phase of the production supply chain were relatively high and apt to make them vulnerable to competition from imports especially if their large natural forest inventories declined in the futureThe economics of tropical forestry is important in a wide range of subjects as noted by the chapters in this book The core timber production harvesting and sawmilling functions probably still are the largest contributor to income for forest landowners and communities in the tropics but we have very little empirical knowledge and research results about these topicsThe lack of knowledge and reliable information about timber production economics in the tropics also is one of the major causes of the fear of forest communities and external investors who can contribute capital to sustainable forest management SFM Without good data the risk is higher making it difficult to attract possible investors or creditorsBetter economic analyses would help provide more benchmarks for the success of forestry operations as well as comparisons between conventional or reduced impact logging RIL or legal and illegal logging Economic studies are important to assess SFM opportunities or to quantify the losses that communities or countries incur if poor practices or illicit timber production prevail They also provide insight about the production costs and global competition for forest products and help identify strengths and weaknesses of domestic supply chainsThe World Bank CONAFOR and PROFOR carried out a project in Mexico that analyzed forest management timber production timber harvesting and sawmilling on community forestry enterprises This chapter draws on the results of that study as reported by Cubbage et al 2013 by examining the factors that influence cost and profit functions in timber productionA consortium of the World Bank and Comisión Nacional Forestal CONAFOR conducted a detailed survey of community forestry enterprises CFEs in Mexico in 2012 in order to collect forest management timber production timber harvesting and sawmilling data Surveys were developed in conjunction with CONAFOR and various stakeholder groups in a series of two workshops and one pilot test in the field The final survey contained an informed consent form for the ejidos a one page summary of key questions and eight modules covering most parts of community forest management from administration to ejido characteristics to silviculture harvesting sawmilling and subsidies A total of 186 questions were included in the detailed questionnaire and some such as on equipment costs had multiple subcomponentsFinal survey instruments were used to collect information from 30 CFEs in Mexico from 12 different states Campeche Chiapas Chihuahua Durango Guerrero Jalisco México Michoacán Oaxaca Puebla Quintana Roo and Veracruz including initial interviews and recontacts as necessary to obtain followup information or gaps in the data This represents a 10 sampling intensity based on a CONAFOR estimate that there are 291 Type III and IV community forestry enterprises The CFEs were sampled based on a list developed by CONAFOR who also helped facilitate introductions for the surveys and data collection

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