A cost benefit analysis of forestry seed orchard establishment in Sappi Forests, South Africa.

Abstract

Forest tree seed produced in specialised seed orchards is the primary source of reproductive material for plantation forest regeneration in South Africa. Forestry seed orchards consist of stands of genetically superior trees planted together under management that encourages flowering and cross pollination. Their primary objective is to produce abundant genetically improved seed for sowing. Sappi has produced seed from its own seed orchards since 1995. In this study the costs and benefits of new and existing seed production orchards for Sappi Forests was examined from an economic perspective in the South African plantation forestry context. The impact of nursery seed use efficiency on seed orchard economic feasibility was also examined. Data regarding seedling production, seed orchards and plantations across Sappi’s land holdings in KwaZulu-Natal and Mpumalanga were collected from multiple Sappi Forests databases including their Forest Management System, Timber Management System and Sappi Nursery databases. Analysis was undertaken to evaluate the net present values (NPV) of benefits, costs and benefit cost ratios (BCRs) associated with the seed orchard programme versus the use of unimproved planting material. Projected revenue increases from increased timber production were assessed. A number of discount rates typically used in South African forestry economic analyses were evaluated. Findings indicated that BCRs were >1 for both current and future proposed seed orchards, with the seed programme overall having a NPV of over half a billion rand, a BCR of 20 and an IRR of 62.5% at a 6% interest rate. A proposed new orchard had a NPV of R 175 million. It was found that increases in seed use efficiency could lead to increased timber production worth R 2 – 8 million per year under various scenarios. This research concurs with similar studies on the subject that establishment of seed orchards is an excellent investment for forestry managers. Based on this research, it is recommended that new seed orchards be pursued where selections of higher genetic gain than those in current seed orchards are available, and demand for the species is over a large land area. Further, nursery improvements that lead to increased seed use efficiency can be motivated based on increased timber production when there are limited quantities of the highest value seed.