Collaboration for Agriculture & Rural Development:" Sustainable and profitable development of acacia plantations for sawlog production in Vietnam - Milestone 5 " ppt

Ministry of Agriculture & Rural Development Collaboration for Agriculture & Rural Development 032/05VIE Sustainable and profitable development of acacia plantations for sawlog production in Vietnam Milestone 5: Baseline conditions established C.E. Harwood, C. Beadle, Phi Hong Hai and Nguyen Duc Kien May, 2007 1 Executive summary This report provides baseline data relating to the growing of acacia sawlogs in plantations in central and northern Vietnam, log harvesting and transport, and primary processing of sawn boards in sawmills. Growing acacia plantations for pulpwood appears to be a profitable business for smallholder farms, many of whom are prepared to borrow from banks to establish plantations. Acacia hybrid clones are now the most favoured planting material. A simple spreadsheet financial model for pulpwood growing was developed indicating that internal rate of return could be as high as 24% under baseline conditions. Sawing technology dictates minimum acceptable log size and some mills can saw 1.5- 2 m long logs as small as 15 cm small end diameter under bark (Sedub). Under pulpwood growing regimes, acacia plantations grown for pulpwood will produce a small proportion of small sawlogs, even without pruning and thinning. A 9-year-old acacia hybrid plantation in central Vietnam was sampled, and estimated to have a mean annual volume increment of 18.9 cubic metres per hectare per year. Of the total stand volume in this stand, 36% was potentially marketable as small sawlogs down to 15 cm Sedub. However, trial sawing of sample logs from this unpruned stand revealed many knot defects which substantially reduced saleable sawn product volume. The information collected provides a baseline against which the physical impact and financial benefits of technologies being demonstrated in the project (pruning, thinning and nutrition and vegetation management) can be evaluated. Glossary Dbhob diameter at breast height over bark IRR internal rate of return MAI mean annual increment NPV net present value Sedob small end diameter (of log) over bark Sedub small end diameter (of log) under bark 2 Growing Acacia species in plantations This summary of baseline conditions refers to lowland sites (less than about 800 m elevation in southern and central Vietnam, and less than about 300 m in northern Vietnam) receiving mean annual rainfall of more than 1400 mm. These regions were identified in the Project review of acacia genetics (Harwood et al. 2006) as being the most suitable environments for profitable production of acacia sawlogs. The best acacia breeds for sawlog production are summarised in the genetics review. Tested best clones of the acacia hybrid (A. mangium x A. auriculiformis) are the most productive acacia variety in plantations, followed by genetically improved and tested planting material of A. mangium and A. auriculiformis. Logs of these three varieties are all widely accepted by sawmills in Vietnam. A. crassicarpa is another promising fast-growing species, but not yet proven for sawlog production in Vietnam. While, in principle, growers in almost all lowland provinces in Vietnam now have access to the selected acacia hybrid clones of FSIV, and to good-quality seed of A. mangium and A. auriculiformis from seed orchards or seed production areas, in practice many recent plantations are still being established with genetically inferior planting stock. For example, one plantation near Hue belonging to the Hue Province Forest Development Corporation established in 2005 used seed collected from acacia hybrid clones (ie. F 2 generation). This advanced-generation hybrid seed is highly variable and generally poor in performance, and MARD has passed a regulation that plantations should not be based on seed collected from hybrids, yet this is still happening. The corporation now has moved to using only clonal plants of MARD- approved hybrid clones, available cheaply from clonal nurseries in central Vietnam (price 2 US cents at the nursery). Almost all the acacia plantations in Vietnam are established at initial spacings of 1300 – 1600 stems per hectare (common initial spacings are 3 m x 2.5 m, 3 m x 2 m, 3.5 x 2 m). Occasionally a spacing of 1000 stems per hectare (4 x 2.5 m) is used. They are grown on rotations that are clear-felled to produce a single crop of pulpwood (see Figures 1, 2). Rotation age varies from as little as 5 years for productive sites in the south growing acacia hybrid clones, to 10-12 years for less productive sites in central and northern Vietnam. Indicative pulpwood mean annual increments (MAIs) for the three main acacia varieties obtainable from smallholder farmer plantations are shown in Table 1 below. The values shown are MAI under bark for a 7-year rotation down to small end diameter under bark (Sedub) of 4 cm, assuming good quality germplasm, initial stocking of 1300 -1600 stems ha -1 , application of a typical technology package (site clearing and manual cultivation of planting holes sized 30 x 30 x 30 cm, at least two rounds of thorough manual or chemical weed control, 50 grams NPK fertilizer per tree). Good-quality forest land is assumed, with moderate slope and an average soil depth exploitable by tree roots of at least 50 cm. These indicative MAIs are based on figures obtained from demonstration pilot plantings on research stations reported by Le Dinh Kha (2001) and Le Dinh Kha et al. (2003), but reduced by 20% to account for generally lower levels of silvicultural inputs on small, farmer managed plantations. 3 Figure 1. Four-year-old pulpwood plantation of A. mangium near Hue, central Vietnam. Despite absence of pruning, stem form is relatively good, although lack of singling has produced some multiple-stemmed trees. Figure 2. Two-year-old farmer-owned and managed plantation of clonal acacia hybrid in Quang Binh province, central-northern Vietnam, age 2 years, mean tree height 6-7 m. Note some trees with double leaders, absence of pruning. 4 Table 1. Indicative volume production under bark from farmer acacia pulpwood plantations (MAI to 4 cm Sedub, m 3 ha -1 year -1 ) Variety Northern Vietnam Central Vietnam Southern Vietnam Acacia hybrid (best tested clones) 10-15 12-20 15-25 A. mangium (improved seed from seed orchards) 8-12 10-18 15-20 A. auriculiformis (best tested clones or orchard seed) 6-8 8-12 12-18 Plantation productivity will be much lower on poor sites with very shallow and degraded soils such as that shown in Figure 3. Soil water and nutrient storage capacity, and soil volume for root system development, is insufficient to support good growth. Improvements in genetic quality of planting stock and additional silvicultural inputs will not deliver high productivity to such poor sites. They are not suitable for investment in wood production plantations, and certainly not suitable for sawlog production. One of the important challenges for plantation forestry in Vietnam is to better identify very poor sites and avoid investment in wood-producing plantations on these sites. Figure 3. Poor 2-year-old plantation of acacia hybrid on skeletal, severely eroded site just south of Hue. Yellow colour indicates tree stress and nutrient deficiency. 5 Pulpwood prices There are over 20 woodchip mills located near ports in northern, central and southern Vietnam. These mills export woodchips. In addition, pulp mills within Vietnam at Bai Bang in the north and near Ho Chi Minh City purchase pulpwood. Mill gate prices paid at Da Nang chip mill in September 2006 were as follows • Eucalyptus wood $US 46 per green tonne (bark removed) • Acacia wood $US 41 per green tonne (bark removed) At the chip mill at Haiphong, the price paid for acacia and eucalypt wood is the same (Mr S J Midgley, pers. comm., 2007). Relative price of acacia and eucalypt varies from mill to mill. At the Bai Bang paper mill, in March 2005, 4 metre logs to 6 cm Sed at the mill gate received 500 000 dong per green tonne (approximately US$30 per green tonne or per cubic metre) (S.J. Midgley, pers comm. 2007). The prices paid to growers are lower than the mill gate prices, because the cost of felling, transport to roadside, debarking, loading onto trucks and transport to the chip mill must be subtracted from the mill gate price. Some forest farmers will undertake some of these activities, rather than pay contractors to do so. At Dong Ha station, acacia wood is purchased at the forest roadside by buyers for 400,000-500,000 dong per “double stere” (a stacked pile 2 x 1 x 1 m 3 , equivalent to 1.2 m 3 solid volume). Logs down to 4 cm Sedub are accepted for pulpwood. As the green weight is approximately 1 tonne per cubic metre, this equates to a roadside price, in the plantation, for pulpwood of approximately $US 20-25 per cubic metre or per green tonne. Wood is transported in small trucks over the forest roads to the highway, then transferred to larger trucks for the highway journey of some 200 km to the Da Nang chip mill. A transport cost from Dong Ha town to the Da Nang chipmill of 100,000 dong per tonne was cited. This information can be assembled to give an approximate price structure for pulpwood (Table 2). Obviously, farmers located further from a woodchip mill will face higher transport costs and therefore will receive lower prices at the roadside for their acacia pulpwood. Growers who are closer to chip mills will receive higher prices. Recently, new chipmills have commenced operations in north-central Vietnam at Da Tuong pass (near Chan May gulf of Thua Thien-Hue Province) and Vung Ang harbour (Ha Tinh province). 6 Table 2. Price structure for acacia pulpwood at Dong Ha Stage Price or cost, $US per green tonne Notes Standing wood prior to harvest 15-20 Cost of felling, bucking to 2-4 m lengths, transport to roadside and debarking 3-5 Harvested wood at roadside in forest, debarked 20-25 Calculated from volume price paid per stere Loading and transport 15 km from plantation to Dong Ha town in small trucks, load onto large trucks in Dong Ha 9-10 Calculated by subtraction. This seems rather high – need to check on next visit Highway transport from Dong Ha town to Da Nang Mill 6-7 Equivalent to $0.04 per tonne per km – seems rather low, need to check on next visit Price at Da Nang chipmill weighbridge 41 Financial model for growing pulpwood A simple financial model for pulpwood growing, produced using Microsoft Excel, is shown in Table 3. The model assumes our best estimates for a range of costs and returns, which will be further checked during meetings with growers and forest extension staff. Using formulas for discounted cash flow, the model calculates net present value (NPV) assuming a real (i.e. net of inflation) discount rate of 10%, and internal rate of return (IRR). All costs and returns are in 2007 US dollars; the model does not factor inflation into costs and benefits. Under the baseline assumptions, growing acacia pulpwood is a highly profitable business for farmers who borrow money to finance the operation. A farmer borrows or invests a total of $US 569 over 7 years, with most costs incurred in year 1, to achieve a stumpage value of $US 2100 at the end of year 7. This represents a net present value of $512 for the net return on the investment and an internal rate of return of 24%. Many farmers now recognise plantations as a profitable farm enterprise, and are prepared to borrow money from banks to establish plantations. Rotation length can be as short as 7-8 years on productive sites in central Vietnam, slightly longer in the north and as little as 5 years in the south. The baseline internal rate of return of 24% assumes that a mean annual increment (MAI) of 15 m 3 ha -1 under bark can be achieved for the pulpwood rotation (volume down to 4 cm sedub). It is emphasised that site quality varies greatly. With poor plantation management, or a poor quality site, low volume production results. An MAI of 7 m 3 ha -1 gives an IRR of 10%, and the investment becomes marginal. 7 Table 3. Discounted cash flow for one-hectare pulpwood plantation – base case. Discounted cash flow model for one hectare of pulpwood plantation Acacia hybrid all costs and returns in US dollars Year cost discounted cost return discounted return NPV of investment at interest rate IRR 1 (388)$ ($468) -$ $981 $512 ($388) 24% 2 (31)$ -$ ($31) 3 (25)$ -$ ($25) 4 (25)$ -$ ($25) 5 (25)$ -$ ($25) 6 (25)$ -$ ($25) 7 (25)$ -$ ($25) 8 (25)$ 2,100.00$ $2,075 (569)$ Interest rate (real) percent interest /100 0.10 initial stocking (m x m) 3.5 2 1429 trees/ha Costs Year 1 site preparation 300$ planting stock @ 4 cents/seedling 57$ delivered to site planting out (days x labour cost/day) 3 3$ 9$ NPK fertiliser (trees x amount x price) 0.1 29$ 0.20$ cost of fertilizer per kg weeding 2 rounds (days x cost/day) 6 3$ 18$ Year 2 Silviculture costs year 2 weeding 2 rounds (days x cost/day) 2 3 6$ Recurring Land cost (annual rent) per year 5$ Annual maintenance cost years 2-7 20$ roading, fire control, as required Returns MAI pulpwood under bark to 5 cm sedub 15 Final harvest year 7 pulpwood volume, cu metres 105 pulpwood stumpage price, $/cu m 20 Sawlog size and quality requirements Because of the strong demand that has developed for acacia sawn wood, larger, sound logs from the pulpwood harvests are directed to local sawmills, where they fetch a much higher unit price than pulpwood logs. However, only a small proportion of the total stand volume in unthinned, unpruned plantations is of sufficient size for sawing. Sawing technology dictates the minimum acceptable log size. Small mills typically use a horizontal bandsaw with logs clamped onto a rail carriage (Figure 4) and with this type of system sawlog Sedub should generally be 18-20 cm for profitable operation. Those mills that have vertical bandsaws where logs can be manually guided past the blade are able to saw down to 15 cm Sedub (Figure 5). Most of the sawn acacia wood is used for furniture components, so there is not a strong demand for long straight logs. Acceptable log lengths at some mills can be as little as 1.2 m. Dimensions of sawn products can be as small as 300 x 50 x 30 mm (after drying). 8 Mill buyers typically visit harvesting operations and purchase all sound logs larger than their acceptable minimum size. They avoid logs which are very crooked, and those with obvious surface defects. Internal defects such as those caused by knots and rot pockets reduce recovery of saleable product and increase production cost as they have to be docked out during sawing. Figure 4. Horizontal bandsaw at small sawmill at Dong Ha, sawing acacia log of diameter 22 cm Figure 5. Vertical bandsaw at Hue, sawing acacia log of diameter 18 cm. Log is guided manually across log bench by two workers. 9 Figure 6. Sawmiller Mr Nguyen Si of Dong Ha discussing defects in board sawn from acacia hybrid sawlog Sawlog prices The price paid for sawlogs on a per cubic metre basis is usually highest for A. auriculiformis, followed by acacia hybrid and then A. mangium. Prices from sawmills in central and southern Vietnam presented below are typical of the current situation. Table 4. Prices paid for acacia sawlogs by Huong Giang sawmill Log small end diameter (cm) Price paid for acacia hybrid logs $US m -3 green recovery of sawn boards (% of log volume) 8-14 45 42 15-20 70 50 20-30 80 55 >30 100 60 Huong Giang sawmill is located on the Perfume River 10 km upstream from Hue. These are the prices paid for logs delivered to the mill. Minimum log length is 1.5 to 2 m. Log volume is calculated as a cylinder based on log length and small end diameter. For A. mangium logs prices paid per cubic metre are 80-85% of those above, while prices paid for A. auriculiformis may be 10% higher. This price table is particularly useful, as it shows the increase in unit price paid as log diameter increases. Mr Nguyen Si (Figure 6) operates a small sawmill at Dong Ha, which saws acacia wood as part of its log mix. He buys acacia sawlogs from local plantations at the time of harvest operations and transports them to his mill in his own truck. He pays $80 10 [...]... methods to support sawlog production in Vietnam Milestone report, CARD Project Vie: 03 2-0 5 Le Dinh Kha (2001) Studies on the use of natural hybrids between Acacia auriculiformis and Acacia mangium in Vietnam Agriculture Publishing House, Hanoi Le Dinh Kha (2003) Selection, breeding and propagation of some main planting species in Vietnam Forest Science Institute of Vietnam (292 pages, in Vietnamese with... auriculiformis and 40 - 50 m3/ha for A mangium for rotations of 7 - 9 years This equates to MAI’s of around 4 -5 m3/ha for A auriculiformis and 5- 7 m3/ha for A mangium Establishment cost for these farmers is low, at around 2-3 M dong/ha Assuming an MAI of 6 m3/ha and an establishment cost of 2 .5 M dong/ha ($US 160/ha), and other costs remaining unchanged from the baseline, the pulpwood financial model indicates... calculated from stand volume and stand age Stand value was calculated using process at the forest roadside of $60 m-3 for all sawlogs and $ 25 m-3 for pulpwood 13 Table 5 Total volume per hectare under bark, sawlog volume under bark, and product values at the roadside, estimated for the 9-year-old acacia hybrid stand at Dong Ha Volume (m3 ha-1) 168.1 MAI (m3 ha-1 year-1) Value ($US ha-1) Stand volume under... stand has not been formally thinned but natural mortality and informal harvesting have reduced stocking to 890 stems ha-1 at age 9 years The stand basal area was about 19 m2 ha-1, which is average for fully stocked acacia stands: basal areas greater than 25 m2 ha-1 are uncommon in acacia plantations, even in Sumatra, Indonesia where growth of A mangium is more rapid than in central Vietnam, MAI in. .. representative of growing conditions in central Vietnam This stand has now been harvested and the site will be used to plant the silvicultural trial (Project Milestone 7) Figure 7 shows the frequency distribution of log Dbhob in four sample plots, each of size 21 .5 x 15 m, in the 9-year-old plantation, measured in September 2006 25 Frequency distribution of dbhob and stand characteristics of nine-year-old acacia. .. plantations, on a rotation of 5- 6 years, producing a volume of 5 5- 6 0 m3/ha at harvest, equivalent to an MAI of 9-1 0 m3/ha Again, establishment cost of farmer plantations is low at 2-3 million dong/ha The financial model suggests that achieving this growth rate at low establishment cost would be an attractive investment, with and IRR of over 20% Summary In summary, the information from these three informal... each board in the sawing study number of pieces 40 30 20 10 0 2 0-6 0 6 1-9 0 9 1-1 20 12 1-1 50 15 1-1 80 18 1-2 00 range of clear length (cm) 16 Figure 12 Frequency distribution of lengths of defect-free sections from the better face of the boards in the sawing study It can be seen that there are many sections of the boards which are too short to meet the minimum defect-free length Knots, and heart-rot associated... number of trees Mean dbhob = 16.3 cm 20 stocking at planting 1900 sph stocking at 9 years 890 sph basal area at 9 years 19.4 m2 /ha 15 10 5 0 11 12 13 14 15 16 17 18 19 20 21 22 23 dbh over bark (cm) Figure 7 Distribution of dbh over bark in the ten-year-old pilot plantation of clonal acacia hybrid at Dong Ha 11 In this plantation, initial spacing was 3 .5 x 1 .5 m giving a stocking of 1900 stems ha-1 The... the stand had been harvested at age seven years for pulpwood, as is commonly done in Vietnam It is emphasised that without thinning, little further increase in tree and log diameter would be achieved by leaving the stand to grow on in a longer rotation As pointed out above, basal areas of tropical acacia plantations rarely exceed 25 m2 ha-1, even on the most productive sites Sawing performance of acacia. .. slightly, while increasing the proportion of sawlog relative to an unthinned stand If the stand had been managed for pulpwood without any thinning, MAI over bark on a seven-year rotation would have been in the range 2 0-2 2 m3 ha-1 year-1 These volume measurements and sawlog estimates are from a stand about two years older than would normally be harvested for pulpwood Percentages of sawlogs would have . Ministry of Agriculture & Rural Development Collaboration for Agriculture & Rural Development 032/05VIE Sustainable and profitable development of acacia plantations for sawlog. (388)$ ($468) -$ $981 $51 2 ($388) 24% 2 (31)$ -$ ($31) 3 ( 25) $ -$ ($ 25) 4 ( 25) $ -$ ($ 25) 5 ( 25) $ -$ ($ 25) 6 ( 25) $ -$ ($ 25) 7 ( 25) $ -$ ($ 25) 8 ( 25) $ 2,100.00$ $2,0 75 (56 9)$ Interest rate. baseline data relating to the growing of acacia sawlogs in plantations in central and northern Vietnam, log harvesting and transport, and primary processing of sawn boards in sawmills. Growing