Optimal Rotation Age
In forestry rotation analysis, economically optimum rotation can be defined as “that age of rotation when the harvest of stumpage will generate the maximum revenue or economic yield”. In an economically optimum forest rotation analysis, the decision regarding optimum rotation age is undertake by calculating the maximum net present value. It can be shown as follows:
- Revenue (R) = Volume X Price
- Cost (C) = Cost of harvesting + handling.
- Hence, Profit = Revenue – Cost.
Since, the benefit is generated over the years; hence, it is necessary to calculate that particular age of harvesting, which will generate the maximum revenue. In order to do so, discounting for future expected benefits are undertaken and calculated, which gives the present value of revenue and costs. From this net present value (NPV) of profit is calculated. This can be done as follows:
- NPV = PVR – PVC
Where PVR is the present value of revenue and PVC is the present value of cost. Rotation will be undertaken where NPV is maximum.
As can be seen in the above figure, the economically optimum rotation age is determined at point R, which gives the maximum net present value of expected benefit/profit. Rotation at any age before or after R will cause the expected benefit/profit to fall.
Read more about Optimal Rotation Age: Biologically Optimum Rotation Age, Non-timber Forest Use and Effect On Rotation, Factors That Forces Harvesting Age To Change
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