Valuing changes to silviculture

Transcription

1 Valuing changes to silviculture Jerry Leech IFA Seminar May

2 In theory, there is no difference between theory and practice but in practice, there is Kim Iles who says he misquotes it from somewhere

3 Lessons This presentation will discuss some of the issues with valuing changes to silviculture and summarise some of the lessons that can be learnt Jerry Leech 3

4 How do you value a stand? Determine Net Present Value i = real discount rate A = annual maintenance cost over r years R = return at year n C = cost at year n A 1 R C NPV = 1 + i 1.0i 1.0i 1.0i ( ) ( ) ( ) r n n Pretty standard calculation Determine A, R, C, i, n and r Many slightly different looking formulations Value with and without research But, importantly, it varies between organisations Jerry Leech 4

5 How do you value research findings? The management decision then depends on Economics, with and without the research Risk appetite of the forest owner The assumptions the owner is prepared to make The forest owner s cash flow situation Politics The accuracy of the predictive models It is not just statistics and economics It will vary between forest owners Jerry Leech 5

6 Valuing many components What if there are many different changes? Establishment practices Weedicide Early age fertiliser application Tree breeding Thinning Rotation length Late age fertiliser application Need to look at combinations Need a holistic approach Need to look at overall silvicultural options Jerry Leech 6

7 RADGAYM II In 1985 I used this approach to look at: Rotation length Thinning regime Later age fertiliser application An early age silvicultural package Plus... Evaluation of the forest estate, not a stand It looked at the whole silvicultural package I ran about 900 models, published 39 alternative models Jerry Leech 7

8 RADGAYM II NPV Three periods over 70 years Average annual volume yield Three size assortments Base model Logging residue Inventory Percent difference cf base model Area losses Thinning Objective Rotation length Fertiliser Jerry Leech 8

9 RADGAYM II Enabled allowable cut to be set Enabled the optimum silviculture to be determined Sensitivity analyses Showed how various combinations of components changed NPV Indicated which models needed work Indicated where silviculture needed work It was a holistic forest based approach It worked Jerry Leech 9

10 Lesson - Analyse at the forest level Showed that silvicultural management decisions should be made at the forest level not the stand level Well known Operations Research dictum Later age fertiliser application varied depending on plantation year Non commercial thinning depends on how much was planted in that year Results are organisation variant Researchers want to value their research Researchers tend to undervalue their research Jerry Leech 10

11 Why partition responses? To indicate where research is needed To justify current or future research To determine economics of change To compare the effects of quite disparate ways of modifying silviculture To determine where changing silvicultural practice can give best bang for the buck Effect of time Management philosophy Not just economics Jerry Leech 11

12 Living on the Edge Bob Boardman Aust.For. 51(3) 1988 Change in yield class (SQ) partitioned By order of finding Schematic Approximate Very useful Indicates gains Additive Jerry Leech 12

13 Living on the edge Bob Boardman Diagram very useful But what would the effect of reducing (say) P be? Are the components independent and are they additive? Well they were additive in that Bob added them in as the research indicated the gain Would taking (say) P or N out give the same net reduction in NPV? Jerry Leech 13

14 Partitioning responses There is a need to partition the various responses Not unusual to compare each silvicultural gain against a base and assume all responses are additive Obviously flawed as responses rarely additive Depends on the base Will vary between organisations Jerry Leech 14

15 Partitioning responses In South Australia the effect of changing one component of establishment (weedicide, fertiliser and even tree breeding) is generally confounded unless all aspects are addressed I suggest the same happens elsewhere Analysis needs to be holistic The question is how Jerry Leech 15

16 Maximum Growth Sequence (MGS) Dick Woods (1976) laid down the formulation the MGS Based on a work by many people, especially Bob Boardman and his team, and also CSIRO It trebled establishment costs in first five years There were many components The level of response was questioned The research was troubled There was an argument about whether to implement or not A challenge to put all the research together Jerry Leech 16

17 Maximum Growth Sequence (MGS) Component complexity in first 5 years Up to 4 ploughing operations Up to 7 fertiliser applications 3 formulations Up to 3 weedicide applications Varying application techniques All partly confounded by tree breeding At one stage someone argued that tree breeding had no effect if everything else was in place! The analysis was confusing Which components were most important? How long would effects last? Jerry Leech 17

18 Maximum Growth Sequence (MGS) Decision to proceed made by consensus Based on the economics of the perceived minimal gain, and the perceived pattern of the gain over time Agreed to research the components to reduce costs to see which components were important Each component had been shown to be important when added to the then current practice but now components were to be tested by exclusion complete change in philosophy Jerry Leech 18

19 Lesson When to implement? Decision made to implement when the generally accepted minimum gain was economic Decision made not to delay until research was proven Decision based on the economic reality of running a business The actual decision was NOT made by researchers but by managers Jerry Leech 19

20 Lesson The problem of successful research There was a lot of research behind MGS But, how to model over whole rotation? Which components mattered? Could costs be reduced and economic gain preserved? Modelling by negotiation High, best guess and low estimates Evaluated the economics of alternative models Challenge to develop models over rotation Challenge of changing the models Changed the method of assessment Jerry Leech 20

21 Add or subtract? Bob Boardman built his model up because he did it in the order the research appeared But when you have actually achieved a combined response is this the best way to determine the effects of each component? Better to economically analyse the cost of taking out each component Makes it very difficult for researchers Varies between organisations Whose problem is it really? Jerry Leech 21

22 Lesson Add or subtract? Change in focus on evaluating research Research had shown that each component was important When it was built from the bottom up (add) Now the research aimed to show What components of the total package were not important in the final mix (subtract) Research focus shifted from build up (add) to reduce down (subtract) Many components that were individually important were no longer so important Jerry Leech 22

23 Add or subtract? Think of it in terms of linear regression Stepwise regression adding in variables (add) and stepwise regression by taking out variables (subtract) often provide different models But generally neither is the best model Think of it in terms of economics If you have a combined package then evaluating by subtraction is generally more logical Can see the cost benefit of change Jerry Leech 23

24 Other Lessons Some of the changes can be minimal, yet very useful Can be changes in timing of operations Can be changes in application Need to consider major changes and lesser changes MGS was a major change Tweaking the MGS were minor changes Both significant economically and silviculturally Jerry Leech 24

25 Significance Significance, statistical or otherwise A result that is not statistically significant May be because the best design was not used May be because the analysis was flawed May economically be very significant But equally the effect may be an artefact Is a statistically non significant response real? So take great care Need to think carefully & ask the right questions Answer is not always statistical significance Jerry Leech 25

26 Lesson - What is the real question? The real issue is what is the management advantage of implementing a change in silviculture as a result of research Varies between organisations Varies depending on plantation age Analysis best done at a forest estate level But... This is virtually impossible for researchers They provide the models for the forest manager Best guess research models - decisions Jerry Leech 26

27 FWPA using LiDAR for late age inventory Six largest Radiata pine producers Each owner has their own inventory They have varying expertise with LiDAR Basic research is needed Each owner needs to work out how to implement It needs Owners to fund Researchers to provide the basic models Managers to evaluate and implement Each have their role Jerry Leech 27

28 Lesson - Whose problem is it? Owners Need to decide philosophy Researchers Need to develop models to cover a wide range of situations Managers Need to analyse the research in their situation The critical question to ask is whose problem is it to do what? Is this question always asked? Needs team work Jerry Leech 28

29 What does it all mean? Professor Sir Ronald Fisher about Principal Component Analysis Well I know the mathematics are perfectly correct, after all I developed them myself, but what does it mean? Do not just blindly accept the statistics! What does a mean sex of 0.51 with a standard deviation of 0.49 mean? Do not just blindly accept the economics or statistics -Think! Jerry Leech 29

30 So where should the research effort go? Not necessarily where past major gains were made Perhaps research into Zinc is a good example Need to look at the current state of practice Work out where future gains might be made Estimate future costs and possible returns Then set research priorities Challenge If past research in an area has been successful then it may be difficult to justify future research Jerry Leech 30

31 Summary Use economics to assist management make decisions about implementing change Look at the total silvicultural package and see how it can be economically reduced Use forest analysis not just stand analysis Ask whose problem it is to do what Think about significance Think about the real questions Ask what do the results actually mean Jerry Leech 31

32 Thank you Any questions or comments? Jerry Leech 32

33 Statistics Statistical ideas are like rabbits. They are often used as the show piece of magic acts. They are simple animals - but not easy to grab hold of (particularly if you're dropped in a whole field of them) and some don't prove worth the effort. The minute you grab a few they seem to multiply and then things are back out of control again. It's a sad story. Why would anybody bother? John Bell Jerry Leech 33

34 Statistics Statistics is a subtle business - not because of the mathematics, but because of the slippery logic Kim Iles Jerry Leech 34

35 Statistics In general, the problem is never to calculate statistics (regardless of your impression from statistics classes). The real issues are what they mean, how you can verify them; and if they are the most appropriate answer to your question Kim Iles Jerry Leech 35

36 Questions The most serious mistakes are not being made as a result of wrong answers The truly dangerous thing is to ask the wrong question Peter Drucker Men Ideas and Politics Jerry Leech 36