Jukka Malinen, Mika Haring, Harri Kilpeläinen, Erkki Verkasalo. (2015). Comparison of alternative roundwood pricing systems – a simulation approach. Silva Fennica vol. 49 no. 3 article id 1293. https://doi.org/10.14214/sf.1293

Keywords: simulation; pricing; roundwood

Highlights: A discrete event simulation model was developed for studying roundwood pricing systems; For a single buyer, pricing based on residual value appraisal produced (RVA) 4.87 per cent higher wood paying capability and 3.70 per cent higher stumpage price than pricing based on average unit prices; As the number of buyers using RVA increases, the competition increased and the advantage decreased.

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In a closed market, roundwood buyers pricing system affect the roundwood flow from the stands to different roundwood users. If a buyer is capable to discriminate higher value stands from low quality stands better than its competitors, the buyer should be able to buy better raw material. In the study, a discrete event simulation was used to examine the effect of residual value appraisal (RVA) -based pricing of roundwood by log dimensions and grades compared to the traditional pricing based on average unit prices (UP) of roundwood assortments on roundwood flow. The core of the simulation model was the data containing 51 pine dominated stands from southern Finland. Sample trees were theoretically bucked by the bucking simulator in order to estimate the volumes, dimensions and grades of the logs and roundwood assortments. The simulation model of roundwood markets included four roundwood buyers, two corporations and two saw milling enterprises. The main finding of the study was that the buyers who use RVA gains an advantage and receives better quality compared to buyers who use UP. As the number of buyers using RVA increases, the competition increased and the advantage decreased.

Malinen, University of Eastern Finland, School of Forest Sciences, P.O. Box 111, FI-80101 Joensuu, Finland E-mail: jukka.malinen@uef.fi
Haring, University of Eastern Finland, School of Forest Sciences, P.O. Box 111, FI-80101 Joensuu, Finland E-mail: mika.haring@gmail.com
Kilpeläinen, Natural Resources Institute Finland (Luke), Bio-based business and industry, P.O. Box 68, FI-80101 Joensuu, Finland E-mail: harri.kilpelainen@luke.fi
Verkasalo, Natural Resources Institute Finland (Luke), Bio-based business and industry, P.O. Box 68, FI-80101 Joensuu, Finland E-mail: erkki.verkasalo@luke.fi

article id 303, category Research article

Lars Lönnstedt. (2007). Industrial timberland ownership in the USA: arguments based on case studies. Silva Fennica vol. 41 no. 2 article id 303. https://doi.org/10.14214/sf.303

Keywords: forest management; backward vertical integration; pricing; secured supply; owner structure

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The forest product companies’ ownership of timberland is decreasing in the United States as in many other countries. In aggregate the forest product industry owned 26.5 million hectares (11.6% of the U.S. timberland) in 2002 compared with 28.5 million hectares in 1987 (FIA 2006). Reasons for this decrease of timberland ownership are several and complex. This article presents four case studies of U.S.-based forest product companies. The vertical integration theory and empirical studies about timberland ownership give a base for the study. Four hypotheses are formulated on the basis of the literature. The results give support to two of them. An important reason for timberland ownership is a wish to secure deliveries. Market conditions are important for the need of owning timberland. Two of the companies did not own timberland, the main reason being more profitable alternative uses of capital. The ownership structure of the company, tradition, and culture are other important explanations for timberland ownership. This study did not show the advantage of timberland ownership for information and coordination.

Lönnstedt, SLU, Department of Forest Products, P.O. Box 7060, SE 750 07 Uppsala, Sweden E-mail: lars.lonnstedt@spm.slu.se

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