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Beetle-infested forest © shutterstock

Austria

This is how much forestry businesses are currently losing

Article by Gerd Ebner, translated by Susanne Höfler | 26.09.2019 - 11:45

While windthrown logs remain attached to the roots which leaves some time for processing, beetle infestation calls for immediate action. This makes market-compliant behavior more difficult and volume planning harder. From detection to removal, all steps and measures must happen as quickly as possible to avoid quality losses.

Currently, the market is saturated, and processing and transport capacities are experiencing bottlenecks. "In addition, timber takeover at sawmills is stricter than usual," Land&Forst Betriebe assesses the situation. "The ÖHU-appointed pick-up deadlines of seven days are often not observed. This causes qualities to deteriorate."

The tables show the everyday business life of a forestry operation: All costs of the forestry operation are basically financed by proceeds free of harvesting costs (amount of coverage 1 = timber yield less harvesting costs). And here, the situation dramatically deteriorated. Where the presented operation had yielded €68,000 with 100 harvested sm³, in case of calamity it currently would only yield €50,130. Losses are further increased by the fact that harvesting costs for beetle-infested wood at a price of €26/sm³ are at least €1/sm³ higher. Proceeds free of harvesting costs for the 1000 sm³ forestry business usually amount to €43,800. The current level of €24,130 is by a whole €19,670 less. With this almost halved revenue, the forestry business is now supposed to cover its fixed costs. While previously, the operation needed to sell 868 harvested sm³ (= 87% of the calculated cut) to achieve this, it would currently need 1575 harvested sm³ (=157% of the calculated cut). It is necessary to use the subjunctive ("would ... need") here because in many cases it is not even possible to exceed the calculated cut due to damages. If this is done regardless, the forestry operation jeopardizes its means of existence in the medium term because it would be plundering its reserves.

Either way: We are dealing with a downward spiral. Either forestry businesses are exhausting their economic reserves or their operational assets.

Proceeds/losses for forestry enterprises "normal" vs. "calamity" | 2019
Basis of calculation: 1,000 harvested sm³; Assumed damaged wood volume Austria 2019: 4 million sm³ of beetle-infested wood

Calculated cut: 1,000 harvested sm³

Calculated cut: 6 1,000 harvested sm³/ha

Model area: 167 hectares - a harvest volume of 1,000 sm³ (calculated cut) and 6,0 harvested sm³/ha result in an operating area of 167 ha.

Grade Normal proceeds* Bark-beetle proceeds**
Normal distribution Pre-Calamity prices Absolute Calamity distribution Post-calamity prices Absolute
1ab 5% €55.0/sm³ €2,750 4% €40.0/sm³ €1,600
ABC 50% €92.0/sm³ €46,000 3% €73.0/sm³ €22,630
Braun Cx 15% €62.0/sm³ €9,300 30% €45.0/sm³ €13,500
Industrial wood 25% €36.0/sm³ €9,000 25% €36.0/sm³ €9,000
Wood fuel (long) 5% €35.0/sm³ €1,750 10% €34,0/sm³ €3,400
Total for every 1,000 hsm³ 100% €68.8/sm³ €68.800 100% €50.1/sm³ €50,130
Proceeds free of harvesting costs (amount of coverage 1)
   Normal*  Calamity** Deviation for every 1,000 sm³
Timber yields per sm³ €68.8/sm³ €68,800 €50.1/sm³ €50,130 €-18.7 /sm³ €-18,670
Harvesting costs per sm³ €25.0/sm³ €25,000 €26.0/sm³ €26,000 €-1.0/sm³ €-1,000
DB 1 €43.8/sm³ €43,800 €24.1/sm³ €24,130 €-17.7/sm³ €-19,670
Fixed cost coverage (balance)
  Normal coverage logging Percentage of CC Calamity coverage logging Percentage of CC
Travel 137 hsm³ 13.7% 249 hsm³ 24.87%
Silviculture 160 hsm³ 16.0% 290 hsm³ 29.01%
Buildings 91 hsm³ 9.1% 166 hsm³ 16.58%
Management 388 hsm³ 38.8% 705 hsm³ 70.45%
Hunt 91 hsm³ 9.1% 166 hsm³ 16.58%
Fixed costs total 868 hsm³ 87.0% 1,575 hsm³ 157.00%