Economics of short rotation plantations

Poplar and willow plantations are cultivated over a period of 15 to 30 years. Hence, the calculation of a plantation’s profitability is of higher complexity than for annuals arable crops. The relatively high initial investment of establishment is accompanied by relatively low expenditures on the plantation’s management in the following years. Moreover, harvesting costs and timber revenues only occur in the years of harvest.

Hence, the calculation of contributing margins, which is generally used to evaluate the performance of annual crops, is not suitable for short rotation plantations. But by means of the dynamic investment appraisal (or equivalent annuity method), the irregular cash flows are transferred into an average annual return over the plantation’s life time. Thus, the economics of wood energy crops could be assessed and compared with the return of annual crops.