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The economics and optimal management regimes of eucalyptus plantations: A case study of forestry outgrower schemes in Brazil

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  • Rode, Rafael
  • Leite, Helio Garcia
  • Silva, Márcio Lopes da
  • Ribeiro, Carlos Antonio Álvares Soares
  • Binoti, Daniel Henrique Breda

Abstract

The main aims of this study are to assess the economic viability and identify the optimal management regimes of eucalypt forests within the framework of an outgrower scheme, at Minas Gerais State, Brazil. Outgrower schemes are partnership contracts that encourage smallholders/farmers to consider reforestation in addition to their agricultural crops. The company provides inputs and seedlings for planting in exchange for the exclusive right of timber purchase at harvest time. The cash flows of tree growers and forest company are evaluated using the Net Present Value and Average Production Cost for the project, with and without the outgrower scheme. The management regimes are evaluated by Linear Programming (LP), the objective function of which is to maximize the Equivalent Annuity (EA) of 144 farms with outgrower schemes. There has been an increase in the profitability of tree growers enrolled in the program for an economic radius of 160km, showing the importance of incentives for eucalyptus plantations in small and medium farms. By LP, 10 management prescriptions common to the 144 farms were selected. It was observed that 15% of the 144 outgrower schemes analyzed did not have an economical prescription. A 10% reduction in the current wood price would increase this amount to 39%. Furthermore, with discriminant analysis of the 10 selected management prescriptions, it was possible to create a classification rule for new partnership contracts, with a 80% success rate.

Suggested Citation

  • Rode, Rafael & Leite, Helio Garcia & Silva, Márcio Lopes da & Ribeiro, Carlos Antonio Álvares Soares & Binoti, Daniel Henrique Breda, 2014. "The economics and optimal management regimes of eucalyptus plantations: A case study of forestry outgrower schemes in Brazil," Forest Policy and Economics, Elsevier, vol. 44(C), pages 26-33.
    • Handle: RePEc:eee:forpol:v:44:y:2014:i:c:p:26-33
    DOI: 10.1016/j.forpol.2014.05.001
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    References listed on IDEAS

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    1. Demarchi, Gabriela & Subervie, Julie & Leite, Fernando Palha & Laclau, Jean-Paul, 2021. "Farmers' preferences for water-saving strategies in Brazilian eucalypt plantations," Forest Policy and Economics, Elsevier, vol. 128(C).
    2. Julia Szulecka, 2019. "Towards Sustainable Wood-Based Energy: Evaluation and Strategies for Mainstreaming Sustainability in the Sector," Sustainability, MDPI, vol. 11(2), pages 1-21, January.
    3. Afonso, Roberta & Miller, Daniel C., 2021. "Forest plantations and local economic development: Evidence from Minas Gerais, Brazil," Forest Policy and Economics, Elsevier, vol. 133(C).
    4. Salles, Thiago Taglialegna & Nogueira, Denismar Alves & Beijo, Luiz Alberto & Silva, Liniker Fernandes da, 2019. "Bayesian approach and extreme value theory in economic analysis of forestry projects," Forest Policy and Economics, Elsevier, vol. 105(C), pages 64-71.
    5. Abdu, Hassan Idris & Eid, Kamel & Abdullah, Aboubakr M. & Han, Zhengang & Ibrahim, Mohammed Hassan & Shan, Duoliang & Chen, Jing & Elzatahry, Ahmed A. & Lu, Xiaoquan, 2020. "Unveiling one-pot scalable fabrication of reusable carboxylated heterogeneous carbon-based catalysts from eucalyptus plant with the assistance of dry ice for selective hydrolysis of eucalyptus biomass," Renewable Energy, Elsevier, vol. 153(C), pages 998-1004.

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