Area of forest ‘at risk’ from deforestation
Analysis Based on Land Sale Values
Another approach to estimating the profit from forest conversion to dairying is based on assessing of typical dairy land sales prices and then allowing for the underlying forestry value of the land, the cost of converting forest land and the cost of adding the basic infrastructure required for this end use. This analysis is very similar to that faced by, say, Carter Holt Harvey when it decides how to dispose of forested land, either as a going-concern forest or as land converted to dairy farms.
Under this approach we deduct from the intensive grazing/average dairy land sale price (estimated at $20,000-$22,000 per hectare) the costs of:
• Forestry only land (assumed at $3,000 per hectare);
• The cost of conversion (assumed at $4,000 to $8,000 per hectare);
• The cost of other infrastructure - dairy sheds, farm houses, dairy company shares, etc. (assumed at $5,000 -$9,000 per hectare).
The net result is expected profits on conversion in the range of $2,000/ha up to $10,000/ha, with a mid-point of something like $8,000/ha.
This analysis provides a range of expected profitability from conversion that is broadly in line with the analysis using anecdotal evidence above ($5,300 to $10,000 profit per hectare).
Contact for Enquiries
Sustainable Land Management and Climate Change
MAF
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 CLIMATE (254 628)
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