The year 2018 saw a peak of the world economic trend, which reflected as high demand for forest industry products. The high demand for wood increased the volume of felled logs to a record level. Meanwhile, the price of wood also increased. Felling of industrial wood from non-industrial private forests increased by 12 per cent from the previous year, while standing sales prices of softwood logs showed an increase of approximately 10 per cent and standing sales prices of pulpwood showed an increase of approximately 9 per cent in real terms (prices converted using the cost-of-living index).
Operating profit in non-industrial private forestry increased to EUR 157 per hectare, which was almost one-quarter more than in the previous year. The operating profit of non-industrial private forestry totalled EUR 2,079 million, which was a better result in terms of money than in the peak year 2007, but the real change when taking into account the change in value was seven per cent lower.
Large differences in earnings high between different parts of Finland
In Southern Finland, the operating profit from non-industrial private forestry was more than EUR 200 per hectare, showing an increase of 22 per cent from the previous year in real terms. In Northern Finland, the earnings were EUR 63 per hectare (+25%). Northern Finland consists of the provinces of Northern Ostrobothnia, Kainuu and Lapland.
In terms of provinces, the highest earnings per hectare were reached in Päijät-Häme (EUR 303/ha), Kanta-Häme (EUR 293/ha), and Southern Savonia (EUR 284/ha). In Lapland, the earnings were EUR 37 per hectare. The earnings increased the most in Kainuu (36%), Northern Ostrobothnia (39%) and Northern Savonia (28%). The felling volumes increased in Kainuu due to damage caused by snow in the winter of 2017/2018.
“Päijät-Häme has the lushest forests in Finland. Sixty per cent of the wood felled in this area was logs, most of it spruce. The growing conditions are clearly less favourable in Lapland than in Southern Finland, which means that there is less wood to be felled per hectare. In Lapland, pulpwood amounted to 70 per cent of all the wood felled; most of it was pine. The standing sales price of spruce logs in Päijät-Häme was almost four times higher than the standing sales price of pine pulpwood in Lapland,” says researcher Esa Uotila from the Natural Resources Institute Finland (Luke).
Return on assets in wood production 13 per cent
ROA in wood production increased to 13.0% in 2018. In Luke’s calculation, the return has been divided into five parts. An increase of stumpage prices by 8.8 percentage points had the largest impact on the return in 2018. Earnings from wood sales increased the return by 4.4, the value of the net increment by 0.2 and state subsidies by 0.1 percentage points. Total wood production costs reduced the ROA by 0.6 percentage points. The return doubled from the previous year and was over ten percentage points higher than during the preceding ten-year period, at which time the result was reduced by a decrease in standing sales prices.
“The calculation method for the return on assets in wood production was originally developed for the comparison of different types of investment. For example, in the calculation, one cubic metre of spruce logs is a ‘share’, the value of which is determined on the regional wood market. The value of assets is calculated by multiplying the number of shares by the share price. In 2018, the value of non-industrial private forests calculated in this manner was EUR 5,0 billion, which is EUR 0,4 billion more than in the previous year,” Uotila explains.
Over the course of the years, the fluctuation of wood prices has increased or lowered the total return from wood production by up to a little over one-quarter. Excluding the changes in wood prices, the return has remained at slightly above 4 four per cent.
Information on the statistics
The statistics on operating profit in non-industrial private forestry comprise gross stumpage earnings (calculated on the basis of the volume of felled industrial wood and energy wood, as well as wood felled for own use and standing sales prices) and state subsidies for wood production. Expenditure include investments in private silviculture and forest improvement, administrative costs and other expenses. The earnings and wood production investments are based on regional statistical information, as well as on administrative costs and other expenses, most of which have been estimated.
The return on assets in wood production published in the statistics on forest as an investment is a return index calculated on the basis of felling, standing sales prices, state forestry subsidies, wood production expenditure and growing stock data. In this calculation, the earnings and expenditure are proportional to the value of the growing stock calculated based on the growing stock and the standing sales prices. The information is based on Luke’s statistics and the National Forest Inventories (NFI).