Quality description of forestry as an investment statistics
Compiler: Natural Resources Institute Finland (Luke), starting from 1 January 2015. Previously, the statistics were compiled by the Finnish Forest Research Institute (Metla).
Basis of the statistics: The statistics are compiled based on the Act on the Natural Resources Institute Finland (561/2014), the act on food and natural resource statistics (562/2014) and the Statistics Act (280/2004).
Funding for the statistics: Funding for the statistics is provided from Luke’s assets.
1. Relevance of statistical data
1.1 Data content and purpose of use
The statistics present investment returns on wood production in non-industrial private forests per factor and region starting from 1990. Using calculations, it is possible to compare annual investment returns on wood production per factor in different parts of Finland. The value of capital (stumpage price of growing stock) is calculated on the basis of average prices of standing sales during the calendar year.
The statistics are used, for example, as key figures in the Finnish budget, as an indicator in the National Forest Strategy, in the preparation and monitoring of national and regional forest programmes, and as background material for decision-making related to investments in forestry at financial institutions, among others.
1.2 Concepts and classifications
Non-industrial private forests include ordinary non-industrial private forest owners (natural persons, estates of deceased persons and enterprises), as well as jointly owned forests and forests owned by municipalities, parishes, foundations and other similar communities or enterprises outside the wood production industry. Until 2008, “non-industrial private forests” also included the state-owned forests that were not managed by Metsähallitus.
Standing sales price is the stumpage price paid for wood to owners of non-industrial private forests in standing sales (EUR per m³).
Stumpage price value is calculated by multiplying the assortment-specific volumes of forests by their standing sales prices.
Return on investment is a return index, which represents the annual return on investment in percentage. It is calculated as a natural logarithm conversion relative to received income, operating expenses, changes in the value of assets, and capital. Nominal returns are calculated using prices valid in the year in question. Returns in real terms are calculated using prices converted to the value valid during the last year of the time series using the cost-of-living index.
Regions are the regions of Finland starting from 2012 and were the 13 districts of public services of the Finnish Forest Centre and the region of Åland between 1990 and 2011.
Factors of investment returns on wood production
Income from roundwood sales represent the impact of returns on wood sales from non-industrial private forests in cash and the value of roundwood harvested for private use on return on investment.
Costs in wood production are based on costs of silviculture and forest improvement in non-industrial private forests recorded in statistics and primarily on estimates of administrative and other similar costs. Total costs of wood production always comprise a negative factor in terms of returns.
State subsidy represent the impact of subsidies obtained by owners of non-industrial private forests for silviculture and forest improvement on return on investment.
Value of net increment represents the impact of changes in the value of forest assets resulting from changes in the growing stock and assortment structure on return on investment. This factor is affected by the development of assortment volumes of growing stock during the year, not by changes in stumpage prices during the year. If the value of felled trees is higher than the value of trees grown in their place, this factor will be negative.
Stumpage prices change represents the impact of changes in the value of growing stock resulting from changes in stumpage prices during the calculation year on return on investment. There may be significant variation between different years, and these changes can have a significant impact on total returns, also in a negative direction.
1.3 Data sources
Data sources include the following statistics published by Luke:
- Earnings: Volumes and prices in roundwood trade, Industrial roundwood removals by region, Fuelwood consumption in small-scale housing, and Total roundwood removals and drain.
- Expenses: Operating profit in non-industrial private forestry
Annual changes in volumes of growing stock are based on Luke’s National Forest Inventory results, industrial roundwood removals by regions and the volume of wood harvested by owners of non-industrial private forests for private use. In the calculation of stumpage price values, volumes of growing stock are based on the assortment-specific volumes in forest land for wood production in accordance with the National Forest Inventory.
1.4 Users’ points of view
Feedback from users is monitored and taken into account when developing the statistics.
2. Accuracy and reliability of data
2.1 Research methodology
Investment returns in wood production comprise a return index calculated as per components on investment returns. Returns are calculated as a natural logarithm conversion relative to factors and capital. Capital is calculated by multiplying the assortment-specific volume of growing stock by standing sales prices.
In the calculation of the Total investment return and Stumpage prices change components, the value of stumpage price value is calculated on the basis of the previous year’s growing stock volumes and stumpage prices. The Value of net ingrement and the Income from roundwood sales components are calculated using the previous year’s growing stock volumes and the value of stumpage prices calculated on the basis of the calculation year’s stumpage prices as the divisor, while the Costs in wood production and State subsidy components are calculated using the value of stumpage prices calculated on the basis of the calculation year’s tree volumes and stumpage prices as the divisor.
The return calculation is presented in the publication of Markku Penttinen and Andrei Lausti (Penttinen, M. & Lausti, A. 2004. The competitiveness and return components of NIPF ownership in Finland. The Finnish Journal of Business Economics 53(2): 135, 143–156. https://www.researchgate.net/publication/279994187_The_Competitiveness_and_Return_Components_of_NIPF_Ownership_in_Finland).
Returns are calculated using nominal and real monetary values. Changes in the monetary value are made using the cost-of-living index (1951=100).
The calculation of the annual volume of growing stock is based on the assortment-specific volumes of roundwood in forest land for wood production registered in the National Forest Inventory (NFI), and felling volumes are based on industrial roundwood removals and the volume of trees harvested by owners of non-industrial private forests for private use. In calculations for the regions of the Finnish Forest Centre (1990–2011), the starting point is 1983, based on NFI7. Its information has been adjusted using multipliers calculated on the basis of changes in NFI9 (timber assortment, forest land for wood production and forests of non-forestry enterprises). Interpolation from NFI9 has been directly carried out from NFI11.
Starting from NFI10, results have been published as averages from five measuring years. In regional calculations 2012–2016, tree volumes between NFIs are interpolated between the centremost years of measuring periods (e.g. NFI11 – NFI12, 2011–2015), and information about later years are extrapolated using the multipliers obtained from the aforementioned interpolation. In annual NFI updates, the centremost year of the measuring period moves and the multipliers obtained from interpolation change, until the next five-year NFI is completed. Starting from 2017, the calculation of tree growth was changed so that growth is based on assortment-specific growth calculated on the basis of the results of annually published National Forest Inventories (NFI). The three last years of the time series are preliminary data.
Felling volumes include wood felled for industrial uses and exports, wood used for subcontracting, and fuel wood consumed in small-scale housing. It is estimated that 30 per cent of fuel wood fulfils the dimensions defined for pulpwood.
Returns on wood production are calculated by multiplying assortment-specific felling volumes by the regional annual averages of their standing sales prices. Total costs of wood production are based on the statistics of operating profit in non-industrial private forestry.
2.2 Factors affecting the reliability of the statistics
The accuracy and reliability of the statistics are presented in the quality descriptions available from the homepage for each statistics.
The value of forest assets is defined as the value of stumpage prices, which is a simple and coarse way to define the value of forest assets. In 2020, the value of stumpage prices in non-industrial private forests (EUR 3,510 per hectare, forest land and poorly productive forest land for wood production) was 30 per cent higher in Mainland Finland than the average of sales prices of forest properties (EUR 2,692 per hectare) recorded in statistics by the National Land Survey of Finland. Between regions, values of hectare-specific stumpage prices differed from sales prices by -21 per cent (Uusimaa) up to +30 per cent (North Ostrobothnia). Forest properties made available for sale usually have fewer trees than forests in the same area on average.
As the formulas used to calculate different return factors are not exact, the total returns calculated based on these factors differ from directly calculated total returns. Between 2012 and 2018, the difference in Mainland Finland was -0.04 to -0.00 percentage points, while the corresponding range in region-specific results was -0.12 to +0.15 percentage points.
2.3 Correction of errors
Any errors identified in the statistics will be corrected as soon as possible, and the corrected information will be published on the homepage of the relevant statistics.
3. Timeliness and promptness of data
Preliminary data is published during March of the year following the statistical year, and final data is published during September.
4. Coherence and comparability of statistics
In the “Forestry as an investment” statistics, returns are calculated similarly for all regions and years. Due to corrections made to tree volumes, returns are not comparable with data published before 24th November 2021.
The returns found in the database were corrected on 24th November 2021. The figures for forest centers have changed between 1990 and 2003. In the 8th National Forest Inventory (NFI8), the proportions of logs were greater than in the 9th Inventory (NFI9). The difference was due to a different way of calculating the division of the tree stem into log wood and pulpwood. This decreased investment returns at the national level especially between 1994 and 2000 due to the deterioration in the value of forest assets calculated on the basis of timber and stumpage prices between inventories. In the new calculations, the growing stock is interpolated from the 1983 baseline directly to NFI9. In the statistical database, the time series begins in 1990.
5. Accessibility and transparency of data
The statistics are available from Luke’s statistical database.