RESEARCH FOR

ECONOMIC CALCULATION OF SHORT
ROTATION WILLOW PLANTATIONS IN LATVIA
Average yield in
willow plantations,
ODT ha -1 year -1
changes in costs according to average yield in willow plantations,%
Changes of IRR
Changes of
harvesting costs
Changes of
transportation cost
Table 2
Accumulated changes
of cash flow
8 -
- -
9 +10.5 -
+12.8 +23.9
10 +20.5 +25.0 +47.9
11 +28.1
+37.8 +65.9
12 +36.8 +16.4
+50.0 +89.8
13 +45.6 +62.8 +113.8
14 +52.0
+75.0 +131.8
15 +60.2 +32.9
+87.8 +155.7
16 +68.4 +100.6 +179.7
Source: authors calculations based on EcoWillow model.
Figure 4. Accumulate cash flow changes of willow plantation, according to biomass price changes, where all
other variables are the same.
Source: the author’s drawing according to EcoWillow model calculation.
Increase of fuel costs by 0.75 LVL L -1 or by
50% (from 0.75 LVL L -1 to 1.5 LVL L -1 ) will raise
the planting costs by 1.5% (from 695 LVL ha -1 to
705 LVL ha -1 ), the harvesting costs will increase
by 30.9% (from 152 LVL ha -1 to 199 LVL ha -1 ) and
transporting costs – by 29.2% (from 164 LVL ha -1 to
212 LVL ha -1 ). The fuel costs plays a significant role
in harvesting and transportation; similarly, other costs
like cutting price, ploughing and trailer costs will rise,
because of the use of fuel in all of these activities.
In some cases financial support in establishment
stage is an important factor to make a choice in
favour of willow plantations instead of not using the
abandoned agricultural land. The first earnings are
possible only after the first harvest; therefore, a single
establishment grant for the willow plantation would
make them more attractive to farmers and move the
payback to the first harvest. The establishment grant
should be 50% of the establishment costs to make
positive cash flow after the first harvest. In the standard
scenario if the establishment grant is 400 LVL ha -1 , the
Kristaps Makovskis, Dagnija Lazdiņa, Ligita Bite
payback is reached after the first harvest and the IRR
will increase by 62% (from 17.1% to 27.7%).
conclusions
The costs of willow plantation include positions
from different sectors (plantation establishment,
harvesting and transport). Increase or decrease of
the costs in a particular sector leads to changes in
the plantation cash flow during plantation lifespan.
Standard model for plantation of 10 ha area and
lifespan 22 years is provided in the study. In standard
scenario IRR is 17.1%, NPV is 1,099 LVL and the
payback is reached in the 9 th year or after the second
harvesting. The establishment costs in the first year
are 739 LVL ha -1 ; harvesting costs in the first harvest
are 152 LVL ha -1 and transport costs of wood chip are
164 LVL ha -1 . Major part of the costs is establishment
(33%), harvesting (26%) and transportation (29%);
all remaining costs taken together constitute 12% of
the total production costs. If the costs of land rise
by 50% (to 12 LVL ha -1 ) the land cost and taxes in
228 ReseaRch foR RuRal Development 2012