Economic Modelling of Poplar Short Rotation Coppice Plantations in Hungary

Abstract

No study has been previously completed on the range of sites, potential yield, and financial characteristics of poplar short rotation coppice plantations (SRC) in Hungary. This paper conducts a literature survey to reveal the biomass production potential of such plantations and presents a model that is used to analyze their financial performance. The results indicate that the break-even-point of production is between 6 and 8 oven-dry tons per hectare per year once a minimum cost level and wood chip price within a 10% range of the 2020 value are considered. The higher the wood chip price, the lower the break-even-point. Since the model excluded the administrative costs that depend on the type and size of the management organization, the break-even-points can be significantly higher in reality, which suggests that short rotation energy plantations can be a financially reasonable land-use option in above average or even superior poplar-growing sites. The rotation period of industrial poplar plantations that produce high quality veneer logs ranges from 12 to 25 years. Though such sites can provide higher returns on investment, short rotation plantations have the advantage of providing a more evenly distributed cash flow. To facilitate the wider application of poplar SRC, the related policies need to apply specific subsidies and allow the rotation cycle to be extended up to 20–25 years, which is currently limited to 15 years.