Define the characteristics of Forestry capital
The term “capital” as used here means produced goods which are not immediately transferred to an ultimate consumer for his use. In forest management, ‘capital’ means growing stock — timber and wildlife as well, and also other productive living things that man may cultivate. It includes equipment of forest production also such as roads, bridges, rolling stock, installations for forest production, recreation, and watershed management; buildings and other structures, machines, tools and other supplies.
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Forest capital possesses some peculiarities. Since foresters are chiefly interested in forest capital we are going mainly to discuss here timber only.
The first peculiarity of forest capital is that the timber product is at the same time the timber growing machine but it is amazing to note that finally the machine becomes the product. It is the main feature of forestry whose consequences pervade the forest management.
The second peculiarity of forest capital is long gestation period involved in forestry. The long period between the decision to produce and the maturing of final produce for harvesting is sometimes 100 years or even more. The market for timber supplies, forestry costs, and technology—all change during such a long time. Thus a long period enhances the chances of loss and risk. The future is to certain.
The third peculiarity of forest capital is its long period of maturity which gives rise to a modest rate of return in forestry. Although the rate of return is presumably the central theme in respect of commercial forestry.
The fourth peculiarity of forest capital is that usually dominates the cost of timber growing among the variable costs. Suppose the foresters leave the trees untended under the nature for growing trees. In this case, the cost of holding the forest capital, or timber-growing stock, may be nearly 100 percent of the variable costs. Now take the example of an extreme case where the foresters play an active role in silvicultural operations etc., the cost of timber growing may overshadow the other kinds of capital and of labor. Timber growing is a unique thing among the industries as the great proportion of its costs are absorbed into the capital plant.
The fifth peculiarity of forest capital is its versatile nature. Some kinds of capital are highly versatile because they are capable of being shifted to some other investment position if found unfit in one. Money is the highly versatile capital. Iron and petroleum are other examples of such capital. An electrical motor is another example among machines. On the other hand, some capitals are less versatile than others.
For example, a saw can only be used to cut wood or a pulp mill can prepare pulp alone. If capital cannot be readily shifted, its value is bound to decline heavily in case the prospective demands for its product diminishes. Forest capital seems to be fairly versatile. It possesses high “time versatility” since it can be shifted either now or sometime later due to its durability.
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