Short-run and long-run costs for milling rainforest cabinetwood timbers

Abstract

This paper provides estimates of short-run and long-run average costs of portable sawmills and discusses the implications of using portable rather than fixed-site sawmills for milling rainforest cabinet timbers in northern Queensland, Australia. Ten portable and eight fixed-site sawmills were surveyed in northern Queensland, and the findings, combined with information from other sources, were used to develop a financial model of milling costs. Financial analysis reveals that, because fixed costs for portable sawmills are low, the cost structure is dominated by variable costs, in particular labour costs. The rate of sawn timber recovery had a major effect on milling cost. The estimated shortrun average total cost of milling rainforest timber with a portable sawmill was $162 m–3 of roundlog ($361 m–3 sawntimber),assuming a 45% recovery rate and a roundlog throughput of 344 m3 y–1. This is higher than the median contract milling price of $140 m–3 of roundlog ($311 m–3 of sawntimber), suggesting that some portable sawmillers (especially part-time operators)do not take all costs into account. The financial model was also used to derive sawmilling long-run average cost curves, based on varying sizes of portable sawmills. The bandsaw has the lowest milling cost for log throughput from zero to about 60 m3 y–1, the Lewis saw from 60 m3 y–1 to 185 m3 y–1, the Forestmill from 185 m3 y–1 to 1240 m3 y–1 and the Supermill beyond 1240 m3 y–1. The financial model developed indicates that even where all costs are included, portable sawmills can be competitive with fixed-site mills in an infant or declining industry situation, and can also play a role in farm woodlot forestry.