A trial was conducted in late 2008 and early 2009 to compare the sawing recovery rate using chainsaws and mini-bandsaws in small-scale timber processing on Leyte Island, the Philippines. The sawing recovery rate for chainsawing was found to be 39% while that for the mini-bandsaw was 52%. The financial feasibility of using both saws in processing timber from smallholder tree farms on the island as well as its policy implications are evaluated in this paper. The net revenue of small-scale sawn timber processing is PhP873/m3 from chainsawing and PhP1895/ m3 for bandsawing. Profitability of sawn timber processing was found to be highly sensitive to sawing recovery rate and therefore both the use of saws with a smaller kerf and training of the saw operators are recommended. Profitability was also found to be highly sensitive to haulage distance of sawn timber. Negative returns were predicted for a hauling distance of more than 2.25 km and 3 km for chainsawn timber processing and bandsaw milling, respectively. It is recommended that farmers, extension agents at local government units and Foresters of the Department of Environment and Natural Resources (DENR) should consider road access in forestry promotion if tree farming is oriented towards the sawn-timber market

Cedamon, E.

Harrison, S. R.

Herbohn, J. L.

University of Queensland eSpace

8. FINANCIAL EVALUATION AND 
IMPLICATIONS OF SAWING RECOVERY OF 
CHAINSAWS AND MINI-BANDSAWS IN 
SMALLHOLDER TIMBER PROCESSING 
 
Edwin Cedamon, Steve Harrison and John Herbohn 
 
 
A trial was conducted in late 2008 and early 2009 to compare the sawing recovery rate using 
chainsaws and mini-bandsaws in small-scale timber processing on Leyte Island, the 
Philippines. The sawing recovery rate for chainsawing was found to be 39% while that for 
the mini-bandsaw was 52%. The financial feasibility of using both saws in processing timber 
from smallholder tree farms on the island as well as its policy implications are evaluated in 
this paper. The net revenue of small-scale sawn timber processing is PhP873/m3 from 
chainsawing and PhP1895/ m3 for bandsawing. Profitability of sawn timber processing was 
found to be highly sensitive to sawing recovery rate and therefore both the use of saws with 
a smaller kerf and training of the saw operators are recommended. Profitability was also 
found to be highly sensitive to haulage distance of sawn timber. Negative returns were 
predicted for a hauling distance of more than 2.25 km and 3 km for chainsawn timber 
processing and bandsaw milling, respectively. It is recommended that farmers, extension 
agents at local government units and Foresters of the Department of Environment and 
Natural Resources (DENR) should consider road access in forestry promotion if tree farming 
is oriented towards the sawn-timber market. 
 
 
INTRODUCTION 
 
On Leyte Island, the Philippines, chainsaws and mini-bandsaws are the two most common 
types of saws used for converting logs into lumber. These two types of saws differ in saw 
kerf (blade thickness). The kerf for chainsaws is approximately 10 mm, and for mini-
bandsaws about 6 mm. There is a poor understanding, particularly among farmers on Leyte 
Island, of the impact of sawing recovery on overall returns of smallholder tree farm 
enterprises. In this paper, the answers to the following questions are sought: 
 
Given a choice between a chainsaw and mini-bandsaw, which machine would yield a 
higher net revenue in smallholder timber processing? 
To which factors is the profitability of smallholder timber processing net revenue most 
sensitive? 
How far from a road should the trees be located to achieve positive net revenue for both 
sawing machines? 
 
These are the critical questions that smallholder tree farmers, timber processors 
(chainsawers and mini-bandsawers), and timber retailers may consider in marketing 
smallholder timber. 
 
The next section of this paper describes how the analysis was carried out. A simple financial 
model comparing the net revenue of timber processing using a chainsaw and a mini-
bandsaw is then presented. The results from a sensitivity analysis and the scenario analyses 
are discussed in the fourth section. The paper concludes with answers to the research 
  59
Sawmilling Recovery Rate and Cost and Implications for Timber Processing 
questions, and a discussion of the implications of sawing recovery of chainsaw and mini-
bandsaw for smallholder tree farm enterprise. 
 
RESEARCH METHOD 
 
Sawing trials were conducted in Bato and Matalom on Leyte Island between September 
2008 and February 2009, to compare recovery rates of chainsawing and mini-bandsawing 
and to investigate if saw operators influenced the sawn timber recovery rate for the two saw 
types. An add-on objective of the sawing trial was to investigate some of the financial and 
policy implications of sawing recovery rate from chainsaws and mini-bandsaws. Key 
informant (KI) interviews and participant observations were conducted to estimate costs and 
revenue of small-scale sawn timber processing. Bandsaw operators, tree farmers, chainsaw 
operators, and carabao skidders involved in the trials were interviewed as key informants. 
Cost and revenue estimates made by Bato KI were validated by the Matalom sawing trial 
cooperators. Most information gathered from Bato KI was found by Matalom KI as 
reasonably correct except for felling and hauling cost which was believed by Matalom KI to 
be high, relative to what they pay in Matalom. The felling and bucking cost was therefore re-
estimated by Matalom KI. The sawn timber recovery rate was estimated using data from the 
sawing trial as reported by Cedamon et al. (these proceedings).  
 
Snapshots of small-scale chainsaw milling and bandsaw milling enterprises are modelled in 
this paper. The model represents the processing of 1 m3 of sawn timber, involving 
purchasing standing trees from a farmer, hauling of logs and sawn timber by carabao 
skidders, sawing by chainsaw and bandsaw, and transporting logs or sawn timber to sawmill 
and customers respectively. Transaction costs and costs related to obtaining harvest and 
transport permits are not included in the model. Standing trees were purchased from a 
smallholder tree farm that is approximately 0.5 km from the barangay road. The distance 
from the barangay road to the town centre where most customers and the bandsaw mill are 
located is 3 km. The rent for sawing equipment (bandsaw mill and chainsaw) and 
accessories per unit of timber sawn is assumed to be sufficient to cover the cost of 
maintenance and replacement of the machine parts.   
 
Table 1 presents the estimated parameters of the simple financial model. The financial 
model was set-up in Excel and the Table and Scenario functions were used to undertake 
sensitivity and scenario analysis. The Excel chart function was also used to present 
scenarios meaningfully.  
 
The financial model assumes that the hauling distance from tree farm to the nearest road is 
0.5 km and the distance of the mini-bandsaw mill from the barangay road is 3 km. It is also 
assumed that the distance from the barangay where the trees were sawn by chainsaw to the 
customer is 3 km. The bandsaw motor power in this analysis is 3 horsepower (hp) which has 
implication for the timber turnout per day. The volume unit of timber considered in the 
subsequent financial analysis is cubic metre, on a sawn timber basis. 
 
 
 
 
 
 
 
 
 
 
 
 
  60
Improving Financial Returns to Smallholder Tree Farmers in the Philippines   
Table 1. Parameters in the simple financial model for small-scale sawn timber processing 
 
 
Physical and financial parameters Chainsaw Bandsaw 
Saw log market price (PhP/m3) 770 770 
Felling and bucking cost (PhP/m3) 740 740 
Off-road hauling cost for lumber (PhP/m3/km) 490 0 
Off-road hauling cost for log (PhP/m3/km) 0 400 
On road hauling cost (PhP/ m3/km) 100 100 
Total wage expenses for 2 men crew (PhP/day)  700 500 
Wage for operator (PhP/day) 400 300 
Wage for helper (PhP/day) 300 200 
Timber turnout (m3/day) 1.23 0.72 
Log requirement for m3 sawn timber (m3) 2.56 1.92 
Sawn timber recovery rate 0.39 0.52 
Rent for machine and accessories (PhP/day) 400 318 
Fuel and lubricant for chainsaw cost (PhP/m3) 600 0 
Electricity cost for bandsaw (PhP/ m3) 0 100 
On-road distance from barangay road to customers or  
selling outlet (km) 
3 3 
Off-road hauling distance from tree farm site to barangay road (km) 0.5 0.5 
Bandsaw motor power (hp)   3 
Sawn timber market price (PhP/board foot, bft) 16 16 
THE FINANCIAL MODEL COMPARING THE NET REVENUE OF TIMBER 
PROCESSING USING CHAINSAW AND MINI-BANDSAW 
 
The cost and revenue of producing 1 m3 of sawn timber using a chainsaw or bandsaw is 
calculated on the basis of the parameters and assumptions presented in Figure 2. The first 
column of Figure 2 lists the cost and revenue items, the second and third columns report the 
calculated costs and revenues for chainsawing and mini-bandsawing while the fourth column 
shows the difference between cost and revenue items for the two sawing equipment types. 
The negative sign in the fourth column indicates that bandsaw milling cost or revenue is 
lower than that for chainsaw milling. There are key differences in costs between the two 
sawing options. For example, bandsaw milling has a lower log cost, felling and bucking cost, 
and also milling cost compared to chainsaw milling, while chainsaw milling has a lower 
transport and labour cost than bandsaw milling. The lower log cost and the felling and 
bucking cost in bandsaw milling is due to the fact that bandsaw milling requires less log 
timber per cubic metre of sawn timber than does chainsaw milling, due to the higher 
recovery rate. In addition to this, the lower cost for bandsawing is brought about by lower 
rental charges on machinery and accessories. It is apparent that the saving on log cost in 
the case of bandsawing is sufficient to cover the transport cost differential. Based on the 
parameter estimates and assumptions presented above, the net revenue of processing 1 m3 
by chainsaw is PhP873 and by mini-bandsaw is PhP1895. 
 
 
  61
Sawmilling Recovery Rate and Cost and Implications for Timber Processing 
 
 
Figure 1. Simple financial model of small-scale sawn timber processing by chainsaw and 
bandsaw  
 
SENSITIVITY AND SCENARIO ANALYSES 
 
To investigate the sensitivity of net revenue to individual cost parameters, a sensitivity 
analysis was undertaken using the Table function in Excel. Parameters listed in Table 3 
were adjusted by plus or minus 20% to represent optimistic and pessimistic values. The net 
revenue was calculated for the estimated optimistic and pessimistic values for each 
parameter in turn with the other parameters held constant at their most likely values. The 
  62
Improving Financial Returns to Smallholder Tree Farmers in the Philippines   
sensitivity analysis reveals that the net revenue of small-scale sawn timber processing using 
a chainsaw and bandsaw is both highly sensitive to sawing recovery rate and log market 
price. The sensitivity ranks of parameters in Table 2 provide an explanation as to which 
parameter the net revenue of small-scale sawn timber processing is sensitive to. 
 
Table 2. Sensitivity analysis for the small-scale sawn timber processing model 
 
Cost or revenue item Pessimistic Current Optimistic Sensitivity 
rank 
 
C
ha
in
sa
w
 
B
an
ds
aw
 
C
ha
in
sa
w
 
B
an
ds
aw
 
C
ha
in
sa
w
 
B
an
ds
aw
 
C
ha
in
sa
w
 
B
an
ds
aw
 
Recovery (%) 31 42 39 52 47 62   
Net revenue (PhP) -126 975 873 1895 1532 2519 1 1 
Hauling distance off-road (km) 0.6 0.6 0.5 0.5 0.4 0.4   
Net revenue (PhP) 824 1818 873 1895 922 1972 7 5 
Hauling distance on-road (km) 3.6 3.6 3 3 2.4 2.4   
Net revenue (PhP) 813 1780 873 1895 933 2011 6 4 
Labour cost (PhP) 840 600 700 500 560 400   
Net revenue (PhP) 759 1756 873 1895 987 2034 4 3 
Fuel and lubricant or electricity 
(PhP) 
720 120 600 100 480 80   
Net revenue (PhP) 753 1875 873 1895 993 1915 3 7 
Rent for machine and 
accessories (PhP) 
480 382 400 318 320 254   
Net revenue (PhP) 808 1849 873 1895 938 1941 5 6 
Log market price (PhP) 924 924 770 770 616 616   
Net revenue (PhP) 478 1599 873 1895 1268 2191 2 2 
 
In a scenario analysis, the optimistic, most likely and pessimistic values of parameters listed 
in Table 3 were simultaneously adjusted in calculating the net revenue of sawn timber 
processing. Using the Scenarios function of Excel, the net revenue of small-scale chainsaw 
and bandsaw milling was calculated and the resulting values are presented in Table 3. For 
the pessimistic scenario, the values of parameters are set at adverse levels (costs items 
increased and revenue items decreased by 20%) and for the optimistic scenario the values 
of parameters are set at favourable levels. For the pessimistic scenario, the net revenue 
from chainsaw milling is predicted to be negative while that of bandsaw milling is positive. 
This indicates that small-scale chainsaw milling is a bigger risk than small-scale bandsaw 
milling.  
 
The net revenues of small-scale chainsaw and bandsaw milling were predicted for various 
levels of sawing recovery rates and off-road hauling distances. The Table function of Excel 
was used to predict net revenues for most likely scenarios at each specified level of sawing 
recovery rate and hauling distance holding other estimated parameters values constant.  
Line graphs were generated to present scenarios meaningfully. Figure 2 shows the net 
revenue of small-scale chainsaw milling and bandsaw milling at varying recovery rates. At  
about 49.3% sawing recovery rate, the net revenue lines for both saw types converge. Below 
49.3% recovery rate, chainsaw milling is more cost-effective than bandsaw milling and 
above this convergence point, bandsaw milling has lower cost, ceteris paribus.  
 
  63
Sawmilling Recovery Rate and Cost and Implications for Timber Processing 
Table 3. Scenario analysis of small-scale chainsaw and bandsaw milling financial model 
 
Parameter Scenario for chainsaw 
milling 
Scenario for bandsaw 
milling 
  
Most 
likely 
Pessi-
mistic 
Opti-
mistic 
Most 
likely 
Pessi-
mistic 
Opti-
mistic 
Sawing recovery rate 0.39  0.31 0.47 0.52 0.42 0.62 
Log market price  770 924 616 770 924 616 
Fuel and lubricant or electricity 600 720 480 100 120  80 
Labour cost 700 840 560 500 600 400 
Off-road hauling distance   3  3.6  2.4   3  3.6  2.4 
On-road hauling distance 0.5 0.6 0.4 0.5 0.6 0.4 
Rent of sawing equipment 400 480 320 318 382 254 
Net revenue 873 -1031 2267 1895 165 3133 
 
0
10
20
30
40
50
60
70
80
-3000 -2000 -1000 0 1000 2000 3000 4000
Net revenue (PhP)
R
ec
ov
er
y 
ra
te
 (%
)
Net revenue for chainsaw Net revenue for bandsaw
 
 
Figure 2. Line graph of predicted net revenue of small-scale chainsaw milling and bandsaw 
milling at various sawing recovery rates 
 
The relative profitability for the two saw types in relation to distance of tree farms from a road 
is examined by plotting the predicted net revenues for various distances. Figure 3 presents 
the line graph of net revenue of the saw types at various distances of the tree farm from a 
road. Figure 3 shows that chainsawing and bandsawing would have positive net revenue for 
trees located no further than 2.25 km and 3 km from a road, respectively, assuming all other 
parameter values are held fixed. It is also notable in Figure 3 that bandsawing has a higher 
positive net revenue than chainsawing. This may be due to the small differential in off-road 
hauling cost.  
 
  64
Improving Financial Returns to Smallholder Tree Farmers in the Philippines   
  65
-1000
-500
0
500
1000
1500
2000
2500
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Off-road hauling distance (km)
Ne
t r
ev
en
ue
 (P
hP
)
Net revenue for chainsaw Net revenue for bandsaw
 
 
Figure 3. Net revenue of small-scale chainsaw milling and bandsaw milling in relation to off-
road hauling distance 
 
RESEARCH IMPLICATIONS AND CONCLUDING COMMENTS 
 
Cedamon et al. (2009) found a significant and large difference in sawing recovery rate 
between chainsaws and bandsaws. The financial implication of sawing recovery rate 
differential was evaluated by developing a simple financial model considering some costs 
that may perhaps be incurred in a sawn timber processing business. The net revenue of 
bandsawing is more than twice what of chainsaw milling because of the higher sawn timber 
recovery rate. A sensitivity analysis showed that the profitability of sawn timber processing is 
highly sensitive to sawing recovery and sawn timber processors should place a high priority 
on improving the sawn timber recovery rate. Apparently, using saws with a smaller kerf can 
increase sawing recovery. Cedamon et al. (2009) reported that skilled operators achieve a 
higher sawing recovery, which suggests that improving skills through providing training for 
sawers is a feasible option. Holding-Anyonge and Roshetko (2003) commented that training 
and certification of mobile powersaw operators will not only increase returns in the timber 
industry, but the improvement in the timber conversion rate will also increase the quantity of 
timber reaching local and national markets and enhance the sustainability of planted trees 
on-farm and natural timber resources. The line graph of net revenue at varying off-road 
hauling distances reveals that to obtain a positive net revenue, trees should be located not 
further than 2.25 km from a road if processed using a chainsaw and 3 km in bandsaw 
milling. Obviously, the trees should be relatively near roads or have road access to minimize 
off-road hauling costs. This result is relevant for extension agents at local government units 
and Foresters of the Department of Environment and Natural Resources in providing 
recommendations for tree farmers planning to establish new (or expand existing) tree farms. 
 
REFERENCES 
 
Cedamon E, Herbohn J and Harrison S (2009) Recovery of milling timber from smallholder tree farms 
using chainsaws and mini-bandsaws. (These Proceedings) 
Holding-Anyonge C and Roshetko J (2003) Farm-level timber production: orienting farmers towards 
the market. Unasylva 212(54): 48–56 


Financial evaluation and implications of sawing recovery of chainsaws and mini-bandsaws in smallholder timber processing

http://espace.library.uq.edu.au/view/UQ:187367/CedamonFINAL08.pdf

Financial evaluation and implications of sawing recovery of chainsaws and mini-bandsaws in smallholder timber processing

Abstract

Similar works

Full text

Available Versions

University of Queensland eSpace