The prospects of cost reductions in willow production in Sweden

The current and future costs of willow short rotation coppice production in Sweden are analysed, considering all relevant cost factors explicitly. The future production costs are estimated considering effects of coppice area expansion and learning. The current and future costs of land and of risk premiums are subsequently estimated. Subsidies for farmers are not considered. If the area of willow cultivation were to expand enough to generate economies of scale, the production cost could be cut by about 10% compared to the current level. When learning effects are also considered, the total cost reduction potential is about 35%. Two major cost components (fertilization and road transport) are roughly stable while two other major cost components (establishment and harvest) have larger prospects for cost reduction, primarily due to potential for learning. Land costs and risk premiums vary and are uncertain, but both are estimated to be potentially significant compared to other cost components. Requirements of risk premiums may become lower as a consequence of area expansion and learning. Land costs are subject to many factors that are inherently uncertain, not the least future food prices. Efficient policies promoting an expansion of willow cultivation are discussed.

► The present and future cost of willow short rotation coppice production is analysed.
► First including effects of area expansion and in the second step also including learning effects.
► Current production cost of willow in Sweden could be reduced in the future, by some 35%.
► Farmers require compensation for cultivation costs, land and risks.