Breeding in the most of the Baltic Sea region countries has been used as an important tool to improve target traits of forest trees for more than 60 years. Its basis is an extensive plus-tree selection: in Latvia alone 1700 Norway spruces were identified and their open pollinated progeny tests established. Despite this effort and proven superiority of the selected material, during the last decades share of natural regeneration is increasing at the expense of planting of selected material. Therefore, before entering the next breeding cycle, objective of our study was to optimise the Norway spruce breeding strategy (testing method, duration, family size) under Latvian conditions, and carry out its financial analysis.

Alternative breeding strategies were optimised with the aid of computer simulation and differential analysis comparing planting of selected (improved) material and natural regeneration was applied. Neither duration, nor costs of different alternative strategies were the same, therefore equivalent annual annuity was used as a criterion for comparison.

The simulations showed that the total genetic gain per cycle differs between the breeding strategies: the GEN strategy yielded 9 % more, but the FEN strategy 30 % (testing time 20 years) or 21 % (testing time 25 years) less than the VEG strategy.

For the base scenario in Latvia (the interest rate r = 3 %; the deployment time of the selected material 24 years; the annual planting area is 5500 ha; the genetic gain varies from 25 to 45 %) the equivalent annual annuity from spruce breeding was positive and in range from 2.0 to 12.9 EUR ha^-1y^-1. Even if a 5 % interest rate for investments in tree breeding and seed orchard management were applied, it was more profitable for the forest owner to regenerate areas with genetically improved material than to rely on natural regeneration. Equivalent annual annuity from the VEG strategy was the highest (5.5-12.9 EUR ha^-1y^-1), exceeding that of the other strategies by 34-174 %. Financial gains from any of the strategies increased with expanding area of annual planting as well as with use of silviculture that promotes larger radial increment and in this way shortens rotation length, since the target diameter can be reached faster.

Keywords: Picea abies, breeding strategy, financial revenue, genetic gain, equivalent annual annuity