Can someone explain why this cedar sapling is dying?

Is your house located in the south part of the town? Because cedars only grow in the northern part of town
 
It is too south for cedars to grow there, since they only grow in the northern part of your town.
 
Yes cedars only in the northern half of the town.

Plus trees don't grow in every spot - that's why I try a native fruit first and if that grows I cut the sapling down & plant what I am actually wanting.
(If you cut a sapling the day after you planted it ie you know its growing, it only takes one axe swing to cut it down - useful if axes in short supply).
I 'save' my silver axes by doing the first 2 cuts with a normal axe and the 3rd and last cut with the silver axe - this will still get you those special designer stumps.

I know this is a lot more than what you asked but I like this link so will give anyway - useful info if you are looking to plant a number of trees near one another.

http://gaming.stackexchange.com/questions/120685/are-there-any-spacing-rules-for-trees
 
for the record iirc it's only about the top third of the map that cedars can grow

It is the top half, but only of the ground part of your town. The sea (and beach?) part of the map that shows at the bottom doesn't count, since no trees csn be planted there anyway.
 
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