Timber management improves investment potential of non-industrial forest land

Linda Benedict  |  4/26/2006 11:31:04 PM

The LSU AgCenter’s Hill Farm Research Station near Homer includes about 300 acres of southern pine, in which various research projects are conducted. (Photo by Mark Claesgens)

Dr. Terry Clason, who has been a researcher at the LSU AgCenter’s Hill Farm Research Station since 1976, focuses on two major areas of research: managing competing vegetation in southern pine plantations and the effects of combining pastures with raising trees. (Photo by Linda Benedict)

Figure 1. Treatment Stand Stocking

Figure 2. Treatment Stand Volume

Figure 3. Financial Comparison

Table 1. Stand harvest volume and product distribution by managementoption

Table 2. Actual treatment costs and revenues in dollars per acre

Terry R. Clason

The economic potential of nonindustrial forest land in Louisiana is virtually untapped. Timber management is a cost-effective financial option on most non-industrial land because it can sustain timber production continuity and create an environment conducive for hunting, recreation or grazing. Since there are no general prescriptions for developing a highly productive forest resource, each tract must be treated as a unique entity based on biological conditions and landowner investment goals.

Many landowners perceive timber management as too costly, especially when timber prices are low. Although timber prices have increased dramatically in recent years, removing timber without appropriate management guidelines affects ecological development by altering vegetative composition in favor of less desirable species.

A study to evaluate the potential of using timber management to improve investment potential of small tracts of non-industrial forest land was conducted in northwest Louisiana. The research area was a 30-year-old, 240-acre mixed pine-hardwood forest of average production quality. Nine, 20-acre treatment plots were established by identifying boundary lines and inventorying the existing timber. Inventory data were used to separate the nine plots into blocks of three plots. Subsequently, three management treatments, which differed by investment goals and management intensity, were assigned randomly to one plot in each block. Management treatments included:
  • No Thin: Allow initial timber value to accrue with no management intervention.
  • Thin: Provide periodic revenue from intermediate harvests.
  • Thin & Release: Provide periodic revenue from intermediate harvests and hunting lease income.
Intermediate harvests were completed on the Thin and Thin & Release treatments at ages 30 and 38. Wildlife habitat enhancement was initiated at age 32 with a hardwood suppression treat ment and was continued with prescribed burns at ages 35, 38, 41 and 44.

Treatment plot growth and development were evaluated from age 30 to age 45. Tree growth data were collected from 20, 0.1-acre measurement plots per treatment plot at age 30 before treatment application and at ages 38 and 45. Cost and revenue data were maintained to determine the cost efficiency of each treatment. The financial evaluation for each treatment was based on these assumptions:
  1. Mean investment assets at age 30 totaled $543.87 for timber only. No land value was included.
  2. The 15-year investment period was from January 1984 through December 1998.
  3. Cost values during the investment period were obtained from actual or published data.
  4. Product stumpage values for ages 30, 38 and 45 were pulpwood $19, $23 and $27 per cord; chip-n-saw $44, $35 and $86 per cord; and sawtimber $178, $213 and $375 per 1,000 board feet.
  5. The annual hunting lease averaged $5 per acre, and the lessee assumed liability insurance costs.
  6. All costs and revenues were discounted annually at 8 percent.
  7. Financial evaluations were based on before-tax dollars.

No Thin Treatment
Age 30 stand stocking, tree diameter, tree height and stand volume averaged 147 trees per acre, 8.9 inches, 65 feet and 17.4 cords per acre (Figures 1 and 2). Between ages 30 and 38, tree mortality reduced stand stocking by nine trees per acre, and stand volume growth averaged 8.6 cords per acre. Periodic stand mortality and growth from age 38 to 45 averaged nine trees and 2.4 cords per acre. Total mean stand volume growth was 11 cords per acre. Final harvest volume was 28.4 cords per acre, with distribution among wood product classes averaging 9.6 cords for pulpwood, 1.5 cords for chip-n-saw and 4,360 board feet of sawtimber (Table 1).

Thin Treatment
Age 30 stand stocking, tree diameter, tree height and stand volume averaged 143 trees per acre, 9.1 inches, 65 feet and 17.2 cords per acre. The first intermediate harvest reduced stand stocking and volume to 60 trees and 9.6 cords per acre (Figures 1 and 2). No trees died between ages 30 and 38, and stand volume averaged 17.5 cords per acre. After the second intermediate harvest, stand stocking and volume averaged 30 trees per acre and 10.5 cords per acre. From age 38 to 45, no trees died and stand growth averaged 1.8 cords per acre. Total stand volume growth was 9.7 cords per acre. Intermediate and final harvest volumes were 14.6 and 12.3 cords per acre with distribution among wood product classes averaging 7.1 cords for pulpwood, 4.2 cords of chip-n-saw and 4,000 board feet of sawtimber (Table 1).

Thin & Release Treatment
Age 30 stand stocking, tree diameter, tree height and stand volume averaged 141 trees per acre, 9.1 inches, 65 feet and 16.9 cords per acre. The first intermediate harvest reduced stand stocking and volume to 60 trees and 9.5 cords per acre (Figures 1 and 2). No tree deaths occurred between ages 30 and 38, and stand volume averaged 18.4 cords per acre. After the second intermediate harvest, stand stocking and volume averaged 30 trees per acre and 11.1 cords per acre. From age 38 to 45, no trees died and stand growth averaged 2.1 cords per acre. Total stand volume growth was 11 cords per acre. Intermediate and final harvest volumes were 14.7 and 13.2 cords per acre; distribution among wood product classes averaged 7.1 cords for pulpwood, 4.0 cords of chip-n-saw and 4,200 board feet of sawtimber (Table 1).

Wildlife habitat enhancement on the Thin & Release option was designed to increase accessibility, improve visibility and enrich the diversity of the shorter plants, known as the understory. The first intermediate harvest limited equipment movement to designated skid trails placed parallel at 50-foot intervals within the stand. All unwanted hardwood, except the mast species that produce nuts and seeds, were removed.

At age 32, a hardwood suppression treatment was applied with ground mobile equipment traveling along the existing skid trails. A contact herbicide was used to suppress the growth of hardwood sprouts and pine and hardwood seedlings, while minimizing damage to the residual mast trees. The understory was maintained by initiating a triennial burning schedule at age 35. It was continued through age 44.

During the 15-year investment period, intermediate harvests removed periodic volume growth, provided shortterm revenue and enhanced stand market potential. The age 30 harvest removed 7.6 and 7.4 cords per acre from Thin and Thin & Release treatments. Volume distribution among product classes was similar for each option. Pulpwood and chip-n-saw accounted for 45 percent and 55 percent of the volume (Table 1).

Harvest yields at age 38 were 7.0 and 7.3 cords per acre for the respective treatments. Treatment pulpwood volume was similar at 2.4 cords per acre, and sawtimber volume was 1,280 and 1,365 board feet per acre for the Thin and Thin & Release treatments. Total stand volume production, which is the sum of final and intermediate harvest volumes for No Thin, Thin and Thin & Release treatments, was 28.4, 26.9 and 27.9 cords per acre. Although final harvest sawtimber volume differed among treatments, sawtimber production during the investment period for the respective treatments was 4,360, 4,000 and 4,200 board feet per acre.

Cost and revenue items for each investment goal are presented in Table 2 by year incurred and value. Actual management costs for the No Thin, Thin and Thin & Release treatments were $15.27, $46.73 and $131.72 per acre (Table 2). Wildlife habitat enhancement accounted for 65 percent of the Thin & Release management costs. Actual costs were discounted annually at 8 percent and combined with initial stand value to derive the respective investment treatment costs, which were $537.81, $582.69 and $636.56 per acre (Figure 3).

Actual total revenue from the No Thin treatment exceeded the Thin and Thin & Release by $382.70 and $255.75 per acre (Table 2), but the discounted revenues for the respective treatments were $631.49, $754.84 and $810.50 per acre (Figure 3). Hunting lease revenues from the Thin & Release treatment provided 5 percent of the discounted revenues and surpassed the discounted habitat enhancement costs by 30 percent.

Net present values at age 45, discounted revenues less discounted costs, show that the investment potential for all treatments exceeded a discount interest rate of 8 percent (Figure 3). Although the No Thin treatment accrued the lowest management costs, its net present value was $68.48 and $70.26 per acre less than Thin and Thin & Release treatments. The internal rate of return, which is the interest rate at which the difference between discounted revenues and costs equals zero, for the investment period was 9.2 percent, 9.8 percent and 9.8 percent for the No Thin, Thin and Thin & Release treatments.

In moderately stocked, mixed pinehardwood forests, intermediate harvests and understory vegetation manipulation can sustain adequate timber growth, generate periodic timber income and create an additional marketing resource. Although intermediate harvesting did not increase timber growth, the removal of periodic growth provides a short-term cash flow for investing in other financial instruments. Altering stand understory provides a resource for additional shortterm cash flow and may reduce future reforestation costs. Thus, timber management practices can help landowners improve the financial potential of their forest land.
 
Terry R. Clason, Professor, Hill Farm Research Station, Homer, La.

(This article was published in the winter 2000 issue of Louisiana Agriculture.)
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