FEATURED PROFESSIONAL: A Comment by Northwest Management, Inc. Timber Investments Hold Great Potential

Timber Investments Hold Great Potential

Today’s investors are beginning to see real profit potential in forestland. Once considered an unexciting investment, forestland has shed that image over the last decade. The reason: timber and land prices have risen dramatically in many areas of the U.S.

A constant rise in demand for wood and wood products is behind the price increase. The U.S. Forest Service forecasts that prices for the Douglas-fir region will climb 40% between the years 2000 and 2040 and Douglas-fir stumpage prices have increased 3.8% in real terms per year for the last nine decades.

A big advantage to investing in timberland is that it offers a profitable combination of long-term stability and attractive returns. Based on the risk-return ratio, timberland outperforms most stocks, bonds and many commercial real estate transactions.

Yet many forest owners are not able to fully benefit from these positive economic trends. That is because many owners have not developed long-term forest management plans. These plans help ensure the productivity, health and sustainability of their valuable forest resources.

One profitable management technique is to control stocking through thinning during growth periods in the forest’s life. This reduces the competition for soil moisture and nutrients. It is typically done when a new stand of trees is planted, but can also prove profitable in older forests.

Marketing your logs by species and quality and playing the market pays big dividends. During the past 4 years, landowners selling cedar and lodgepole pine have hit these species highs and received terrific returns.

The more intensively the stands are managed, the more options can be available to the landowner. The landowner can take advantage of market conditions to continue enjoying investment gains and still retain the recreational benefits from owning forestland.

Planting Container-Grown Seedlings

Vincent Corrao, Northwest Management, Inc.

Each year millions of trees are planted on private lands. The success or failure of these plantations is dependent on seed source, seedling quality, handling, soil conditions, site preparation and planting technique. Let’s look at some of the most important points that need to be considered when putting in a plantation.

The seed source or where the seeds originate is very important to the success of the new tree stand. Seeds should come from similar elevation and aspect and the trees from which they are collected should exhibit good form and growth characteristics. Proper seed zone is an important issue and each seed zone differs by geographic area. Always inquire from the nursery where the seed came from and does your property fall within this seed zone.

Seedling quality is determined by standards such as the caliper of the stems, root to shoot ratios and color. Most nurseries grow excellent seedlings. In the fall seedlings need to shut down and harden off in preparation for the cold winter months. The process of hardening off and the cold storage in tree boxes during the winter is a very critical period for seedling quality. Seedlings need to be handled as little as possible and proper storage (temperature and humidity) of the trees during the winter has a great impact on the seedling’s ability to perform when planted in the spring. Trees that are poorly stored (i.e. too warm) often perform poorly.

Planting in spring should be done as soon as the soil reaches 40ºF for several days. The spring moisture will be available to the seedling as the days warm up and seedling has the best chance of rooting and supplying the needed moisture to the top of the tree.

The removal of grass, forbs and brush directly around the seedling will improve planting success by reducing the competition for moisture, light and nutrients. Hand scalping away the vegetation can be done in some situations, but several herbicides can now be spot applied reducing the competition for one to two seasons. Generally the better the site preparation, the higher the planting survival and growth of the seedling.

Planting technique differs a little by planting tool used, but the seedling needs to be planted straight up with the top of the plug (root collar) at least 1/2 inch below the soil line. The soil should be packed firmly around the plug with no organic material such as sticks or leaves pushed into the hole. Avoid stomping or packing the soil with your foot or a stick since excessive packing or seedling scaring reduces survival. Following these major points will aid in producing a successful healthy plantation.

FEATURED PROFESSIONAL: Ken Nuhn, Certified General Appraiser, Columbia Natural Resources Analysis LLC


Appraising Forest and Other Rural Lands

Undeveloped rural land (i.e. forest, pasture, riparian areas) has been traditionally given a lower economic value than land providing products or housing to people. Even now, the value of these lands are derived mainly from the use they provide. Some locations provide annual crops, others provide a characteristic like shoreline or view to people who value this feature and are willing to pay for the land to own it.
As the population grows and people become more sophisticated in their wants and needs, the demand for the specific economic features has grown, as has the desire to protect some locations from development by using Conservation Easements or funds provided by the government to protect open spaces.

Uncovering and understanding the relationship between value and these economic features in natural resource areas is fundamental to proper management of the resources. Often, one area may have several competing or complementing features, making the management decision more difficult.

The forestland or rural appraisal of property is first and foremost a method of uncovering and estimating value relationships at a given time. Analysis of the various uses for rural property, and the demand for those uses, offers the property manager valuable answers to fundamental questions. A fully developed appraisal can address many areas of concern, providing a manager with both the information and the support to make a well-informed decision.

The manager and the appraiser should work together from the initial consultation to make sure that the manager’s questions about the land are being answered, as well as considered from the aspect of value. The expertise available to the client should be as varied as the questions.
I believe that the depth of knowledge and training of the appraiser are valuable elements in the forest land appraisal. The complexity of issues influencing the forest or other rural land ownership makes great depth of knowledge across the spectrum of issues nearly impossible for one single individual. Assembling a team of experts in the range of issues and analyzing appraisal problems by various members of the team based on the specific situation is one advanced method of efficiently and completely answering today’s difficult forest land and other natural resource appraisal questions.

Forest managers’ considerations are much more varied than the “value” estimates developed. They require thoughtful and accurate answers based on solid knowledge, across a wide range of natural resource information. The team approach, used by Columbia Natural Resource Analysis LLC, provides forest and rural landowners with in-depth, extensive data of natural resource information, together with a staff of knowledgeable analysts to provide information for today’s difficult resource decisions. The team approach to forest and rural land appraisal is better for the client, and I believe, better for the future of rural lands.

(Ken Nuhn has been an appraiser for 15 years).

What Factors Must Be Considered For “Good” Forest Management?

Vincent Corrao, Northwest Management, Inc.

Managing a forest is pretty simple…You mark the dead and dying trees to cut, thin a few here and there and you have a nicely managed forest!! The trees look healthy, are spaced evenly and to most observers look like they are growing.

Today, silviculture, the art and science of growing trees, is combined with ecosystem management and landscape management, and when we are done with all these ideas, we say, “this is good.” The question becomes, “What is good for tree health, ecosystem stability, and the inhabitants of the forest (humans included)?”

In Europe, especially Germany and Austria where forest management has been practiced for centuries, some questions have come to the surface on tree health, soil productivity and tree growth. Multiple rotations of single species (i.e. planted spruce stands) have depleted or are suspected of depleting nutrients, and have weakened tree health, producing less growth and may not be the best management for the forest ecosystem. Over the years, the rotation of spruce and conifers was preferred over many of the hardwood species. Nutrient recycling, lost from the absence of the hardwood species and the concentration of only a few specific species has changed the productivity of the soil and consequently lessened tree growth.

Managing a forest for a large number of species with varying age classes, heights and diameters provides stability and diversity, which can be very productive for tree growth, wildlife habitat and with proper species selection be more resistant to insect and disease problems.

Managing a forest in this manner requires careful selection of the trees to leave, and protection of the seedling, sapling and pole size trees.

The crowns of the trees left in the forest should be very pointed and conical, extend 30 to 50% or more of the total tree height and should exhibit a nice green color. The regeneration should be thinned so that the healthy vigorous trees can take advantage of the thinning of the larger overstory trees and provide replacement trees as other trees fall out of the stand due to mortality or harvesting activities. This type of management requires that the trees to be left or removed be marked to insure that the management objectives are being met. Each tree species has it’s own ecology of where it like to grow and when considered, the trees will have higher growth rates. Careful selection of an experienced logging contractor with the right size equipment will make all the difference in the quality of the harvest and protection of the regeneration.

The next time you hear someone talk about silvicultural prescription, ecosystem or landscape management, ask them if there are considering the health of the individual tree, spacing of these trees, future productivity and the impact that this management will have on the forest.

FEATURED PROFESSIONAL: Patrick Moore, Greenpeace Misguided

An environmental movement that was initially well motivated has taken a detour that could have devastating global consequences on the life and lands it was intended to protect.

As a founding member of Greenpeace and a scientist, I am dismayed by the attempts of some environmental leaders to claim the loss of the Earth’s forests and its biodiversity is due to forestry activities. Not only is this an inaccurate assumption, it is a dangerous one.
The causes for deforestation and the extinction of species can be traced to many sources. The U.N. Food and Agriculture Organization estimates that 95% of deforestation is caused by clearing for human activities. Over the decades of this century, massive areas of land(s) have been cleared throughout the world and urban areas have sprawled into once forested regions. In contract, since the 1970s, the result of forestry activities has been reforestation.

The disappearance of forested areas has contributed to the extinction of certain species that depend upon forest biodiversity. Other contributors to the decimation of animal populations include the introduction of foreign predators and disease. To date, no one has been able to supply evidence of any one species becoming extinct because of logging activities. Unfortunately, that does not stop key personalities in the environmental movement from making such allegations.

Outside of the obvious negative affect of misinforming the public, I am very concerned that some proposed environmental policies will create conditions leading to the further degradation of the planet we share. Suggestions have been made by those opposing forestry activities that on first examination, sound like ideas worth exploring; reducing the use of wood for fuels, developing alternative building materials and the creation of “tree-free paper” products. However, a look beneath the surface of these proposals reveals a short-term agenda with long-term negative impacts. For example, the alternatives offered to wood in the production of paper include hemp, kenaf and cotton. These are annual, single-crop that will have to be planted on huge tracts of land—land where we could be growing trees. These vast field of crops would not support the bio-diversity of life that flourishes in our forest. And, as annuals, new crops would have to be planted each year. Trees, in contract, are grown over a period of many years.

A second piece of the environmental agenda is to reduce the use of wood as a building material by producing so-called “environmentally appropriate alternatives”. Currently, the only viable substitutes for wood building materials are steel, cement, plastic and brick. Each of these materials requires a great deal more energy to produce than wood and none returns benefits to the environment. On the other hand, wood is produced with solar energy. Its growth helps to clean the atmosphere of excess carbon dioxide (eliminating “greenhouse gases”). Trees provide a natural habitat for animals and, unlike the proposed alternatives, are a renewable resource.

These misguided efforts are part of the movement’s assumption that, if we reduce the use of wood, our forests and all its creatures will be saved.

This ignores the fact that 50% of all wood used in the world is burned to supply energy for cooking and heating. In these developing, tropical countries where people cannot afford fossil fuels, the unsustainable wood gathering for fuel is a major cause of deforestation. And, if these millions of people could burn fossil fuels, the result would be a significant contribution to greenhouse gases.

Ironically, the goals of environmentalists could be met by increasing forest cover and wood production, rather than reducing it. Our international assistance budgets could help developing countries grow sustainable supplies of wood for fuel from managed forests. Worldwide, if the millions of hectares of unused and inefficiently used farmland were returned to forests, biodiversity of species would be supported, and more of the excess CO2 in our atmosphere would be consumed.

Over the past 10,000 years, we have satisfied the growing needs of the human population by gradually clearing them with farmlands and pastures. We now recognize what devastating effects continued deforestation can have on our environment and we are obliged to honor the evidence—reduction in the use of wood will not save our forests, not he species that depend upon them for survival.
In preserving species biodiversity there is no crop better than trees which provide more habitat than any other environment. Faced with a need to affect our climate, trees are the greatest absorbers of carbon dioxide and critical to reversing the damage we have done with our use of fossil fuels.

It is very important that people look critically at proposals that promise (or threaten) to alter the future of the planet. Each action we take, will cause a re-action—producing building materials in factories instead of forests will create even higher pollution levels, for example. It is paradoxical that some of the remedies prescribed by the environmental elite, may be instruments of destruction.

To allow an issue that promises to outlive our generation to be politicized and orchestrated by self-appointed experts is to deny future generations their birthright. Our solutions must be based on logical, consistent, science-based information and planning if we are to restore and preserve a healthy environment. We have an obligation to come together to develop strategies that recognize the enormous responsibility we have inherited as we attempt to “manage” what used to be the sole domain of God and nature.

(Patrick Moore, Ph.D., is a founding member of Greenpeace and served as director of Greenpeace, International. www.greenspirit.com
This piece is excerpted from the California Forestry Association.)

Why Have a Management Plan?

Vincent Corrao, Northwest Management, Inc. (1999)

  • A Management Plan identifies the goals and objectives of the individual or group that owns the land.
  • The Plan directs management activities throughout a 20 to 30 year period moving the property to the owner’s desired stand of the future.
  • A Plan outlines the silvicultural treatments necessary to improve and manage the health of the timber.
  • A timber valuation, included in the Plan, provides a landowner with an estimation of value before any management activities occur, and gives the owner an estimate of the total value of the asset.
  • The cruise information together with the silvicultural prescriptions identify the species, size, and volume of timber to be removed. The quality of the timber is evaluated with the log prices to determine if now is an appropriate time to sell, both from a price and a biological standpoint, rather than selling at some future date.
  • The Management Plan document is used by all parties to implement activities on the property.

A forest Management Plan is a tool that provides a landowner with direction for the management of the property. The plan consists of several sections which include the landowner’s objectives, an evaluation and description of the resource, and a silvicultural prescription. There are several items which must be evaluated and considered as the forest Management Plan develops.

The process of developing your Management Plan starts with you. As a landowner you must consider why you own the land. Developing your management goals and objectives, which will become the centerpiece of your plan, is the first phase of the management plan. Issues you might consider include forest health, wildlife, aesthetic, recreational, and monetary concerns. Regardless of how different concerns may conflict with each other, write them down for further consideration. Your Management Plan will help you sort out your concerns and prioritize the issues. Each concern will influence the way your Management Plan develops. This may be the most difficult part of developing the Plan; however, it is also probably the single most important part of your plan. The goals and objectives provide the direction for the rest of the Plan.

One of the services Northwest Mangement, Inc. provides is developing Management Plans with private landowners.

FEATURED PROFESSIONAL: Amy Gillette, Executive Director, Idaho Forest Owners Association

Idaho Forest Owners Association

Formed in 1983 by an alliance of forest landowners such as yourself, Idaho Forest Owners Association (IFOA) is dedicated to the management, use and protection of private forest resources in Idaho. Some of our objectives include encouraging the multiple-use concept of forest management, educating the public on the value of forest resources and the need to manage them, and preserving the right to practice forestry on private lands.

A Board of Directors of 11 landowners guides the organization, and our annual meeting is now held in conjunction with the Non Industrial Private Forest (NIPF) landowners workshop held in Moscow, Idaho each March. In addition, we sponsor a field tour in the fall in conjunction with Idaho Tree Farm members, and we try to visit a different part of the state each year. Recent tours have included Orofino, McCall, Horseshoe Bend, and Tensed where we have seen first-hand management techniques practiced by landowners such as yourself. These tours are a great pool of information sharing and one of the best methods of evaluating what works and what doesn’t work out in the woods.

Legislation at the state level has been an important function of IFOA throughout the years. Although we are not lobbyists by any stretch of the imagination (!), we have successfully lobbied for legislative changes such as: the right to practice forestry on private lands, increasing the acreage limit from 2000 to 5000 acres for those landowners wishing to be in the Bare Land & Yield property tax category, and lowering the taxes in the Productivity property tax category (to take effect in 1999). Our on-going project has been to add a non-industrial private forest landowner to the State Scaling Board, and although our efforts have been defeated the past two years, we are hopeful that the bill will pass in the 1999 Legislature.

We would welcome any ideas or suggestions that you may have to improve IFOA, and if you are not a member already, we would love to send you a membership form! Dues are $25 per year, for which you receive 4 issues of Northwest Woodlands, 4 issues of the IFOA newsletter, and information and education worth millions! We are only a phone call away, at (208) 762-9303 or you can reach us at PO Box 1257, Coeur d’Alene, ID 83816.

Know When to Bet, Hold or Fold

Vincent Corrao, Northwest Management, Inc.

Sell your logs now! No, hold off! OK, wait a while, see what happens. Selling forest products has never been as challenging as it is in today’s markets. The market peaks of 1993 and 1994 bring back fond memories of owning sawlogs that were worth a lot of money. We all long for the good old days, or do we? Let’s look back at 1986 through 1992, the average delivered log prices for the major species ranged from $150 to $293/mbf. We saw significant and steady increases in the log prices through these years, but they were a far cry from the peaks in 1993 of $445/mbf and in 1994 of $505/mbf. These years (93 and 94) were referred to as the owl premium, a time when the timber supply was dwindling and lumber prices soared. Random length composite lumber price rose to over $500/mbf in January 1994 and has not been back to that level since. Where are we today in relation to the past? In 1998 the average open market delivered log price was $436/mbf. This was for all species, but both lodgepole pine and western red cedar were at historical highs, especially the cedar with delivered log prices from $725 to $830/mbf.

When considering what has happened to log prices during the past 10 years and where the log market is today, the prices are not that low. So the question comes up, “Why am I not making very much money selling logs?” Let’s consider what is happening in the market place. Most logs are now purchased by diameter breaks as compared to the camp run offer that were commonly used in the past. Most mills have at least 2 diameter breaks, often 3 and sometimes 4, especially on pine. The smaller timber sells for considerably less than the middle or upper size classes. If your major species is grand fir, then there is an additional challenge since this market has been soft for the past two years, it is readily available, and most mills have plenty of it. Another factor is the availability of small sawlogs, which is affected by the pulp market. The pulp log market is so soft that most facilities are not purchasing. Many small sawlogs that once filtered into the pulp loads are now being utilized as small sawlogs. The pulp products that were once harvested at the same time as the sawlogs are left in the woods. Thus, harvest cost increase and silvicultural prescriptions change. Let’s look at a plan for success when dealing with the log market. Pulp is out, if you have a lot of pulp whether it is large or fiber size material, now is the time to fold. If your stand is small fiber and sawlogs, you may be able to use a cut-to-length mechanized harvesting operation to complete your commercial thinnings and process the majority of the small trees into sawlogs.

Evaluate the size and species of trees you want removed from your woodlot. This is your guide to whether it is a good time to sell or hold. The removal of the trees should be based on the biological and economic impact to your stand. You should grow a variety of species and sizes to maintain forest health and optimize marketing opportunities in the future. Knowing which ones to hold and when to move is dependent on: which species are in need of harvesting; where the market is at that point; impact on the forest; and whether it makes good economic sense. Grand fir is a good example of a tree that often needs removed due to overstocking and insect or disease problems, but it is never worth as much as we think it should be. Looking back at where the price has been for grand fir and where it is today will tell us if the removal is a sound business decision. In most cases, reducing the stocking of grand fir reduces tree competition, fire risk, and makes room for the shade intolerant species such as ponderosa pine, white pine and larch. Pine and larch are generally more resistant to insect and disease problems. Before selling, evaluate the species and log size, the forestry needs and the market for each product. The log market today is good for most species, but realize that the market is volatile and can swing 5 to 15% between quarters. Remember individual species can have better prices some years than others and timber supply issues in each area affect prices. For a better look at the market and the past prices look at the Log Market Report on this site and evaluate whether you want to bet, hold or fold.