Larry Foster RF, Land REALTOR
At a recent landowner meeting, one of the attenders asked me if the timber markets have gotten any better. I told him they are about the same, but as a landowner myself I am still optimistic about owning timberland as an investment.
A recent article in Acres.com stated that timberland has provided a historical financial return of 10.9% over the most recent 37 year period. Acres.com is one of the GIS tools that Great Southern Land LLC uses, giving us access to a mapping database, comparable sales information and market intelligence about rural property. Financial return includes income from harvesting trees, supplemental income such as land leases for hunting and capital gains from appreciation of the underlying land as well as growth of the trees. This is competitive with other long term investments such as stocks, bonds and precious metals. Timberland is sought after by institutions such as banks, insurance companies and pension funds for the attractive return as well as diversification attributes.
Physical tree growth potential has been greatly enhanced by advances in silvicultural practices, as chemical site preparation has mostly replaced mechanical chop and burn. The array of chemicals available enables a targeted prescription based on the type of vegetation present, and burning is now mostly optional. Reduction of competing vegetation is the most controllable factor limiting seedling growth and survival. Increased availability of containerized seedlings makes high survival much more likely and reduces the risk of failure to the point it is no longer necessary to plant a large number of extra seedlings to allow for mortality. This results in more growing space for the trees.
Genetic improvement provides additional physical growth increases along with impressive gains in quality and disease resistance. As trees grow larger in size, they become potentially usable for more valuable products, starting with pulpwood, followed by chip n saw, sawtimber and poles. For example, the value of logs suitable for poles is about twice per ton as much as sawtimber in our area. The main criteria for poles are size, straightness and few knots. Genetic improvement in stem form and straightness increases the proportion of trees qualifying as higher quality products. Progress in silviculture and genetics means that future returns from timber management can be driven by productivity and tree quality even without increases in timber prices that we all hope to eventually see.
Investing in timberland takes patience, but trees continue to grow and the land steadily appreciates in value while we wait. In other words, money grows on trees!
