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Article on timber investing

Started by GATreeGrower, December 24, 2013, 03:07:37 PM

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mesquite buckeye

I should be rich any second now. ;D
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

Southside

Hello everybody, guess its time to announce my retirement - had no idea how rich I was until reading this article.  Anybody seen stumpage prices go up 3% per year since 2007?  I know I am actually happy that I think I can finally make money in this business.
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

wesdor

I am sure we had at least $10,000 worth of hardwood on the farm in 1971.  According to the chart we should have had $1,500,000 in 2010.

Where can I claim my millions?  :D

GATreeGrower


bill m

I think he needs to go back to school and learn about growing timber and managing a forest. What happens to your investment when insects, disease, or a natural disaster strikes? Also I don't think you can wait forever to harvest your timber. Yes, you can leave it on the stump for a spell but what happens when it becomes over mature and stops putting on good growth? Sometimes you have to harvest before losing any value and to get the next crop of trees growing even though the markets may be down.
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mesquite buckeye

Good point. Hollow and down trees don't sell that great after a while unless you are Poston. ;D ;D ;D :laugh:
Manage 80 acre tree farm in central Missouri and Mesquite timber and about a gozillion saguaros in Arizona.

clearcut

According to the California Board of Equalization (the tax man) Medium size Ponderosa pine in my area had an average stumpage price of $340/MBF. (Harvest Value Schedules July-Dec. 2007). Today (July-Dec 2013) Ponderosa has an average stumpage price of $200/MBF.

Medium sized redwood went from $780/MBF to $450/MBF

Also 6% annual growth is Site 1 around here. Site 2 and 4% is more common. Small landowners are often on Site 3 at about 2%.

And what happens when the mill closes? We have 2 closed mills in this county, so hauling costs risen dramatically.

And where did he get those annual returns?

We need a smiley with a shovel for this guy.

I still think timber can be a good investment, but let's not mislead people.
Carbon sequestered upon request.

GATreeGrower

The general consensus was as I expected  ;D

Wudman

Looking at the long term, this article is not too far off base.  I make my living as a timberland manager.  Today, things are not so great on the solid wood side.  We are selling pine sawtimber for about 1/2 of what it was worth 10 years ago.  Grade pine is in worse shape than that.  The fiber side is holding its own and improving considerably in some markets. But over the long term as referenced in the article, things are much better.  Through the early 80's, as family farms were going broke, you could buy Virginia timberland for $1000 per acre with no problem.  As you hit the mid 80's and early 90's the Federal timber sale program out west crashed.  As a result, private timber sales skyrocketed in value.  Investors in the Northwest during that time experienced triple digit returns.  Stumpage markets in the southeast were hot.  I sold a 100 acre tract of mature pine timber in 1994 that brought $699,000 (wood only - the same tract would be worth a third of that today). If you were invested in the market in the 1980s, today you look pretty good.  If you bought in 2008, life is not so good.  Over the long term, things will get better.  Even during the worst of times with the stock market during this last downturn, our timber investments were still generating positive returns.  They were small, but they were positive.  The same couldn't be said for my stock investments. 

As far as growth, most private lands are producing about 1/3 of their capability.  I work in Central Virginia.  Biological growth of 7-8% on a managed stand is reasonable.  Get down to the Georgia coastal plain and biological growth is well above that.  In addition to the biological growth, you have to factor in the appreciation as wood transitions from pulpwood to sawtimber.  That adds to your returns.  Before the "global economic crisis" of 2008, land appreciation values in Virginia were bumping 22% per annum.  I bought my farm in 2000 for $687 per acre (cutover timber land + 25 acres of open land - 146 acres total).  I replanted the cut area.  By 2007, it would have brought $2000 per acre easily.  In my business, we were selling land virtually site unseen to speculators. That stopped in 2008, but markets are seeing some recovery now.  My note will be paid off in 2015.  I'll be able to thin my pines by then.  With today's pricing, that thinning will generate about $30,000.  If I catch a spike in fiber markets, I may clear-cut and start over.  In addition to that, I have a nice little hunting area.  If I can get ahead of the sweet gums, I plan to plant a little switchgrass on the open land.  We have a biomass plant in the area that uses it for fuel.

All in all, if you pay a reasonable price, you can not go wrong buying land.  They aren't making it anymore.  Actively managed stands will minimize your chances of catostophic events.  Your management can reduce chances of bark beetle activity, wildfire, etc.  I haven't figured out how to control hurricanes and tornadoes yet.  However, I will still invest every available dollar in dirt.  One of my college professor's families was in the sawmilling business down south.  His father was a large landowner.  His quote - "All I want is the acre that joins me."  I'd like to follow suite.

Wudman 
"You may tear down statues and burn buildings but you can't kill the spirit of patriots and when they've had enough this madness will end."
Charlie Daniels
July 4, 2020 (2 days before his death)

GATreeGrower

Quote from: Wudman on December 25, 2013, 01:16:32 PM

All in all, if you pay a reasonable price, you can not go wrong buying land.  They aren't making it anymore.  Actively managed stands will minimize your chances of catostophic events.  Your management can reduce chances of bark beetle activity, wildfire, etc.  I haven't figured out how to control hurricanes and tornadoes yet.  However, I will still invest every available dollar in dirt.  One of my college professor's families was in the sawmilling business down south.  His father was a large landowner.  His quote - "All I want is the acre that joins me."  I'd like to follow suite.

Wudman 

That is what I was looking for :)   Depending on some folks management objectives it may not be possible to maximize timber return without giving up something they arent willing to sacrifice. 

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