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THE FLORIDA FOREST STEWARD  A Quarterly Newsletter for Florida Landowners and Resource Professionals
Volume 8, No. 4                                                             Winter 2002
 
The Future of Private Forestry
Timber Price Update
 
A University of Florida Cooperative Extension Service and Florida Division of Forestry joint project:  

Chris Demers (editor), School of Forest Resources & Conservation, UF, P.O. Box 110410, Gainesville, FL  32611-0410, (352) 846-2375 or cdemers@gnv.ifas.ufl.edu 
Alan Long (co-editor), School of Forest Resources & Conservation, UF, (352) 846-0891 or AJL@gnv.ifas.ufl.edu  
Todd Groh (co-editor), Florida Division of Forestry, 3125 Conner Blvd, Tallahassee, FL 32699-1650, (850) 414-9907 or groht@doacs.state.fl.us  
Chuck McKelvy (co-editor), Florida Fish and Wildlife Conservation Commission, 3125 Conner Blvd, Tallahassee, FL 32699-1650, (850) 414-9911 or mckelvc@fwc.state.fl.us

 
 Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida 
 

The Future of Private Forestry

 
The better part of this issue will focus on an important question faced by landowners across the state. What does the future hold for private forestry in Florida? With growing urban areas, changing demographics and market shifts, what kinds of changes in the forestry business and land management can we expect in the coming decades?  This is a million dollar question, and there is no way to answer it with any certainty, but several resource management professionals and a distinguished landowner have stepped up to offer some insight and observations that may help to prepare us for what the future may have in store for private forestry. 

The idea for this topic came from Allen Tyree, the Hamilton County Extension Director. Contributors include Vince Leffler, 2001 Florida Tree Farmer of the Year; Dave Lewis of Southern Forestry Consultants in Monticello and 2001 President of the Southeast Society of American Foresters; Tom Mastin of Natural Resource Planning Services in Gainesville; and Kenneth Munson of International Paper Company in Savannah, GA. Their insight was combined with information from a few written sources to answer the questions below: 

1 - Will people ever want to grow pulpwood rotations again?  

Vince Leffler: "If demand and improved market conditions return." 

Dave Lewis: "I have never felt like pulpwood rotations were a good idea for most private landowners and I think this will be even more true in the future with fewer pulp mills domestically, more recycled paper, and increasing foreign competition. The exception to this may be for tracts managed intensively for pine straw for the long term and pockets of good pulpwood markets." 
Tom Mastin: "While pulpwood rotations certainly are not favored by the present market, landowners may have good reason in some instances to plant at higher densities that yield high volumes of pulpwood. The most likely scenario would be to maximize production of pine straw. Such an operation would usually be conducted on highly productive old field sites planted in slash pine. In such cases, the production of timber may become secondary or co-equal with straw production" 

Kenneth Munson: "The current economics of a strict pulpwood rotation are not particularly attractive given today's relatively low wood prices. However, a landowner making any forestry investment should look at the investment for what it is - a long term proposition that, during the course of a rotation, will see prices fall and rise relative to a historically rising trend line. Forestry is still a sound investment that produces attractive, low-risk returns over time." 

2 - Should larger products be the objective?  

Kenneth Munson: "Timber serves multiple purposes: creating structural lumber, sawdust for engineered wood, chips for OSB (oriented strand board) and paper, and residuals for fuel. However, sawtimber has and will likely always be the real driver in producing greater financial returns from forests (other than forests converted to real estate uses). In 2001, pine pulpwood stumpage sold for about $6.50/ton while sawtimber on average sold for $26/ton. A private landowner who begins with a sawtimber objective begins with the most options for later stand management, including an early harvest for pulpwood. Integrated companies with forestlands and mills may choose for strategic reasons to grow some stands on a pulpwood rotation. However, non-industrial private landowners would be wise to begin with sawtimber in mind." 

Tom Mastin: "While the current market favors larger products, we could soon find ourselves in a poor market situation for large products if all landowners favor such products and lumber markets continue to weaken. The best managers may be challenged to make forestry profitable in the future. Every landowner should examine his/her situation and look at all of the products that may be produced from their land including pine straw, timber, and hunting/recreation. Landowners should try to develop a program that maximizes their goals, monetary or otherwise. Analysis of alternative timber production schemes using computer models will become increasingly necessary to plan for the best mix of products. Most landowners will need professional assistance to help make these decisions." 

Vince Leffler: "As an end product, yes. However land use and demand may indicate a shorter rotation." 

Dave Lewis: "I don't think there is any question about it for most private forest landowners. Larger products have always been an objective in this area. The growth and yield models I have used bear this out especially using the kind of prices for pulpwood we are seeing now. In my book, thinning pays. Longer rotations are better for most landowners because in most cases they are more profitable by yielding valuable high-grade products such as sawtimber, plywood and poles. Longer rotations also stagger income through thinning, result in less frequent clear-cuts and thus less frequent reforestation costs, are generally more pleasing aesthetically, and often result in better wildlife habitat and recreational opportunities. They also offer more marketing flexibility, in my opinion." 

For landowners with wildlife objectives, larger product objectives are a good match on acres managed for wildlife habitat because more space is required between trees for both, which means bigger trees and more sunlight to the understory for wildlife food plants. 

3 - What are some alternatives and mid-rotation products?  

Dave Lewis: "Pine straw, silvopasture (livestock and timber), hunting revenues. Possibly pine used for OSB. If hardwood prices continue to increase relative to pine pulpwood prices it may become profitable to plant fast growing hardwoods." 

Tom Mastin: "As mentioned above, alternatives include pine straw and hunting/recreation. Other products might include fence posts and fuel wood, but these products generally are lower in value than pulpwood. Should the global warming issue heighten, carbon sequestration credits may become one of our most important products. Within the next few years some landowners may be paid by government to manage their lands to certain sequestration standards." 

Kenneth Munson: "Certainly recreation leases provide a modest annual revenue source for landowners. This is more practical on larger ownerships away from the urban setting. In terms of traditional products, the principal opportunity is in production of small logs. New technology is being put in place in several mills that allow high-throughput sawing using small diameter logs. In addition, manufacturing efficiencies (recovery of usable product) are expected to increase utilization of trees. With good silvicultural practices and a reasonably productive site, a landowner could expect the volume removed in a thinning to contain both pulpwood and small logs. In today's market, small logs will sell in the range of $15 to $18/ton." 

For more information on other alternative forest products, see Circular 810, "Alternative Enterprises for Your Forest Land", online at www.sfrc.ufl.edu/Extension/pubtxt/cir810.htm

4 - How will increased urbanization affect what we do on our land? 

Tom Mastin: "Urbanization brings some very significant problems to forest landowners. Regulatory pressures increase, trespass and protection problems will increase, and markets for products decline due to diminished availability of resources and increased production costs. Generally, urbanization and timber production are not a good mix." 

Kenneth Munson: "Urbanization will directly reduce the land we have in productive forests and indirectly reduce the productivity of lands in the urban development fringe. As the world population increases, the demand for paper, packaging and building products will increase. The wood for this demand can come from only two sources - increasing the productivity of the remaining forestland or harvesting other more sensitive forests. Reducing the impact of urbanization and creating incentives for land owners to grow trees is essential to reducing pressure on native and old growth forests." 

Dave Lewis: "It will make it harder to grow trees commercially and maybe impossible to do so in some areas. It doesn't make a lot of sense to grow trees commercially on $5,000 to $10,000 per acre land. Carrying out normal silviculture practices such as burning, spraying, and even harvesting is already difficult in some areas." 

Vince Leffler: "More people, more problems." 

The first article of the summer 2000 issue of the Florida Forest Steward (vol. 7, no. 2) was dedicated to this topic. Urbanization is changing Florida's forests, physically and socially. Forestland parcels are becoming smaller and the number of forest owners is growing. Rural forests become interface forests, which eventually become urban forests. As this transition from rural to urban takes place, demographics change and the forest becomes valued more for non-commodity benefits. These changes have implications for the issues addressed in questions 5 and 6. 

5 - Will burning be an option for much longer?  

Vince Leffler: "Probably not, liability and smoke management are too great to deal with." 

Tom Mastin: "Burning is very problematic at present, and unfortunately, it may continue to diminish in use. Even with existing legislation to protect qualified people who conduct prescribed burning, cost is becoming prohibitive for many landowners. Conducting a well-planned and executed burn today generally costs $10-$25 per acre, sometimes more depending on circumstances. Even with protective legislation, liability is a big issue. Few people want to take the risk of smoke on highways and health related complaints related to smoke." 
 

Kenneth Munson: "Prescribed burning will continue to be a useful tool but with tighter controls on its application. Fire has always been a part of our forested ecosystems. Many of our native wildlife species evolved in frequently disturbed forests and so respond positively to fire. Fire creates positive biological affects that are very difficult to mimic using mechanical or chemical methods. The best way to insure our continued use of fire is to use the tool responsibly." 

An article by Ed Macie in the fall 2001 issue of the Florida Forestry Association's Florida Forests magazine entitled, "Managing Forests in the Wildland-Urban Interface", discussed the challenges of using fire in the face of increasing urbanization. Fire is one of the most significant threats facing the wildland-urban interface, the area where human influence on forests is increasing the most. Consequently, the use of fire as a management tool is increasingly challenged by people moving into the interface. Landowners closest to areas with increasing residential development will likely find it more difficult to burn on their property as more people move in. The University of Florida School of Forest Resources and Conservation is researching the effectiveness of alternative methods of vegetation management that may be used in place of, or in combination with, fire where the risks are too great with fire alone. 

6 - What will the regulatory scene be like in 5, 10, 20 years?  

Tom Mastin: "Regulation will continue to increase and, in some cases, may drive landowners out of productive forest management. We are now fighting many regulatory battles on the local level, and unfortunately timberland owners have little political clout against well-organized opposition groups. This is unfortunate because regulation is very often counterproductive to the aims of the regulators. While we are presently winning some battles, productive forestry may be rare in some Florida counties in 20 years." 

Dave Lewis: "Increasing regulation but probably gradually. We will probably continue to see more pressure from local governments. The public is not being educated or persuaded as to the true picture of the forest industry." 

Vince Leffler: "Probably more. As the state becomes more urbanized, regulatory problems will increase." 

Kenneth Munson: "That's hard to guess, but it will be more rather than less. The public has said loud and clear that our forests should be managed sustainably. And we agree because it makes good business sense and it's the right thing for the environment. My company (International Paper) follows the guidelines of the SFI (Sustainable Forestry Initiative) program. SFI is a set of guidelines and principles to which we strictly adhere to ensure the perpetual planting, growing and harvesting of trees while protecting wildlife, soil, plants, air and water quality. Many of the SFI operating requirements have been standard forestry management practices within our company for decades. We have been managing forests in the South for over 100 years and our forests are in better shape today than they have ever been." 

This goes back to the issue of increased urbanization. As more people move into the wildland-urban interface, the social dimension of the once-rural area is likely to change. People moving to the interface from more urban areas are likely to have values and expectations that are at odds with those of traditional rural landowners. They may favor restrictions on land use to protect and increase their property values. This could mean more restrictions on forestry or agricultural practices that new residents perceive as harmful or unattractive. As Dave Lewis alluded to, forestry education and public relations will be more important as more people move to the interface. 

7 - Is forestry still a profitable investment?  

Kenneth Munson: "Forestry has proven over the years to be a good investment. The demand for forest products is increasing while the pressure on forestland is increasing. As several financial analysts report, forestry has a very good "risk-return" profile. A landowner must take a long view when it comes to investing in forestry. Over the cycle of a rotation, with smart management practices and prudent timing, forestry is still a good investment." 

Tom Mastin: "Forestry is not a short-term venture, so it is not possible to judge the profitability of forestry by the current economic situation. Certainly, if you look at the last 25-50 years, most forest landowners in the southeast would say that it has been a profitable venture. If you look at the last 25-50 months, this might not be the case, but people own forestland for a variety of reasons, not just monetary profit. In addition, land values will probably continue to trend upward, regardless of the products grown on the land. Therefore, owning forestland will continue to be profitable over the next 25-50 years, but profits may come from sources not associated with timber production or from the production of non-typical forest products." 

Dave Lewis: "I think so. Most private landowners understand that it is a long-term investment and most aren't solely dependent on the land for their living. The "new breed" of landowner that we are now seeing a lot of is more interested in the recreational value of the land (i.e., hunting) than they are in getting a profit from the timber. I also think we are in a "down" cycle with a lot of negative thinking going on, but I am optimistic that we will pull out of that eventually. A little rain would help things -- we've been in a nearly four year drought. Our country does need to wake up, however, to the fact that our agriculture and forest industries are very important and need protection from unfair foreign competition and senseless regulation in order to thrive and survive. Hopefully, we are seeing the tide turn a little bit in this regard. To answer the original question a little better, I think the answer is yes but I think you have to work at it harder." 

Vince Leffler: "This is a million dollar question." 
 


Timber Price Update
 
This information is useful for observing trends over time, but does not necessarily reflect current conditions at a particular location. Landowners considering a timber sale would be wise to let a consulting forester help them obtain the best current prices. Your county forester or extension office has a more detailed version of this report. 

Stumpage price ranges reported across Florida in the 4th quarter 2001 Timber Mart-South (TMS) report were: $10-$26/cord for pine pulpwood, $45-$82/cord for pine C-N-S, $82-$115/cord for pine sawtimber, and $92-$107/cord for pine plylogs. On average, all four product prices were down compared to 3rd quarter prices. Hardwood pulpwood prices ranged from $8-$17/cord, which was also down from the previous quarter. A more complete summary of 4th quarter 2001 stumpage prices is available at your County Extension or County Forester's office. 

Trend Report 

The graph linked below charts quarterly Timber Mart-South stumpage prices for three major pine log classes in northeast Florida since the beginning of 1993. Numbers on the horizontal axis indicate the year (first digit) and quarter (second digit), so 31 would indicate the first quarter of 1993. 

Click on the link to see the graph - use the "Back" function to return here 

In spite of record southern pine beetle infestations and subsequent salvage operations, stumpage prices of most products were on a slight increase in the 3rd quarter, with the greatest average increase in the sawtimber size class; a gain of about $10 per cord since the 2nd quarter. However, south-wide average pine stumpage prices for all products dropped in the 4th quarter and are still below the long-term trend line for each product, respectively; and the oversupply of pulpwood continues. 

At the National level, as has been widely reported, the September 11 attacks have resulted in an uncertain economy that was weak before the tragedies. Buyers remain cautious about building inventories in the face of uncertain demand in a slumping economy, the duration of which is equally uncertain. 

Additional Duty on Canadian Lumber Lifted 

According to an update from the Florida Forestry Association, in mid-December the Commerce Department lifted a 19.3 percent countervailing duty to comply with world trade rules, cutting in half the amount Canadian exports must pay to export to the U.S., but the duty may be reimposed in mid-May. A second 12.6 percent anti-dumping duty on Canadian lumber remains in force. Final hearings are scheduled for March to determine if the preliminary countervailing duty will stand. Officials from both governments are negotiating a settlement that would grant Canadian softwood duty-free access to U.S. lumber markets if the Canadian lumber industry and government agree to restructure their existing timber stumpage pricing regimes according to a market-based approach.