Unlocking the Economic Potential of Your Woodlot

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According to a recent survey1 of family forest owners in New York State, timber production is not the primary reason for ownership.  But chances are that if you own a woodlot of thirty acres or more you’ll eventually have the opportunity to sell some timber.   If you have good timber it’s not difficult to find a buyer.  In fact, it’s likely a buyer will find you.  You might get a letter or perhaps someone will knock on the door – “Your woodlot has some sawtimber.  We specialize in selective harvesting.  Would you be interested in selling the mature trees”?

This is where things get tricky.  If you say “yes”, you’ll get an offer based on the value of the best trees in the woodlot - or at least what the buyer thinks is a high enough amount to close the deal.   If you proceed with the sale, that’s exactly what will be cut – the best timber you have.  What’s left will be whatever the buyer can’t sell very profitably.  People call this selective harvesting because not all the trees are cut and it is a less pejorative term than high-grading – but this is still high-grading.  High-grading is a timber harvest that removes the trees of commercial value, leaving small trees, as well as large ones of poor quality and of low-value species in the woodlot.2  And, according to the Society of American Foresters, about 80% of family forest owners sell timber this way.3

Suppose you’re a bit more knowledgeable and decide to use a consulting forester, have the timber marked and get competitive bids.  A consulting forester should start by asking about your ownership objectives.  How important is getting the most money you can for the timber in your woodlot?  For most people who decide to sell timber, getting top dollar is pretty important.  But if you tell the consulting forester; “I want to get as much as I can for my timber” this may translate into marking and selling all the best trees you have.  You’ll get a good price, and you’ll still have a woodlot after the timber is gone.  However, the woodlot will be depleted and the next sale will have much less value.  Selling all the good timber in a single harvest and leaving the rest makes no more sense than spending the entire principle of your retirement account in one year when your goal is to continue earning future returns. 

If you’re interested in long-term management, the trees that are left growing after a timber sale are just as important as the trees that are cut.  The essence of forest conservation is leaving an adequate number of well spaced, healthy, high-value trees to produce seedlings for regeneration and to become part of the next harvest.  A silviculturally sound harvest means that you won’t get as much for your timber sale because you’re not selling all the best trees.  And the logger will be cutting some low value trees to improve the future quality and condition of the woodlot.  But you can think of this approach as an investment in your woodlot - and one that will pay high future returns.  Silviculture is the art and science of controlling the establishment, growth, composition and health of forests to meet the needs of landowners and society on a sustainable basis.
 
Consider the following consequences of only selling the most valuable trees you have:

  • Cutting the best and leaving the rest can reduce future value by 75 to 90%.4
  • Millions of acres in the eastern hardwood region have been so degraded by this type of exploitation that there is little left to manage.5
  • Future productivity and ecological services are diminished6


 In Europe, where forestry was originally developed and most privately owned woodlands are managed with silviculture for the long term, landowners harvest three times the volume of timber per acre than landowners in New York State[7].  Although several factors contribute to Europe’s higher productivity, forest management is probably the most important. 
We know silviculture improves productivity, but specifically how much is this worth to the woodlot owner?  The following example shows how the value of future growth (board feet - bf) is affected by which trees are harvested.  Keep in mind that every woodlot is different.  These suggested returns might be considered average for woodlots that have not been previously high-graded.  The numbers are based on calculations using the DEC stumpage price report and the Silvicultural Guide for Northern Hardwood Types.

Comparison of Treatment Returns Unmanaged Northern Hardwoods
Type of Harvest Initial Harvest Income per Acre Future Productivity in bf/Ac/Yr Average Value of Residuals/Mbf Value of Growth Ac/Year
High-grading Cut All the Best $300 65 $75 $5
Cut Some of the Best & Some of the Rest $225 100 $150 $15
Cut the Worst First $150 200 $225 $45



Note that high-grading yields the highest immediate income which makes it a very tempting choice for many woodland owners.  But also examine the right hand column – the value of future timber growth per acre per year.  Although the initial income is lower, notice how dramatically forest management can increase the value of annual growth – even a modest amount of silviculture.  How many landowners would not be interested in a consistent return of $45 per acre per year from periodic timber sales?  That potential return should stimulate some serious thinking about long term management and silviculture.  And consider that after a woodlot has been high-graded, it often takes decades of cutting the “worst first” and other rehabilitation measures before it can again consistently produce the $45 per acre per year return.
 
For those who want some additional evidence that appropriate forest management could significantly increase the financial returns from a woodlot, consider the following.  These are calculations using information from the Silvicultural Guide for Northern Hardwood Types[8], the DEC stumpage price report[9], and the Forest Resource Survey of New York State by the Forest Service[10].  They show what a forest owner could realize from timber management.
 
The silvicultural guide says; "With moderately intensive silviculture, managed stands can yield at least 50 percent more volume than unmanaged stands".  So the potential volume increase is expressed as a factor of 1.5.
 
The silvicultural guide includes a product distribution table.  It shows the types of timber products that might be harvested from a typical unmanaged northern hardwood stand compared with the effect of applying silvicultural guidelines on timber quality.

Comparison of Product Distribution
Timber Product Unmanaged Woodlot Managed Woodlot
Veneer 2% 6%
High Quality Sawlogs 3% 9%
Medium Quality Sawlogs 40% 50%
Low Quality Sawlogs 15% 15%
Pallet Stock 40% 20%

The quality factor is calculated using a spreadsheet with the total board foot volume of sawtimber from the forest resource survey.  Sawtimber volume was converted into dollars by species and log quality using the stumpage price report.  The comparison of the timber value of unmanaged versus managed forest shows that management can increase stumpage value by 40%.  So quality increase can be expressed as a factor of 1.4.
 
Silviculture can also be used to shift the species mix from low value species to high value species.  I used a factor of 1.1 for species mix improvement which could be achieved by shifting 10% of the volume of low value species to higher value species.
 
In conclusion, the total potential value increase is: 1.5 multiplied by 1.4 multiplied by 1.1 = 2.3.  In other words, over time silviculture could more than double the timber value in a previously unmanaged woodlot.  More timber volume, better log quality, and higher value species all leverage one another.  Unfortunately, most woodlots have a past history of high-grading.  But this means the potential for improvement with appropriate silviculture might be even higher.  It seems realistic to conclude that silviculture could increase future timber growth by at least 50% and value by at least 300% - if more landowners used it.   
 
Why is this important?  Perhaps some readers have seen "The Economic Importance of New York’s Forests"[11], a publication which documents the economic contribution of the timber resource to the state’s economy.  The forest products industry supports the tax base, provides jobs, and helps preserve our working forest landscape.  Unfortunately, the economic viability of the industry is weakened because the value and productivity of the forest resource has been degraded.  Some of this degradation is the result of insects and diseases (both native and invasive), ice storms, wind storms, etc.  But most degradation is the result of shortsighted harvesting practices which "cut the best and leave the rest".  Why aren’t we managing the timber resource in local woodlots more sustainably today to help strengthen our economy over the long run?
 
            Even if you have no concern for the future of the timber based economy in New York State, think of the detrimental effect that an exploitative timber harvest will have on your own ability to cover the cost of property taxes and other ownership expenses in future years.  Property taxes are the same whether your timber is growing at $5.00 per acre per year or $45.00 per acre per year.  And perhaps your children or even your grandchildren will someday inherit the land.  The woodlot can be a family legacy.  Therefore, it makes good sense to manage your trees sustainably, with the goal of maintaining a steady stream of future revenues for yourself and improving value and productivity for the next generation.
 
Sustainable timber management could eventually double or perhaps triple the economic contribution of the forest resource, without diminishing other ecological, environmental and recreational values.  Family forest owners have the ability to make this potential a reality if they invest in silviculture.  However, key supporting players (loggers, mills, consulting foresters) must also be willing to encourage long term management as an alternative to high-grading in order to make substantial progress.  Knowledgeable woodland owners are capable of changing this situation for the better by unlocking the economic potential of their woodlots with silviculture. 

Carl P. Wiedemann is from New York Forest Owners Association
 
References That You Can Find On-line
 
1.       An Assessment of Family Forest Owners in New York State – Connelly, Brown and Smallidge - http://www2.dnr.cornell.edu/ext/info/pubs/misc/ForestOwnersHDRU07_6.pdf
 
2.    High Grade Harvesting – Catanzaro and D’Amato - http://extension.unh.edu/resources/files/Resource000210_Rep228.pdf
 
3.    The State of America’s Forests – Society of American Foresters http://www.safnet.org/publications/americanforests/StateOfAmericasForests.pdf
 
4.    Selective Harvesting – Jeff Stringer, Kentucky Woodlands Magazine http://www.ca.uky.edu/KYWoodlandsmagazine/August2008index.php
 
5.    Degraded Stand Treatments – Wayne Clatterbuck, University of Tennessee http://www.sref.info/resources/publications/print_pubs/treatments-for-improving-degraded-hardwood-stands
 
6.    A Damaging Tradition: Diameter-Limit Cutting Diminishes a Woodlot – Irwin Post http://northernwoodlands.org/articles/article/a_damaging_tradition_diameter_limit_cutting_diminishes_a_woodlot/
 
7.    Europe’s Forests: A Renewable Resource
http://www.roadmap2010.eu/wisd/pdfs/18-29.pdf
 
8.    Silvicultural Guide for Northern Hardwood Types in the Northeast http://www.nrs.fs.fed.us/pubs/6537
 
9.    The Economic Importance and Wood Flows From New York’s Forests 2007 http://www.dec.ny.gov/docs/lands_forests_pdf/economic.pdf
 
10.  Stumpage Price Report – New York State Department of Environmental Conservation http://www.dec.ny.gov/lands/5259.html
 
11.  New York Forest Inventory -  US Forest Service http://www.fs.fed.us/ne/fia/states/ny/index.html