An investment in your forest's future
To invest in trees one must be patient. Investing in your standing timber can almost always give a stable low risk return. Many of you have harvested trees before, getting immediate income from the timber sale; some of you harvested a second time many years later getting another return. Many often don’t realize that tree for tree, the second harvest was probably better than the first because of the improved growth enabled by the first harvest. While not that obvious, you actually did make an investment in that second harvest – your forestry cost for the first one. On the surface that money was spent for the service to sell those trees, but the value of forestry is not just in getting the most money you can, it is also measured by the improvement to the trees left behind – enhancing their future value.
When explained like that it’s easy enough to see, but what about those areas on your property not ready for harvesting – those dominated by young pole trees (6-10 inches)? Have you thought about how to invest in them too?
The unique thing about trees is they are both the factory and the product; and what makes that factory productive, is its crown. The bigger the crown, the more leaves it has. The more leaves it has, the more food it makes. The more food it makes, the faster it grows. The faster it grows, the faster it becomes valuable. The faster it becomes valuable, the sooner it can be harvested. The sooner it can be harvested, the sooner it can be converted to income. So the question is: how do we make all those factories really, really productive? How do we make the trees grow bigger crowns? The answer is: thinning – give ‘em room. In young pole stands we call this kind of thinning Timber Stand Improvement (TSI). TSI is the best investment you can make in the future growth of young trees.
The other unique thing about trees is that they increase in value in two distinct ways.
- Trees grow – they increase in value just by adding more units of volume that can be sold at some point.
- Trees improve in product grade – as they grow to certain size class milestones and cover up knots with new wood, they jump in product grade commanding higher prices per unit volume.
In northern hardwood forest the most extreme example is for a 10 inch tree. It could be the best looking tree in the woods, but if you were to cut it down it would only be good for firewood; it’s just too small to make lumber – it’s worth about $1.00. But…let it grow just 2 more inches to become sawtimber sized and it can be sold to make lumber – now it’s worth $10.00. That doesn’t sound like a lot of money, but that’s a 1,000% increase in value! Let’s see Wall Street do that. It’s not quite that extreme as trees pass through the sawtimber and veneer grades, but the bigger they get the higher the prices paid become. (Don’t be misled, however, there are other financial factors to consider besides growth and grade in measuring return, but that’s a discussion for another time perhaps.)
The key is making all this happen as quickly as possible. That’s where Timber Stand Improvement comes in – we can manipulate growth and grade through thinning. If you let thick woods of 6-10 inch trees go on their own, some natural thinning will probably occur as trees die, but it could take 20 years or more for that 2 inches of growth to happen. Depending on the quality of the soil, TSI can cut that time down to about 10 years; even less for certain species. That doesn’t necessarily mean you’ll have a big timber sale in 10 years, but the timber will be well on its way. The second key to the success of this is to identify the right trees or growing stock to keep. The ultimate goal of TSI is to remove the least desirable trees up front and reach the point where, in future harvests, the worst of the best trees are selected to harvest. TSI gets you bigger and better trees faster.
With TSI you are investing in forestry and harvesting services to help your trees grow more quickly and more valuable. And, barring natural disasters, trees are guaranteed to grow. Long standing research has shown that “capital investments in treating stands of upland oaks and northern hardwoods, through TSI and repeated commercial thinning until final harvest, generally show an annual real return on investment of more than 4%”
[N. Journal of Applied Forestry, Vol. 2 No. 1, 1986]. What held true from research 28 years ago still holds true today; an investment in TSI is a good investment for your forest asset.