Forest
Stewardship News Release
July
28 , 2008- For Immediate Release
Contact: Allyson
Muth, Phone: 814-865-3208, E-mail:
New Publication on Valuing Trees and the Decision to Cut Timber
Written by: Michael
Jacobson, Associate Professor, Forest Resources, 814-865-3994, mgj2@psu.edu
Timber harvesting is an integral part of forest management and perhaps
one of the most important decisions a forest landowner will make. As a
forest landowner you want the best prices for your timber.
If you have been following timber markets recently (see http://www.sfr.cas.psu.edu/TMR/TMR.htm) you know prices are down for most tree species in our region. Reasons are numerous but link to our sluggish economy as well as changing consumer demand for our high-valued hardwoods. One of the beauties of timber production, unlike agricultural crops, is that forest landowners have the option of waiting until markets improve before cutting timber. With annual crops you have to harvest no matter the market conditions. Using financial tools you can actually determine the optimal time to cut your timber.
A new publication (Number 8 in the Forest Finance Series, entitled: "To cut or not to cut: Tree value and deciding when to harvest timber" is available at http://rnrext.cas.psu.edu/FS/FSfinancepubs.htm) discusses the financial decision to harvest timber. The publication explains the process of deciding whether to cut today or wait. This is done by comparing the expected financial rate of return received from letting the trees grow and harvesting them later, to the rate of return received from an alternative investment (i.e., harvest today and invest the income elsewhere).
The publication contains worksheets and examples for calculating financial returns. It also addresses concepts such as financial maturity, timber value, grade, and price. Grade value, often ignored, is critically important for obtaining the correct valuation for hardwood forests. As our hardwoods grow, they shift from pulpwood to sawtimber grades to veneer grade and in so doing may increase exponentially in value.
The publication gives an example for a 12-inch DBH black cherry tree where the rate of return for waiting 7 years is 5%, waiting 14 years is 13%, and for holding off 21 years the return is 18%. The higher rate of return is not only the additional volume growth butbut also the shift from one sawtimber grade class to another.
Due to our long timber rotations (often over 80 years in PA) landowners may only cut timber once in their lifetime. Considering the financially optimal time to cut can make a big dollar difference; however, forest owners should also think about other sustainability issues. Financial return is but one of multiple factors affecting the decision to cut as harvesting will influence the condition, growth, composition, wildlife habitat, and biodiversity of the next forest.
The Pennsylvania Forest Stewardship Program provides publications on a variety of topics related to woodland management for private landowners. For a list of free publications, call 1-800-235-WISE (toll-free), send e-mail to , or write to: Forest Stewardship Program, Forest Resources Extension, The Pennsylvania State University, 320 Forest Resources Building, University Park, PA 16802. The Pennsylvania Bureau of Forestry and USDA Forest Service, in partnership with the Penn State's Forest Resources Extension, sponsor the Forest Stewardship Program in Pennsylvania.
# # #
