CHAPTER SEVEN

COSTS OF WOODLAND MANAGEMENT

Woodland Management Costs are Important

Some investment analysts claim you should not worry about costs, but rather focus upon returns. Well and good, provided you aren't terribly concerned about the required length or liquidity of your investments. Highest returns from woodland investments normally do not come before several decades, and indeed with some strategies, no portion of an initial investment may be recoverable for many years.

Woodland investments can be similar in many regards to most other investments, but have unique characteristics. Simply the cost on your money for many decades can result in very large expenditures that dramatically affect end profits. For example, a current expenditure of $1000.00 compounded at an alternate annual rate of only 7 percent for thirty years yields a total cost of $7,612.00. Minimizing costs while getting the job done properly is an important forest management consideration.

Land

For good reason, the cost or value of bare land generally should not be considered as a part of the cost of woodland management. Land is a singularly unique asset, and should be thought of as an investment unto itself. Owning land is one thing, but why you own it and how you use it are altogether different matters.

As a landowner you have many, many options and the freedom to decide how to put your land to good use. You could certainly grow forests, but you might opt to produce livestock, row crops, or other agricultural products on some or all of your property. Or, you might choose to develop your land for housing or commercial projects. At any rate, having chosen to be a landowner, you then chose, and will hopefully remain, to be a woodland owner.

Cultural Practices

Cultural practices are specific treatments required for establishing, developing, and protecting stands of trees. Such activities necessarily demand varying levels of expertise, capital, and time, but are absolutely required to maximize investment returns. Creating a new stand of trees necessitates creating optimum conditions for new natural or planted tree seedlings to become established and begin to grow. Costs associated with naturally replacing harvested trees are low, and normally run less than $50.00 per acre. Medium to high cost investments of $75.00 to $200.00 per acre can be expected for most tree planting projects. Preparing a site for planted seedlings could require the use of equipment such as a bulldozer or tractor. Herbicides may be necessary and the best choice for eliminating unwanted competition when used alone or in combination with mechanical treatments. Many times a controlled fire is a prescribed treatment to help prepare an area for the establishment of a new stand of trees. When planting trees, seedlings must be purchased, and perhaps a contractor hired to do the planting.

As stands develop, low to medium cost intermediate treatments are sometimes needed to allow individual trees, or groups of trees to grow properly. Practices can include release treatments by applying herbicides to control woody and herbaceous competition, vine control, or crop tree release activities in which certain undesirable trees are removed that are competing with high value individuals.

For complex investments such as Christmas tree production or many types of hardwood plantations, medium or even high establishment costs in excess of $200.00 per acre are common. Additionally, costly annual expenses such as pruning or mowing will be incurred for several years, or perhaps through the entire life of these investments.

Protection measures are occasionally employed in high-risk situations. Various practices can be used to mitigate potential wildfire losses including establishing and maintaining firebreaks. Beaver control is sometimes necessary, especially in parts of west Tennessee.

Cultural practices can be expensive, and significantly affect long-term results. The costs versus the benefits of conducting each activity should be carefully examined before it is implemented.

Tennessee Timber Consultants Professional Services

Few woodland owners have the time, special knowledge, and skills to oversee every aspect of their forest enterprise. There are simply too many variables, too much to know, and perhaps too little time for one individual to do everything, and do it correctly. Wise owners know that using our professional services will make them more money over the long haul.

Management services are available through private contractors for carrying out most cultural practices. Fees vary significantly based upon location, and the type and extent of the work to be performed. Our foresters will represent your interests so that you can receive the services you need at the most affordable prices.

The periodic need for legal counsel is obvious. Buying and selling land, establishing estates, and resolving boundary disputes commonly require an attorney. Additionally, lawyers should always review all timber sale contracts or timber deeds before you sign them.

Annual accounting services may be needed to help you wend your way through the maze of Internal Revenue Service tax codes. Of equal importance, however, is to initially establish the proper records to adequately track each individual woodland account. Proper record keeping may very well prevent you from unnecessarily paying thousands of dollars in income tax.

It is very difficult to maximize financial returns from your property if you don't know exactly where it is. Having a registered survey of your property, coupled with clearly marked boundary lines, is basic to land management. Licensed surveyors are expensive, and periodically painting your boundary lines is no picnic. It is very important for management purposes, timber sale transactions, and preventing timber trespass that your property be distinctly defined.

Related Costs

Installing and maintaining associated capital assets such as roads, bridges, fences or gates are often costs associated with woodland management. Tax relationships with these costs were touched upon in Chapter Four.

Section 208 of the Clean Water Act requires that certain measures known as Best Management Practices, or BMP's, be taken while conducting forest management activities. Meeting State or Federal water quality standards during and after harvesting operations, for example, generally requires the installation of erosion control structures, as well as planting vegetation on bare, erodible areas. At Tennessee Timber Consultants we ensure that the installation of BMP's by loggers is a required part of timber sale contracts. Failure to comply with BMP's or other water quality laws can result in fines to property owners totaling to many tens of thousands of dollars.

Opportunity Costs

Procrastination is a terrible thing. "You know, if I had only made that investment ten years ago when I had the chance, look where I would be today." Failing to make that investment created an opportunity cost. "If only I had planted those trees...," or "I wish now that I had used Tennessee Timber Consultants when I sold my timber because...." Opportunity costs are the difference between what you actually earn, versus what you could have earned had you made a different decision.

Well, no one is totally clever, and makes all of the right decisions all of the time. The difficulty with a woodland investment, however, is that a delayed or improper decision is often irretrievable or irreparable, and can create lost opportunities that persist for decades to come. And, it is too late to cry about the small amount of income you received for your timber after your trees have all been cut and hauled away.

Woodland owners who insist on a long term planning horizon, and who rely upon our professional services are seizing their opportunities and reaping nice rewards for their efforts. However, those who harvest their timber indiscriminately, and who sell their timber without proper advice are losing staggering sums through lost opportunities.