Buying Land

Successful Investment and Management of Pine Plantations

Successful Investment and Management of Pine Plantations

If you live in the Deep South, the beautiful, towering pine trees with their straight, sturdy trunks and huge pine cones, are as much a part of your view as grass or blue skies. The 13 Southern states that span Virginia to Texas are called the “wood basket” of the United States, aptly named for its established and integral timber industry. For centuries, the southern states have been providing much of U.S. lumber, and it creates hundreds of thousands of jobs and pumps billions of dollars into the economy each year.

Until the last century, the landscape of much of the Deep South – especially that in the Lower Coastal Plain – was dominated by the venerable longleaf pine. As the timber industry picked up steam and the “cut out and get out” management style was replaced with a more sustainable mindset, companies opted for the faster-growing loblolly pine, which is the leading commercial timber species and is the backbone of the Southern timber industry.

The Life Cycle of a Pine Tree

Pine trees essentially have three primary stages that coincide with their commercial uses:

Pulpwood refers to trees or logs that are small or flawed, not ideal for making into lumber. Pulpwood is broken down into pulp and used to make paper products such as cardboard and fiberboard. Pulpwood is the primary fiber feedstock for wood pellets that are used for energy production.

Saw timber refers to logs or trees that are large enough, and of a high enough quality, to be sawn into lumber. Saw logs are made into larger lumber, such as 2x10s and 2x8s.

Chip-n-saw comes from trees intermediate in size between pulpwood and saw timber. The outer portion of the log is is sawn off to produce chips, while the rectangular inner portion of the log is sawn for small dimension lumber.

Poles are the rarest of the by-products simply because of the time and good fortune it takes for a pine tree to grow tall and straight enough to become a utility pole or pilings for structures like docks.

The monetary value, as well as the typical age the tree must be to yield each product, increases along the pulp to pole spectrum. Naturally, the tall, wide, mature trees are more valuable

As landowners and GameKeepers, we are tasked with balancing the needs of the wildlife and the resource with the monetary needs we might have to sustain ownership. Every landowner will manage their pine plantations differently based on the needs mentioned above and their priorities as such. The monetary side of managing pine plantations will likely vary based on market conditions, such as the current price of pine pulp in your area, as well as whether you need to cash flow your property, meaning you will likely need to harvest timber more frequently than someone who is comfortable financially.

Let me explain the prevalent management styles and philosophies by walking you through the life cycle of a pine plantation.

Pines are typically planted in what are known as “plantations,” in which seedlings are either manually or mechanically planted in rows, with typical tree-per-acre counts running between 400-600 trees to the acre.

Depending on the quality of the site and seedlings, when loblolly pines are between 12 and 16 years old, the landowner will have the option of thinning the plantation by harvesting a select number of trees per acre. Thinning is an essential part of any timber farm investment. The removal of some tress from a stand (typically inferior and sub-dominant trees) will not only provide revenue, but also improve the quality of the remaining plantation by giving other trees more room (and resources) to grow. Harvesting the inferior trees will allow dominant trees to receive more sunlight and nutrients. Trees from a first thinning will typically go for pulp. The revenue varies depending on market conditions, but as an example, if pine pulp prices are around $8 per ton, the landowner should receive around $400-$500 per acre, depending on how heavy the thinning.

The first thinning of a pine plantation will go a long way in determining its “identity”. It is important the thinning be handled carefully, and not necessarily with dollar signs in mind. Landowners should utilize a reputable registered forester in all aspects of the thinning process, from logging crew selection to deciding upon the density in which you thin. You need to think of a first thinning as a management practice first and income event second. Thinning should be dictated by forest health considerations and be conducted to maintain vigorous growth; it should not be delayed by a poor pulpwood or chip market.

The density in which you thin the plantation is known as a basal area, which is a ratio of wood volume to the acre. The higher the number, the more volume of trees left per acre. The lower- the less. Bear in mind that as a rule the more trees you leave, the taller and straighter those trees will be, and with less, you will have trees that are shorter with larger diameters. This is simply based off the trees’ natural instinct to fight for sunlight. How heavy you thin really depends on your long-term goals. Case in point: On our family property, we are on a 40-year rotation with an emphasis on quality saw logs and also poles. To achieve that, we knew we would need to leave more trees to the acre, and instructed our thinning crew to stay between an 80-85 basal area. Our forester also monitored the activity periodically during the thinning, to ensure our specific objectives were carried out.

Selecting a quality thinning crew is crucial. You do not want a crew that will thin in wet conditions and damage the root system of the remaining trees, or scuff up remaining trees in the process of harvesting and hauling out those that were cut. A quality thinning crew will be in high demand and will likely be hard to pin down. If you can get one though, it can make a huge difference moving forward.

After the first thin, the canopy will be opened up, allowing sunlight to better reach the forest floor. It is important to control the understory with a mixture of herbaceous spraying and prescribed fire. A well-managed pine plantation can provide good wildlife habitat and produce hunting opportunities for the landowner. A poorly managed plantation can have the opposite effect. Once you thin, it is important to get on a spray and burn schedule within the next year. It is critical to not let the competition get a head start.

After the first thin, the plantation continues growing in volume and as the trees reach 18-22 years of age, they begin approaching the saw log phase in which they have at least one 8-foot section that can be used for lumber. Smaller trees in this class are typically referred to as “chip and saw” in which the tree will yield one log and the rest of the tree will go for pulp.

When the pine stand reaches this age class, landowners have a choice as to whether to do another thinning and remove more inferior trees, or clear cut the stand and begin the process again. Unless the landowner is in an area in which the market is driven by high pulp prices, such as coastal Georgia, they will likely opt to do another thinning. Understand that whether to do a thinning at any stage of the plantation should really depend on whether the stand needs it or not, versus simply doing one for financial reasons. If you put the health and management of your plantation first, the revenue will take care of itself to a degree.

The average length of most saw timber rotations are 35-40 years. It is likely that a landowner will have another thinning in between the second thinning and the final clear cut that will remove subdominant trees, many of which will be decent quality saw log trees. The goal, again, is to maximize the quality of the plantation by giving dominant trees the ability to thrive with adequate sunlight and nutrition.

The final clear cut is one of the most bittersweet events in a landowner’s life. The financial rewards can be great; 40-plus-year-old saw log and pole pine plantations can realistically yield upwards of $2500 per acre in many areas. However, many landowners are left wondering, “what now?” and it can be overwhelming. As landowners, we do oftentimes need to realize income off the property, even if it comes at the expense of aesthetics. Starting over does provide us with the opportunity to improve the site and begin the rotation again.

Managing for Wildlife and Income in Pine Plantations

From a wildlife perspective, pine plantations can be excellent habitat depending on how intensively managed. If someone abandons a plantation after it is thinned, it will grow into a sweet gum and briar thicket that will provide little true benefit to the wildlife. Again, herbicide and prescribed fire are the pine plantation’s best friend.

Additionally, it is important to have age class diversity so that your property is somewhat like a mosaic and the pine plantation component offers different benefits such as nesting and brood rearing habitat for wild turkeys. Age class diversity will also ensure that as the timber matures you are periodically harvesting timber and thus realizing cash flow.

The key is to map out your goals for the pine plantations on your property. There are so many variables to consider and many depend on the market conditions. The current trend, as noted above, is shorter, pulp-driven rotations that employ mass pollinated and/or containerized seedlings noted for their rapid growth. While the input cost with using these trees is sometimes two or three times greater than the cost of commonly used second generation seedlings, the typical first thin age is between 9-12 years, and the final cut between 18-22. These trees exist primarily in areas where the pulp prices can offset the high input costs; these trees are not expected to produce high-grade saw logs, as their rapid growth reduces the strength of the tree.

If you are not in a pulp-driven market, you will likely opt for a longer rotation simply because, on average, saw logs and poles are the highest ticket item in the market. New housing constructions, which were devastated by the Great Recession of 2008-2009, seem to be on an upswing. As housing starts to increase, the demand for lumber increases and thus the need for pine saw logs.

Timberland has a history of strong investment performance, generating an average return on investment in excess of 10% depending on the market. Timberland is a long term, slow-and-steady-wins-the-race investment, not a “get rich quick scheme.” You need to invest wisely and be in a position to manage the plantation putting the best interest of the timber first, versus the needs of your bank account.

Regional factors such as the proximity to mills greatly affect the ROI a property can realize. As an example, in Coastal Georgia, the emergence of wood pellet mills that supply the European Union’s “Carbon Neutral” policy has spurred pine pulp prices that exceed $20/ton. In one region of Alabama, a pulp mill recently closed and landowners in that region are hard pressed to receive $4 per ton for pine pulp.

Investing in a Pine Plantation for the First Time

The best advice for someone looking to invest in timberland is to start by selecting a property located in an area with established infrastructure and a proven timber market. A Mossy Oak Properties Certified Land Specialist can help determine which timberland investment is right for you. After you have identified potential properties, review a soils map from the county Natural Resources Conservation Service (NRCS) to find out what the site index of the soils on the property are. Site index is a measure of the potential productivity of a soil for a given kind of tree, namely loblolly pine. As an example, if the site index for a class of soil found on a property is 100, on average, a 50-year-old pine tree will have a height of 100 feet. High quality sites (a high site index) is crucial to produce the greatest volume response; even superior genetic seedlings will not be able to overcome poor soils.

Quality timber tracts will also need to have access and quality road systems to allow for ease of logging and transport. The more work and cost the logging crew has to endure to log your property, the lower the price you can expect to receive. Sites that hold up better in wet conditions and thus may be logged in periods of wet weather can generate higher prices if the supply of wood at the mills has decreased because of the weather. Being within 30 miles of a pulp and/or saw mill is advisable to garner the highest prices possible. Again, the higher the cost for the logging crew and their truck drivers, the less you can expect to receive.

In keeping with the diversity principle above, investing in a tract of timberland with multiple age class stands, including some that are nearing thinning or final clear cut, is advisable if you have the money to do so. Not only will this tract be more likely to provide more immediate recreational benefit versus a recently clear cut tract, it will also allow you to realize income via harvesting sooner than later. However, if you are simply trying to build an asset base and thus stretch your money further, then tracts with early age class stands may need to be your focus, as these tracts will likely have marginal recreational and standing timber values attached to the “bare dirt value” of the property.

Guidance When Investing in Pine Timberland

As you look to invest in timberland, having a trusted team of land brokers and foresters assisting you is paramount. You will also want to develop a relationship with your local NRCS or Forestry Service representatives, to understand what cost-share and/or assistance programs may be available for reforestation, prescribed burning, or other management activities.

At Mossy Oak Properties, many of our offices in the Deep South focus specifically on timberland tracts and have brokers that are also registered foresters. The depth and breadth of knowledge they offer can help assure that when you purchase a timberland tract it is not only a property you will enjoy from a recreational standpoint, but also one that will be a sound investment. While we believe that land is certainly the best investment anyone can make, it is wise to make sure that the property is the best fit for your wants and needs.

Article contribution by Mossy Oak Properties. The Mossy Oak Properties land brokerage network was launched in 2003 and has since grown to over 100 franchised brokerages in 30 states throughout the country.

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