VARDAMAN VIRTUAL FORESTRY COMPANY

The Most Direct Link to Knowledge Workers in the Southeast Forest Economy

HIGH SOIL PRODUCTIVITY CAUSES LOTS OF PROBLEMS, HIGH-TECH REGENERATION COSTS LOTS OF MONEY, BUT THEY CAN COMBINE TO PRODUCE SUPERB INVESTMENTS

In the Lower Coastal Plain of the Carolinas, Georgia, and Florida and the Black Belt of Mississippi and Alabama, and in smaller concentrations throughout the South, are tracts with abundant soil moisture and fertility in which plants grow with almost unbelievable speed. The forests on these tracts are about as close to tropical rainforests as we have: every time one plant is removed, several more fight to take its place and the gap is closed immediately.

When this powerful growth engine is harnessed by modern technology to a valuable crop like loblolly pine, the volume growth is astonishing to those who are not familiar with the areas. Although expensive cultivation is needed to harness it, the rapid growth that ensues will produce real rates of return (RRR) well above 10% compounded annually.

There's also an unusual plus. When Jim Vardaman founded JMV&CO in 1951 and for nearly 30 years thereafter, it took about 35 years of good management to grow a crop of timber, and early dribbles of cash occurred at ages 18 and 26. The stout-hearted investors who planted trees then had to be prepared for a long wait. If they ran into financial difficulties or witnessed a roaring timber market during the first 15 years they could get out of their investment only by selling everything, for getting cash from timber sales was impossible (there wasn't any). That's not the case now; clearcuts large enough to produce some return on the total investment are now possible as early as age 9.

At age 9 in a modern plantation on such lands, the volume of timber that can be sold at good prices plus the sale of the land will net enough to produce an RRR of 3.06% on the owner's original investment (land plus regeneration). Therefore, he has an "escape hatch" much earlier that formerly. The volume of merchantable timber develops so rapidly that his comparable RRR will rise to 5.56% if he can delay selling until age 10 or 7.42% at age 11.

The other side of this coin is much less attractive. If he postpones regeneration, all the culls left from the clearcut plus the root sprouts of undesirable species immediately respond to the high fertility and moisture and soon capture the site. The growth of these trees is also astonishing. As a rule of thumb, we estimate that the cost of controlling them will rise $50 per acre. Each year the owner will not only lose income, but also will have to spend $50 more per acre in regeneration costs.

On the other hand, he will have invested only the $250 value of his land, and it will usually produce from hunting leases a small surplus over taxes, perhaps 1% or 2%. Eventually, the trees that developed naturally after the clearcut will become merchantable. The make-up of this stand will be unique for each tract, and unless we measure sample plots, anything that we say now will be purely a guess. Our guess, however, is that income from timber sales will be impossible for at least 10 and probably 15 years.

If you own a tract of highly-productive land that is now hooked up with a heavy stand of timber, we suggest that your timber-sale plan include a plan for prompt regeneration; if it doesn't, the timber sale will almost surely reduce the value of the land.