VARDAMAN VIRTUAL FORESTRY COMPANY

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BONANZA

FERTILIZATION: A BONANZA FOR PLANTATION OWNERS

Regular readers of our newsletter realize that the variation within and between pine plantations is huge, that treating all of them in the same manner is a bad mistake, and that thinnings selected by someone with a conflict of interest are recipes for disaster. If you are still in doubt, read the nearby article about the 18-year-old plantation. But that’s enough bad news. Now we suggest that both the cure for most problems (low SI-25 to begin with, poor practices during establishment, and disastrous thinnings) and the chance for superb returns on investment can be created by fertilization after thinning. After measurement of sample plots to determine what you actually have, analysis with PTAEDA2V will reveal the size of the opportunity

Large areas of the south now in pine plantations have relatively low inherent productivity. When trees on them are 25 years old, the main stand will be 65 feet tall; we speak of such tracts as having a Site Index (SI-25) of 65. In plantations like these, a PTAEDA2V-type thinning at age 12 will remove all pulpwood-quality trees and leave a per-acre stand with a market value of $239. When land sells for $300, total investment = $239 + $300 = $539. If left to grow for ten years without help, predicted market value of timber = $1,293, so total value = $1,293 + $300 = $1,593. Annual, compound value increase over the 10-year period = 11.4%.

If fertilized after thinning at an estimated cost of $150, total investment = $239 + $300 + $150 = $689. Total market value ten years from now = $1,755 of timber + $300 of land = $2,055, and return over the period = 11.5%. You may not get excited over such a small improvement, but you should note that the impact of $150 in fertilizer was enough to increase the return on the total of $689 for ten years.

Here’s a similar analysis for SI-25 of 70, a slight increase in inherent productivity. Total investment after thinning without fertilizer = $295 of timber + $300 of land = $595. Total market value ten years from now = $1,742 of timber + $300 of land = $2,042, a return of 13.2%. Total investment with fertilizer = $595 + $150 = $745. Total market value ten years from now = $2,371 of timber + $300 of land = $2,671, a return of 13.6%.

Here’s a similar analysis for an actual tract with SI-25 of 89, the highest we’ve ever measured in our 50-year practice. Total investment after thinning at age 14 without fertilizer = $1,574 + $300 = $1,874. Total market value ten years from now = $5,316 + $300 = $5,616, a return of 11.6%. Total investment with fertilizer = $1,874 + $150 = $2,024. Total market value ten years from now = $6,760 of timber + $300 of land = $7,060, a return of 13.3%. If this doesn’t seem like a "superb" investment to you, think about this: $150 of fertilizer increases return on the total $2,024 by 1.7% over the ten-year period.

You probably noticed that we used $300 for land regardless of its productivity. That’s crazy, but that’s the current market situation. Bidders seem to believe that land is land and any acre is worth $X. If you are a serious investor, you will avoid this euphoria.

You should notice that carrying the burden of land decreases the return because land doesn’t rise in value (if there is any rise, it’s not as rapid as that of timber). Investors in PPIC’sâ avoid this drag, but can still capture the benefits of fertilization.

Why Timber Values Rise Rapidly During the Final Ten Years No Matter What You Do

Two factors are responsible for this. 1) The area of a circle increases with the square of the radius, so even if heights are equal, 10-inch trees contain 56% more cubic feet or pounds of solid wood than 8-inch trees. That’s why we have continuously emphasized that proper procedures during establishment are vital. If you plant so many trees per acre that they compete with each other early in their lives or if you fail to give them a boost with cultural practices, you can’t go back and start over. They will always be too small to bring optimum prices.

2) Although their quality makes them suitable for sawtimber, trees 8" DBH can be sold only for pulpwood; they are not big enough to produce lumber. Thus the market value for all 8" trees is about $2.61. Once trees become 12" DBH, those of sawtimber quality have a market value of $17.25. On the other hand, pulpwood-quality trees 12" DBH have a market value of only $7.09, solely because they weigh more. Therefore, sawtimber-quality 8" DBH trees will increase in value by 561%, whereas pulpwood-quality 8" DBH trees will increase by only 172%.

That’s why we’ve screamed and hollered about improper tree selection in thinning. See the nearby article describing what a pulpwood cutter did to our client three years ago. He eliminated all her chances to get sawtimber prices for 51% of her trees.

What to Do About Your Plantation NOW

If your goal is to make money growing trees and your plantation is between 10 and 20 years old, even if it has already been thinned, you should find out NOW what you have and decide what to do about it. A PTAEDA2V analysis is the most accurate way to do this. Our client whose values were seriously reduced by the pulpwood cutter decided to clearcut her stand and start over. Our client with SI-25 of 89 decided to fertilize his plantation after thinning because of the big boost that it gave his return.

Timing is important. The fertilizer’s nitrogen component will volatilize unless it is quickly incorporated in the soil, and the only way to do this is to get plenty of rain very soon after application. Furthermore, it doesn’t help if some fertilizer is taken up by trees to be removed in the thinning. It takes time to do the analysis, time to prepare the sale, and time for loggers to remove the thinning, so we must get started on this project as soon as possible. If you want to weed your garden to assure an abundant harvest, now is the time to do it.