VARDAMAN VIRTUAL FORESTRY COMPANY

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SHOULD I ALLOW MY PLANTATION TO GROW OR THIN IT OR CLEARCUT IT AND START OVER AGAIN?

So far as the trees in a plantation are concerned, it is not as easy as you might think to decide whether to thin them or allow them to grow. This is true because the strong ones grow fast and the weak ones grow slow and the strong ones grow even faster when you remove the weak ones. It is nearly impossible to make accurate growth predictions without a computer-driven, individual-tree, growth-and-yield model like our PTAEDA2V, and even the models that we know about cannot perform this task without modifications. Consequently, Harold Burkhart and his associates at Virginia Tech have recently modified ours to allow us to input an existing plantation and manipulate it through all conceivable management options.

But the problem facing landowners is even more complicated because the trees must have land to grow upon and the condition of the trees and the manner in which they are installed on the land have a great effect on what the two combined produce. The decision is not about the trees alone, but about the total investment. Burkhart et al have also modified ECONV, our economic-analysis program, to allow us to calculate the most profitable use of the underlying land and then to evaluate the whole investment. Using the Jane Smith Georgia plantation as an example, we have described the procedure in general terms below.

The first part of the decision concerns the trees. We measured plots to determine the per-acre stand in one-inch DBH classes and suitability for pulpwood or sawtimber and also determined SI-25 to be 60 and the age to be 23 years. One timber buyer suggested A) clearcutting it now, another suggested B) removing every third row and thinning the remainder now and clearcutting seven years from now, and we suggested C) removing pulpwood-quality and low-vigor trees now and clearcutting seven years from now.

Next we entered the stand in PTAEDA2V and calculated net cash flows and their present values at 7% for all three options as follows:

As you can see, rank of the three options above in order of highest present value is C, B, A, and the reason is that, after thinning, the strong trees will grow faster than the 7% discount rate.

But one year after the trees have been sold and removed, the land can be planted according the JMV&CO specifications that we have so often described, and we calculated its per-acre values under these conditions to be $490. Consequently, present values of the total investment under the same options will be as follows:

Now the options rank A, C, B. The reason is that using all modern techniques raises land values substantially and that, at a 7% discount rate, it is worth a lot to free the land for such use quickly; the faster tree growth cannot make up the difference. (But as Dan Hopkins points out, Mrs Smith should choose her own discount rate, and if she chooses 5%, as many people do, the options rank C $2,310, B $2,240, A $2,210.)

We used a land value of $490 per acre because it is worth that under the most profitable timbergrowing regime, but you can use any value that suits you. If, for instance, you have decided to liquidate your timberland investment and merely want to determine whether to do it now or later, use the estimated market value of the land instead of $490, and treat it in the same manner.

The techniques just described are sure to increase profits growing trees, for at the least they provide expert guidance about what to do at critical points in the rotation. We are anxious to introduce them to you. If you will gather these key facts about your plantation: 1) number of all trees per acre by quality and one-inch DBH classes, 2) age, and 3) SI-25 and send them to us, we will prepare an analysis for you free of charge. (There will be a moderate charge if we have to gather the facts from your land). Check the appropriate box on the enclosed reply card, and we will call you promptly.