VARDAMAN VIRTUAL FORESTRY COMPANY

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

THE KIND OF REGENERATION PLAN NEEDED BY SERIOUS INVESTORS

The secondmost important operation in making money growing trees (timber sales procedure is first) is regeneration. You get only one shot at it, and you're stuck with it for at least 20 years. The right plan often creates an investment with a 12% annual real return (IRR); the wrong one usually produces a real IRR of less than 6%. We prepared the following plan for an actual tract in Georgia, and we present it almost in full to demonstrate many important procedures.

We have completed our site evaluation and reforestation plan for your tract in Land Lot ___, ____ Land District, ______ County, Georgia. The recommended management plan follows.

We tested 480 different scenarios with various cultural treatments, tree spacings, thinning ages, levels of thinning, and harvest ages. To evaluate them, we first forecast by computer simulation the volume of timber produced by each. We then applied current market prices and discounted future values to the present at the 8% interest rate you chose to arrive at the bare land values.

Bare land value (BLV) is an important criterion for evaluating possible management options. BLV is the net present value of all future crops assuming that the practices be repeated indefinitely. Looked at another way, BLV is a measure of what the land is worth when it is used in a given manner. The best options are as follows:

Option Number	Trees/ acre	Site - prep	Thinning age	Residual basal area	Harvest age	Bare Land Value
1	330	H	13	75	23	$ 835.14
2	330	HR	12	80	21	999.95
3	363	H	13	80	22	845.05
4	363	HR	11	75	21	1,005.40
5	330	MB	12	80	22	976.01
6	330	MBR	11	80	21	1,211.45
7	363	MB	12	75	22	920.57
8	363	MBR	11	80	21	1,137.66

NOTE: "H" = herbicidal site-prep, hand planting, no herbaceous release

"HR" = herbicidal site-prep, hand planting, with herbaceous release

"MB" = mechanical site-prep, bedded, machine planting, no herbaceous release

"MBR" = mechanical site-prep, bedded, machine planting, with herbaceous release

Option 6 yields the highest BLV. If first-year seedling survival falls below 95%, however, the reduced stocking level will allow the trees to become too limby, thus reducing the quality of the sawtimber trees. We recommend option 8, as it provides a greater margin of safety on seedling survival and reduces risk to the investment.

We estimate the IRR for options 6 and 8 to be 11.92% and 11.67%, respectively. This small reduction in return on capital is, we believe, a small price to pay for greater security.

Option 8 includes mechanically preparing the site by shearing the residual vegetation and raking into windrows, bedding the area to be planted, machine planting of 363 grade-1, second-generation coastal-plain, loblolly seedlings per acre, and releasing them from herbaceous competition in the spring following planting ("band spraying" by tractor.)

The plan calls for thinning the trees at age 11 by removing those not suitable for sawtimber plus enough small-diameter trees to reduce basal area to 80 square feet per acre. The residual stand should contain about 200 trees per acre of the best-quality trees and should be harvested at age 21.

Should you engage us to perform the reforestation work according to option 8, we will solicit bids for the work from vendors on our list and Georgia Forestry Commission lists and submit the bids to you for approval. We will specify the requirements of the work and supervise the vendor you choose. We will inspect the prepared acreage and verify all work before you disburse payment. We will order custom-grown seedlings, have the seedlings stored in a refrigerated warehouse in Albany, deliver them fresh to the site, have the vendor apply LiquaGel to the root systems, inspect for proper planting techniques, and keep a record of the plots we take on the stocking. We will also certify the average root-collar diameter of a sample of the seedlings. Finally, we will cruise the planted areas approximately one year later to report first-year survival.

Our fee for supervising the work is 15% of all costs as incurred. A schedule of estimated costs for each part of the planting operation is shown in the attached management plan.

We recommend that you apply for possible government subsidies to help offset the cost of reforestation. You should do this by contacting the county ASCS office. If approved, you will find that the Georgia Forestry Commission will impose certain restrictions for you to qualify for payment. They may approve only a limited acreage, insist on a higher number of planted trees per acre, and specify other practices.

If you wish, we will make an economic analysis of any GFC plan, so that you can decide whether governmental restrictions attached to the subsidy will reduce the bare land value by more than the payment you will receive. We will quote you a price for the analysis before doing it.

If you want us to proceed with the plan as described in option 8 above, please sign, date, and return one copy of this letter to us, and keep the other copy for your records. We will not begin soliciting bids for the work until cutting operations have concluded and you receive a release from ______ Timber Company. The cutting contract will expire on 31 March 1997.

THE VARDAMAN FOREST MANAGEMENT PLAN

28 April 1995

The following Management Plan is for approximately 76 pine plantable acres in Land Lot ___, ____ Land District, ______ County, Georgia.

The dominant soil type is Alapaha loamy sand. Using a soil auger, we verified this according to SCS description:

Typically, the surface layer is black loamy sand about 5 inches thick. The subsurface layer is loamy sand and extends to a depth of about 28 inches. It is dark gray in the upper part and gray in the lower part. The subsoil is sandy clay loam and extends to a depth of 70 inches or more. The upper part of the subsoil is gray with light yellowish brown mottles, and the lower part is mottled brownish yellow, red, light gray and strong brown. Plinthite is below a depth of about 46 inches and makes up 5 to 15 percent of the lower part of the subsoil.

To determine the normal site index, we searched for dominant and codominant loblolly pines on which to measure their age and total height. As this tract is dominated by slash pine with loblolly and longleaf as minor components, relatively few loblolly trees were available to be measured. Also, many trees exhibit mechanical injury from a windstorm or other event several years ago. This is seen as a "crook" about 10 to 15 feet below the top of the tree. While the damage has not reduced the merchantable volume of the trees, it has affected total tree height.

Of the several loblolly trees present, only three qualified for site index measurement, being dominant or co-dominant in the stand, free of defect and disease, and not over-crowded. These trees exhibit a site index, base age 25, of 69.1 feet. Nevertheless, a sample of such small size is not sufficient to establish site index for the entire tract.

As data were lacking to establish site index from the existing stand, we used data from the USDA Soil Survey for ______ County. First, we estimated the percent of total area covered by each of the six soil types present. Then using the site indices listed in the soil survey, we calculated the average site index for the tract weighted by acreage. By this method, we estimate the average normal site index, base age 25, for the pine plantable area to be 66.6 feet.

According to a chart prepared by Dr. Lee Allen of the North Carolina State Forest Nutrition Cooperative, the practice of bedding on the Alapaha and related soils will yield a weighted average gain in site index of 4.6 feet. Adding the bedding gain to the estimated normal site index yields a total of 71.2 feet. Since we recommend using 2nd generation improved seedlings, we further revised the normal site index up 11% to 79.0 feet.