VARDAMAN VIRTUAL FORESTRY COMPANY

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

THE KNOW-WHAT-YOU-OWN SYSTEM FOR PROFITABLE TIMBERLAND INVESTMENTS

The first step in dealing with the enormous complexity of the SE U.S. forest economy is to reduce that of the part you must cope with.  You can do this best by restricting your efforts to the parts easiest to understand, most in demand, and most likely to produce your objective.  Therefore, the K-W-Y-O system sets these conditions:

1. Invest only in loblolly pine, in the culture of which we are world leaders.

2. Invest only in planted pines.

3. Maintain unit operating areas at a minimum of highly-accessible 40 acres.

4. Choose land with SI-50 of at least 90 for loblolly pine.

5. Do not subdivide ownership so that more than one signature is required to convey sales.

6. Open a computer file for all investment records in digital form.

If you are considering buying a tract that does not qualify under these rules, postpone action until you have studied this system.  If you are a joint owner of a tract, sell out, for these ownership-arrangements always impede operations and have an unfortunate tendency to cause disputes among friends and kinfolks.  Then you will be better able to cope with the large, unpredictable changes that always occur from outside our forest economy.

The next step is to determine the age of the plantation.  Don't forget that trees planted in February 2002 will always be one growing season or one year older than those planted in November 2002.

The next step is to measure a sample of the plantation in the manner shown at http://www.vardaman.com/greensheets/star.htm.  With these data in your computer you will always know what you own without additional fieldwork prior to the harvest cut.  This is one huge benefit of plantations; essential, detailed data are available at a flip of a switch.

Now using PTAEDA2V, thin the plantation from below to an average density of about 175 trees per acre after the 12^th growing season, harvest it at age 22, and sell the land a year or two later.  Estimate cash receipts from sales from current state reports and assume no changes in prices. (The demo version of PTAEDA2V is at http://www.vardaman.com/ptaeda2v.htm )

Now list your schedule of cash flows, especially total costs to date, from now to disposal of the tract, in the manner shown at http://www.vardaman.com/greensheets/rearr.htm.  Analysis of these figures with a $30 financial calculator from any office-supply store will reveal the ROI you are likely to earn under current conditions.  At least once each year (or each month if you like), repeat the process.  Don't forget to insert new sale prices from the state reports.  When it begins to produce unsatisfactory ROI’s, it is trying to tell you to sell out instead of hoping that big price increases or rare weather events will bail you out.  Many other timberland investments are always available and first-rate investments for idle cash are numerous.