VARDAMAN VIRTUAL FORESTRY COMPANY

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

WHAT A HIGH-PROFIT REGENERATION AND FOREST-MANAGEMENT PLAN SHOULD LOOK LIKE

High-profit forest management is not the simple matter that it is often made to appear by many foresters. The same combination of techniques cannot be successfully applied to all properties within a wide area. Modern technology and the utter necessity of doing things right the first time are and never will be simple matters. If you persist in believing that they are, you are sure to earn poor returns from your timberland.

High-profit forest management requires high investment of skill, technology, and money, but produces high yields on every invested dollar. Low investments of these productive factors almost guarantee low profit.

At the risk of telling you more about forest management than you really want to know, we present below the full text of a plan (changed only to preserve confidentiality) that we recently prepared, including a schedule of cash flows in which JMV&CO will be the investor. To put it another way, JMV&CO not only prepared the plan, but will back its professional judgment with its own money by making the cash payments for 50% of the timber as shown below.

The XYZ Tract is adjacent to the _______ River, and the areas to be regenerated are 700+ acres of fields that were last farmed in 1992. These areas will first be bush-hogged by the landowner to remove last summer's herbaceous growth; then an aerial photograph will be taken to determine the actual acreage. We have determined by field examination that there are basically two site index categories on the tract. The lower of these is the Lakeland soil series with a site index (base age 25) of 60; the higher is a grouping of Magnolia, Savannah, Ruston and Leaf soils with an average site index of 67.5.

Legal Description: Open fields that have not been planted in agricultural crops in Sections __, __, __, Township __ North, Range _ East, ____ County, Alabama.

Soils Description: To determine the site index and other information needed to develop this plan, we used the Soil Survey published by the Soil Conservation Service. We then went to the tract and on each soil type, using a bucket auger and Munsell Soil Color Charts, we verified each soil series, tested its site-index correlation, and determined that no hard pan lies under any of the fields. The following is a list of the different soils on this tract and a brief description of each:

Lakeland Fine Sand: This is the only Lakeland soil mapped in the county. It is an excessively drained soil on low terraces along the _______ River. Natural fertility and organic matter content are low, and reaction is strongly acid. Water enters and moves through the soil rapidly, and available water capacity is very low. In a representative profile, the surface layer is a very dark-grayish brown fine sand 7 inches thick. Below is a reddish-brown to brown fine sand to a depth of 18 inches; strong-brown fine sand to a depth of 32 inches; mixed very pale brown and brownish-yellow fine sand or sand to a depth of 54 inches; and a very pale brown sand to a depth of 75 inches.

Magnolia Fine Sand: This series consists of well-drained, red soils on uplands. These soils formed in thick beds of sandy clay loam and sandy clay marine sediment. Slopes range from 0-12 percent, but slopes of 2-8 percent are dominant. In a representative profile, the surface layer is brown fine sandy loam about 8 inches thick. The thick subsoil is yellowish-red sandy clay loam in the uppermost 5 inches; red heavy sandy clay loam to a depth of 22 inches; red clay to a depth of 55 inches; and yellowish-red sandy clay to a depth of 55 inches; and yellowish-red sandy clay loam mottled with reddish yellow to a depth of 70 inches.

Ruston Series: This soil consists of well-drained, acid soils on uplands and stream terraces. It is friable, and infiltration and permeability are moderate to moderately rapid. The available water capacity is moderate. These soils formed in thick beds of unconsolidated sandy loam to sandy clay loam sediment. Slopes range from 0-25 percent, but slopes of 0-5 percent are dominant. In a representative profile, the surface layer is brown fine sandy loam 8 inches thick. The thick subsoil is yellowish-red heavy fine sandy loam in the uppermost 8 inches; yellowish-red light clay loam to a depth of 30 inches; yellowish-red sandy clay loam to a depth of 60 inches; and yellowish-red light fine sandy loam to a depth of 80 inches. Below is strong-brown sandy loam mottled with pale brown.

Savannah Series: This soil series consists of moderately well drained, acid soils that have a fragipan in the lower part of the subsoil. These soils formed on uplands and stream terraces in unconsolidated beds of medium textured to moderately fine textured sediment. Slopes range from 0-8 percent, but slopes of 0-5 percent are dominant. In a representative profile, the surface layer is brown fine sandy loam about 8 inches thick. The subsoil is yellowish-brown heavy fine sandy loam or loam to a depth of 23 inches. The compact and brittle fragipan in the lower part of the subsoil is yellowish-brown heavy loam mottled with light yellowish-brown, strong brown, gray, and yellowish-red to a depth of 33 inches; yellowish-brown sandy clay loam mottled with red, pale brown, and gray to a depth of 45 inches; and mottled red, yellowish-red, strong-brown, yellowish-brown, and gray sandy clay loam to a depth of 75 inches.

Leaf-Angie Association: This soil consists mainly of poorly drained to moderately drained, nearly level soils on broad stream terraces along the _______ and ________ Rivers. They have a surface layer of gray silt loam that is about 2 inches thick. The subsoil, in the upper 36 inches, is gray silty, clay mottled with yellowish brown and strong brown. The lower part, also about 36 inches thick, is mottled light gray and strong-brown clay. The natural fertility and organic content are moderate and reaction is very strongly acid. Infiltration is moderate, and permeability is slow. The available water capacity is moderate.

[If you wonder why we went into such detail about soils, wait until you see how one group produces much more income than another.]

In January 1994 we will plant genetically-improved, second-generation seedlings whose volume production can be documented; these are available from two major companies and other sources. Under such conditions, the most important characteristic of the seedlings is how crowded they were in the nursery bed and how much this crowding affected development of vigorous roots and shoots. We have available seedlings that were grown at 15 per square foot, which is sufficient to meet the criteria in our hypothesis. We will pick up, care for, and have a JMV&CO forester on the ground during the entire planting operation to insure proper installation of the seedlings.

In May or June 1994, as soon as the herbaceous vegetation has produced enough leaves to be affected by herbicides, we will sample the vegetation to determine the species to be controlled and present a herbicide prescription and a detailed account of the factors considered in making it. [A sample of such a prescription appears in the Green Sheet of 15 July 1992.] Then we will spray bands centered on the rows of planted trees.

Our total price for establishing the plantations is $115.65 per acre. In the cash-flow analysis below, we assumed your bush-hogging cost to be $10.35 per acre, giving total regeneration costs of $126.00 per acre.

Since we will plant genetically-superior, second-generation seedlings, we have revised the site index (age 25) to 74.9 to predict growth for the grouping of Magnolia, Savannah, Ruston, and Leaf soils, hereafter referred to as Management Area 1; the revised site index is 66.6 for the Lakeland soil series, hereafter referred to as Management Area 2. By repeated computer runs with PTAEDA2V+ECONV, we determined that the most profitable plan calls for planting 330 trees per acre 11 feet apart in rows 12 feet apart, a thinning at age 12 to remove trees not suitable for sawtimber plus enough other small trees to reduce basal area per acre to 80 square feet, and a harvest at age 22. A summary of inputs is as follows:

The key to profitable forest management is regulation of competition of all kinds at all times. In addition to eliminating competition from herbaceous plants and hardwood species, we must regulate competition between planted seedlings themselves. If there are too many of these, their growth will be too slow. The ideal way to accomplish this last mission is to obtain exactly the right number (not too many to compete excessively with each other but not too few to utilize all the growing space) of living seedlings at the end of the first growing season, but no one can predict the future. The best that we can do is to guess at the right number to plant in the first place.

Our analyses with PTAEDA2V+ECONV revealed that there is very little difference in BLV between planting 303, 330, or 363 trees per acre. PTAEDA2V predicts that survival at age eight for these initial planting rates will be 270, 292, and 312 respectively, and other data show that almost all mortality occurs during the first growing season. We selected 330 to give us a small margin of safety, but of course, 270 live seedlings in December 1994 will be enough to accomplish the financial results that we have predicted. If a survey at that time reveals that there are fewer than 270 living, we will plant at our expense additional seedlings of the same or better quality to raise the number of living trees to 270 or more.

If you agree to our plan as outlined above, please sign all copies of this agreement and return one to us. As soon as the acreage to be regenerated has been determined from the aerial photograpghs, payment will be due at the rate of $62.50 per acre, which will cover the cost of the management plan, photographs, seedlings, and planting. On 1 April 1994, $53.15 per acre will be due to cover the cost of the herbicide treatment.

So that you may decide whether you want to generate early cash flow by selling a 50% interest in the timber as explained in our Green Sheet of 15 July 1993, and to demonstrate the difference that soil productivity makes, we have set forth below schedules of cash flows for each area:

We hope that you can now understand why a single forest-management prescription cannot be successfully applied to all properties over a wide area. Even when the only difference between Areas 1 and 2 is what seems to be a slight difference in site index, the cash flow and IRR of Area 2 is much lower.

We are very excited about high-profit forest management, so excited that we bought some of it with company funds. We'd love to make such a plan for you.