THE RIGHT WAY TO LOOK AT YOUR TIMBERLAND
On the first Friday of 2002, we received this e-mail:
“We have about 1,000 acres of timberland located in this county. Approximately 100 acres is 14-year-old CRP pine, and the remainder has either been cut and has spotted natural regeneration or is in need of clearcutting and reforestation. Basically, it’s a mess.
“We are interested in the following:
| 1. | We would like to turn the above listed tract of land into the most profitable timber production facility possible and to do so using the most scientific approach possible and to not be restricted to the ‘traditional’ thought processes prevalent in the timber industry. |
| 2. | We would like information on selling the CRP timber with a lump sum, plus annual yearly payments with a final date to cut. We saw a similar sale described on your web site and want to understand the realism of this approach.
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| 3. | We would like to clearcut, map, and reforest the remaining tracts of land. |
“We are not interested in:
| 1. | Listening to a traditional timber broker discuss how hard it is to do all of this. |
| 2. | Listening to a traditional timber broker minimize our return and maximize his, while not yielding the correct reforestation program. |
| 3. | Having countless useless conversations about timber in general. We need someone who knows, summarizes, and executes.” |
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He thus looks upon his timberland as a business. In “The Essential Drucker,” Peter Drucker wrote this about management of a business: “Business must always, in every decision and action, put economic performance first. It can justify its existence and its authority only by the economic results it produces. A business management has failed if it does not produce economic results. It has failed if it does not supply goods and services desired by the consumer at a price the consumer is willing to pay. It has failed if it does not improve, or at least maintain, the wealth-producing capacity of the economic resources entrusted to it. And this, whatever the economic or political structure or ideology of a society, means responsibility for profitablility.”
We think that this is exactly the right way for owners to look at their timberlands. Timberland is an economic resource, just as stocks, bonds, and office buildings are economic resources. It must produce an appropriate return or it should be sold to someone
who has other uses for it. What may be urban sprawl to commentators with no direct financial interest is the proper trade for seller and buyer following Drucker’s instructions.
It won’t produce the return by accident. Timberland requires as much skill, knowledge, and advanced techniques as do other economic resources. Its owners are not required to produce beautiful views, “wildlife habitat” (whatever that is), or fancied environmental benefits demanded by many urban residents who are enjoying benefits produced by proper management of urban economic resources. On the other hand, they should consider selling it if they do not “improve, or at least maintain, the wealth-producing capacity.”
We are delighted to have the chance to satisfy him. The first step we suggested was to get a copy of the Soil Survey of his county, plot his lands on the aerial photos in the last section, and send us a copy. The total area of 1,000 acres is almost sure to contain several productivity classes that have different possibilities and require different treatment. We will examine these photos without charge, suggest the needed actions, make the required measurements, predict the financial results, and if necessary supervise execution of the plan.
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