VARDAMAN VIRTUAL FORESTRY COMPANY

UNIQUE INVESTMENT OPPORTUNITY CREATED BY SUSTAINABLE FORESTRY INITIATIVE®

Henry S. Kernan, who owns 1,200 acres of northern hardwood forests in New York, contributed a thoughtful analysis of sustainable forestry in the June 2001 issue of Journal of Forestry (JOF), official publication of the Society of American Foresters (SAF).  He wrote, “My woods have the attributes, trimmed down to size, of sustainable forestry.  They may even have the attributes of ecosystem forestry…  Whatever they are, they have received appropriate awards as a tree farm since 1961.  The National Forestry Association has tagged them green; Smartwood will soon certify them sustainable.

“But my management does not attain the objective of financial gain…Now, after 53 years of ownership, the imbalance of cost over income is $96,511.89.  The history of land use, real property taxes, and my own management decisions account for that high figure.  There must be exceptions, but I believe that most of the state’s half-million nonindustrial forest owners do not make money growing and selling trees…

“My decisions also remove parts of my forest, timberland or not, from the cutting cycle.  Those parts are streamsides and roadsides, swamps and bogs, old-growth trees, and the top and one steep side of Quaker Hill.  Meadowlarks have their open grassland and woodcocks their bushy mating ground.  People who come to hunt, fish, and trap, or just walk and ride horses along my forest roads bring me goodwill and gifts, but no income.”

The February 2001 JOF argues that “sustainable forestry is a social construct.  That is, definitions will vary with the values of the beholder.”  In very large ownerships, it means many things.  For one, “the new goals focus on biodiversity, clean water, recreation, timber, wildlife habitat, and mineral utilization...Annual public forums will be held in the 20 forest districts.”  Another emphasizes biodiversity with concern for cavity nesters, deer yards, riparian areas, and leaving high-quality trees that will enhance the growing stock.  Another requires selective harvesting, leaving seed trees, and removing slash.  Another tried and failed to stabilize timber supply and local employment; more recent attempts suggest that social and economic issues remain vexing problems because they are inherently value-laden.  Another modifies timber harvesting in and near wetlands because of its effect on birds and herpetofauna.

A more-technical analysis of the Sustainable Forestry Initiativeâ (SFI), “An Empirical Evaluation of Spatial Restrictions in Industrial Harvest Scheduling: The SFI Planning Problem” by Karl Walters and Eric Cox appeared in the May 2001 issue of Southern Journal of Applied Forestry, another SAF journal.  One result of this analysis was that “the spatial restrictions imposed under SFI guidelines can yield significant reductions in harvest levels and discounted net revenue.”

The Effect of These Voluntary Restrictions on Those Who Want to Make Money Growing Trees

All owners of the forests described above are subject to the world market forces.  If they prefer to produce scenery or wildlife habitat instead of merchantable timber, investments in them must produce lower economic returns.  But best of all for some of us, their decisions to reduce timber growth and sales reduce timber supply in our market.  If a flood of Canadian lumber is a minus, tens of millions of acres under SFI is a huge plus.

This situation is especially beneficial to owners of PPIC’sâ, Pine Plantation Investment Contracts, such as Beauty 13.5% and the Gambler sales.  PPIC owners or their predecessors in title created forests where there were none.  The lands under these forests were in row crops, pastures, or cutover timberlands.  PPIC investors leased rights to use these lands by paying more per year than the landowners earned in other uses; therefore, they improved the IRR of landowners.  These leases, as opposed to purchases, created exceptional returns, for every invested penny went into trees and none into land.  They are superb examples of how the market economy created forests where there were none.  If profit is your goal, follow the PPIC path; don’t try to make high returns in the manners described above.