PTAEDA2V: INVALUABLE TOOL FOR MAKING AND MANAGING INVESTMENTS IN PINE PLANTATIONS
Many forestry publications and press releases from forestry organizations report "low" pulpwood prices in southeastern U.S. (They don’t mention that sawtimber prices are virtually unchanged.) Consequently, many landowners have postponed thinning over-crowded stands 12-15 years old "until pulpwood prices go back up." This decision impacts returns on their investments in several ways because:
- It postpones cash flows that they expected from thinnings.
- It will probably postpone cash flows from harvests to allow time for crop trees to respond to added growing room.
- Since trees to be removed in thinning have either poor quality or low vigor, they are the slowest growers in the stand and normally not worth saving.
- Competition from these poor trees reduces growth of crop trees and may reduce harvest cash flows.
- No one knows when or if pulpwood prices will improve.
To demonstrate how prices and growth rates affect the investor, we made a series of PTAEDA2V runs and financial analyses on two PPICsâ that we own. One in Georgia was planted by us in our typical manner at 325 seedlings per acre; the other was established under the CRP and appeared to have been planted at 800 seedlings per acre. Predicted real rates of return (RRR) derived from this work are as follows:
|
Rotation
|
Fertilized?
|
Pulpwood Price Decrease |
RRR from 325/A. at start |
RRR from 800/A. as start |
|
12-22 |
No |
0% |
8.64 |
6.88 |
|
|
|
25% |
8.49 |
5.67 |
|
|
|
50% |
8.35 |
4.60 |
|
|
|
100% |
8.06 |
2.78 |
|
|
|
|
|
|
|
|
Yes |
0% |
10.16 |
11.89 |
|
|
|
25% |
10.02 |
10.68 |
|
|
|
50% |
9.89 |
9.60 |
|
|
|
100% |
9.63 |
7.77 |
|
|
|
|
|
|
|
13-23 |
No |
0% |
8.51 |
6.38 |
|
|
|
25% |
8.37 |
5.16 |
|
|
|
50% |
8.23 |
4.09 |
|
|
|
100% |
7.49 |
2.24 |
|
|
|
|
|
|
|
|
Yes |
0% |
9.76 |
10.29 |
|
|
|
25% |
9.63 |
9.13 |
|
|
|
50% |
9.50 |
8.09 |
|
|
|
100% |
9.24 |
6.80 |
We think that these figures teach several lessons:
- Starting with 325/A. reduces the amount of timber sold for pulpwood and thus the impact of pulpwood price changes.
- As long as pulpwood prices remain unchanged or relatively so AND you fertilize the stand after thinning, planting 800/A. is the better deal.
- Generally speaking, postponing cash flows reduces RRR.
But the real value of this exercise is to show that PTAEDA2V, which we use in managing PPICs and all other work, is an invaluable guide for investment decisions about pine plantations. Furthermore, the table contains results from a minor decision in the rotation; the same procedure will be much more valuable each year after age 15 as sawtimber prices fluctuate. Once these figures are in the computer, it doesn’t take a genius to produce good results; anyone familiar with cash-flow analyses can do the job with a $30 pocket calculator.
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