Income Potential from Indiana Woodlands

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1 Income Potential from Indiana Woodlands Lenny Farlee, Extension Forester Forests in Indiana Today 4.8 million acres (about 20% land area) 85% private ownership 75% family ownership Wood volume growth exceeds removals and mortality by 2.6 times 1

2 Indiana s Forest-Based Economic Sector $8 billion in forest-based manufacturing $1 billion in forest-based recreation Indiana mills purchased 315,794,240 board feet (Doyle rule) of logs. Of that total, 84% was grown in Indiana 38,000 + jobs in the hardwood industry 1 bd.ft. of timber harvested = $43 of economic impact Should I Manage My Woodlands? Productivity and health can be enhanced. Specific benefits and products can be actively encouraged. Timber value of managed forests is about 27% higher than value of unmanaged forests. Derive income from acres not suited to other agricultural systems. Natural processes have been disrupted by past and present activities/conditions. 2

3 How Do I Begin? Use a professional forester Professional Forester Categories Public Sector IDNR District Foresters Extension Foresters NRCS Foresters, other public agencies Private Sector Foresters Private Consulting Foresters - ACF Industry Foresters NGO Foresters conservation or landowner organizations 3

4 Services provided by foresters Selecting the appropriate trees to sell Provide an estimate of volume and value Familiarity with timber markets Marketing/advertising timber for sale Timber sale contracts Monitoring logging Information on tax issues Follow-up management Get in the marketplace to get a better price BUNYAN TIMBER SALE WEST CO. Buyer #1 $132, Buyer #2 123,860 Buyer #3 106,805 Buyer #4 102,364 Buyer #5 100,750 Buyer #6 100,350 Buyer #7 98,462 Buyer #8 96,850 Buyer #9 96,000 Buyer #10 91,776 Buyer #11 87,279 Buyer #12 82,000 Buyer #13 80,989 Buyer #14 70,250 Buyer #16 70,126 Buyer #17 64,848 Buyer #18 61,000 Buyer #19 60,237 Make sure the right people know about your sale! 4

5 Selection of the trees to harvest is critical to current and future income Knowledge of local and regional market outlets and major players Hot and Cold species in the market, or species under threat ash and EAB Improving the future forest quality, composition, and vigor with harvest decisions grow the good, cut the bad Increasing your LONG-TERM income. Avoiding unnecessary damage. Motivation to Manage Timber Indiana hardwoods are among the highest in quality and value regionally. There is a well developed primary and secondary industry providing good local and regional markets. Timber can grow in value three ways: volume, unit value, and real price increase. 5

6 What trees do I want to grow? Historically good timber markets/returns: Black Walnut White and Red Oaks Black Cherry Maple Tuliptree Many others have markets as well, although values may vary widely or be consistently low. Species Ranking - Indiana Species Premium Species Prime Log Price $/MBF 10 Prime Log Price $/MBF 17 B. Walnut $1,375 $1,533 Cherry $827 $650 W. Oak $717 $917 Hard Maple $677 $550 R. Oak $617 $650 Mid-Value Species T. Poplar $405 $600 W. Ash $457 $524 Soft Maple $387 $383 Hickory $398 $483 Basswood $310 NR Pallet Species Beech $262 $283 Pine $223 $277 S. Gum $228 NR Elm $243 NR Sycamore $240 NR Cottonwood $194 NR 6

7 Quality Matters! Comparison of delivered sawlog values March 2017 White Oak Tuliptree Beech Log gr. $/MBF Log gr. $/MBF Log gr. $/MBF Pr. 917 Pr. 517 Pr. 283 #1 617 #1 414 #1 300 #2 430 #2 300 #2 267 #3 300 #3 263 #3 267 Clear wood combined with desirable species yields high value 2017 Forest Products Price Report and Trend Analysis - Jeffrey Settle, Chris Gonso, Mike Seidl 7

8 Black Walnut Prime Veneer Log Dia. ($/MBF) > Black Walnut Sawlogs Grade $/MBF Prime 1533 No No No High quality and large diameter logs may yield more money! 2017 Forest Products Price Report and Trend Analysis - Jeffrey Settle, Chris Gonso, Mike Seidl Delivered log prices have grown above the rate of inflation, but considerable volatility is the norm 8

9 Timber Harvesting Harvesting can capture the value in trees that are of poor quality or vigor and make room for the growth of higher quality trees, as well as harvest valuable trees as they mature. Take the bad with the good it s tough to sell only bad. Reduce Erosion Use Best Management Practices BMP s Most erosion happens on skid trails and roads. BMP s are a set of practices designed to manage water runoff to prevent sediment reaching water bodies. IN DNR Division of Forestry 9

10 Getting started with management actions Many woodlands still suffer from past poor management or lack of management and need actions to correct problems. Some examples of problems: Grazing or burning history resulting in many hollow trees Poor species or quality composition due to selective harvests that take the best and leave the rest, called high-grading Competition from invasive species Competition from grapevines Overcrowded conditions causing slow growth. The USDA may help you with your woodland management costs Cost-sharing may be available for thinning, vine and invasive species control, pruning, planting, and many other conservation activities Contact your local Natural Resources Conservation Service office 10

11 Products from the Forest Portable sawmills provide some options for harvesting and utilization Woodmizer , can refer you to a local custom sawyer 11

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13 Forest Farming producing crops under the shade of forest trees. These crops could be specialty food items like shitake mushrooms, syrups or ramps, herbal medicine plants like ginseng or goldenseal, and ornamental materials like grapevine or running cedar 13

14 Food items from woodlands Fruits persimmon, paw-paw, wild plum, black and raspberry, crab-apple, juneberry Nuts walnut, hickory and pecan, hazelnut, butternut Syrups maple, black walnut, birch Oils walnut, hazelnut, other nut trees 14

15 Plants like ramps (wild leek), ginseng, or goldenseal can be collected or cultivated in forest understories Fungi wild-collected and cultivated: Morels, Shitake Correct ID is critical! 15

16 People will pay for the privilege to hunt. The amount of land, quality of hunting, and exclusivity of access can influence how much. Some companies specialize in managing leasing of hunting land for landowners Google hunting leases in Indiana Oh Deer! Deer hunting may help reduce risk of heavy damage to crops and forest regeneration Photo taken summer 2010 West Lafayette, IN 16

17 Recreation and Retreat Indiana forests and tree plantings prevent wind and water erosion of soils and provide protection of valuable soil and water resources 17

18 Property Taxation and Woodlands Woodlands may be taxed as a type of agricultural land assessed at 20% of similar ag land valuation Woodlands may be taxed as recreational or excess residential land often several times higher than ag land assessment Woodlands may be placed in Classified Forest and Wildlands - $13 assessed value per acre IN DNR Division of Forestry Tax considerations for timber sales Trees sold may be taxed as a capital gain if certain conditions are met Costs associated with the sale may be deducted prior to figuring tax Your capital basis in the timber can offset some tax liability What is my Basis? 18

19 Forest Management Advantages Low cost inputs. Flexible harvesting schedules. Flexible management schedules. Opportunities for adding value. Self-perpetuating. Incentive programs. Good markets. Diversification. Environmental Services Thanks for your time! Lenny Farlee, Extension Forester