Economic Returns to Uneven- and Even-Aged Management of Southern Bottomland Hardwoods

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1 Economic Returns to Uneven- and Even-Aged Management of Southern Bottomland Hardwoods James Henderson and Brent Frey Department of Forestry Mississippi State University

2 Overview Value in hardwood management for timber and basal area concerns Putnam et al growth assumptions Application of Putnam et al Red Oak, White Oak, Ash, Mixed Hardwood Valuation of timber volumes over time Returns by species and by growth assumptions

Overview m 2 /ha 44 87 131 175 ~ft 2 /acre Adapted from: Oliver, C.D., Burkhardt, E.C., and Skojac, D.A. 2005.

3 Overview m 2 /ha ~ft 2 /acre Adapted from: Oliver, C.D., Burkhardt, E.C., and Skojac, D.A The increasing scarcity of red oaks in Mississippi River floodplain forests: Influence of the residual overstory. Forest Ecology and Management 210:

4 Stocking Guide for Southern Bottomland Hardwoods Goelz (1995) developed a stocking guide based on Putnam et al. (1960) A B line based on Putnam et al. (1960) suggested residual stocking. The assumption is it is safe to thin from 100% stocking to the B-line. A more extreme thinning may degrade the stand from production of epicormic sprouts.

5 DFC 60 to 70 BA target

6 Basal Area and Log Quality Lower basal areas do not promote self pruning as well as higher basal areas. Persistent limbs or epicormic branching reduces log quality and future stumpage value.

7 Basal Area and Log Quality FAS/1F Red Oak $1,400 MBF #1 Com Red Oak $1,000 MBF #2 Com Red Oak $800 MBF Estimated high value lumber yield for each log grade using the U.S. Forest Service Log Grade Rules.

8 FAS, No. 1 Common and No. 2 Common Lumber of less value can result from maintaining lower basal areas.

9 FAS/1F Red Oak $1,400 MBF #1 Com Red Oak $1,000 MBF #2 Com Red Oak $800 MBF

10 $200,000,000 Mississippi Total Revenues Over Time For Hardwood Sawtimber and Pulpwood $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 HDWD ST HDWD PW $60,000,000 $40,000,000 $20,000,000 $0

11 Methods

12 Economic Returns to Uneven- and Even-Aged Management of Southern Bottomland Hardwoods Putnam et al Table 6 uneven-aged stocking and diameter distribution Table 7 even-aged stocking and diameter distribution Table 9 diameter growth rates by species

13 Economic Returns to Uneven- and Even-Aged Management of Southern Bottomland Hardwoods Table 7. Hypothetical stocking and estimated development and yields per acre, for wellmanaged even-aged southern hardwood stands at end of successive growth periods on average or better sites. Table 9. Ten- year average diameter growth rates for trees free to grow in unmanaged stands on average bottom-land sites.

14 Economic Returns to Uneven- and Even-Aged Management of Southern Bottomland Hardwoods Putnam et al Tables 7 and 9 Table 7. Hypothetical stocking and estimated development and yields per acre, for wellmanaged even-aged southern hardwood stands at end of successive growth periods on average or better sites. Table 9. Ten- year average diameter growth rates for trees free to grow in unmanaged stands on average bottom-land sites.

15 Putnam et al Growth Assumptions Under the best intensive management on good sites, the growth rates for the individual species shown in table 9 might eventually be increased 30 percent. From Table 9 Putnam et al. 1960

16 Putnam et al Growth Assumptions Table 9 growth rates by species and at a 30% increase for managed stands applied to Table 7 even-aged stand development. From Table 9 Putnam et al. 1960

17 Putnam et al Growth Assumptions Time required for regeneration and growth to the 2- inch class will vary radically from place to place and time to time. It may range from 8 to 10 or even 15 years but may be assumed to average 8 to 10 years. From Table 9 Putnam et al. 1960

18 Growth Assumptions by Species Three species: Red oak, White oak, and Ash Growth to the 2-inch class in 8, 10, 12, and 15 years Two species specific growth rates with four starting ages at the 2 diameter over the development of the stand. 8 possible scenarios for each species

19 Value in hardwood management for timber Discount rate of 4% applied 2 diameter improvement cut precommercial thinning $ per acre from Cost and Cost Trends for Forestry Practices in the South (2011) TMS 2001 to 2011 for S.E.U.S. $19.78 / cord hardwood pulpwood $323 / mbf,d red oak sawtimber $298 / mbf,d white oak sawtimber $261 / mbf,d ash sawtimber $188 / mbf,d mixed hardwood sawtimber

20 Product Prices Over Time U.S. South: (Source: TMS) Ash Sawtimber Red Oak Sawtimber White Oak Sawtimber Hardwood pulpwood Mixed Hwd Sawtimber $/MBF (D) $/Cord Q2011 4Q2001 2Q2002 4Q2002 2Q2003 4Q2003 2Q2004 4Q2004 2Q2005 4Q2005 2Q2006 4Q2006 2Q2007 4Q2007 2Q2008 4Q2008 2Q2009 4Q2009 2Q2010 4Q2010

21 Valuation of timber volumes over time 2 diameter improvement cut precommercail thinning $ per acre from Cost and Cost Trends for Forestry Practices in the South

22 Land Expectation Value The LEV formula is: LEV = [Net Value in Year n] [(1+i) n 1] where: i = interest rate in decimal percent n = the rotation age in years To use the LEV formula, compound all of the costs and revenues associated with timber production to the end of the first rotation or cutting cycle and subtract costs from revenues to determine the net value in year n.

23 Results

24 Volumes for improvement and regeneration harvests by average diameter and species indicating age to reach average diameters by growth rate from a starting point of 2 inch average diameter by either age 8, 10, 12, and 15. (Putnam et al (1960) Table 7) Diameter Improvement cut ST bdft PW cords Regeneration Cut ST bdft PW cords Unmanaged Growth Rate Red Oak age to reach diameter White Oak age to reach diameter Ash age to reach diameter Managed Growth Rate Unmanaged Growth Rate Managed Growth Rate Unmanaged Growth Rate Managed Growth Rate

25 Economic returns by average diameter for red oak assuming 2 diameter at age 8 and +30% growth Improvement Cut Regeneration Cut (Final Harvest) Cuts + Final Net FV LEV Year Inches ST ($) PW ($) Total Rev ($) ST ($) PW ($) Total Rev ($) Total Rev ($) ($) ($) , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

26 Red oak LEVs by growth rate starting at 2" average diameter age and indicating optimal rotation age using a 4% discount rate. $ LEVs $1, <$1,199.87, $881.72> Age 2" age 8 Mgt. 2" age 10 Mgt. 2" age 12 Mgt. 2" age 15 Mgt. 2" age 8 2" age 10 2" age 12 2" age 15 Optimal Rotation Age Mgt. growth diameters 30 at ages of 54*, 63, 65, 68 (exception 2 age 8 line peaks at age 54 with 26 dia) Unmgt. growth diameters 26 at ages of 68, 70, 72, 75

27 White oak LEVs by growth rate starting at 2" average diameter age and indicating optimal rotation age using a 4% discount rate. 500 LEVs 400 $ $ 300 <$419.20, $313.18> Age 2" age 8 Mgt. 2" age 10 Mgt. 2" age 12 Mgt. 2" age 15 Mgt. 2" age 8 2" age 10 2" age 12 2" age 15 Optimal Rotation Age Mgt. growth diameters 22 at ages of 69, 71, 73, 76 Unmgt. growth diameters 18 at ages of 73, 75, 77, 80

28 Ash LEVs by growth rate starting at 2" average diameter age and indicating optimal rotation age using a 4% discount rate. $ LEVs $ <$258.69, $194.19> Age 2" age 8 Mgt. 2" age 10 Mgt. 2" age 12 Mgt. 2" age 15 Mgt. 2" age 8 2" age 10 2" age 12 2" age 15 Optimal Rotation Age Mgt. growth diameters 22 at ages of 77, 79, 81, 84 Unmgt. growth diameters 14 at ages of 65, 67, 69, 72

29 Mixed Hardwood LEVs by growth rate starting at 2" average diameter age and indicating optimal rotation age using a 4% discount rate. $ LEVs $ <$334.50, $259.65> Age 2" age 8 Mgt. 2" age 10 Mgt. 2" age 12 Mgt. 2" age 15 Mgt. 2" age 8 2" age 10 2" age 12 2" age 15 Optimal Rotation Age Mgt. growth diameters 22 at ages of 65, 56*, 65, 71 (exception 2 age 10 line peaks at age 56 with 18 dia) Unmgt. growth diameters 18 at ages of 68, 70, 72, 75

30 Even-Aged Mgt. Conclusions LEV s on managed sites vary greatly by species Financially optimal rotation ages: Red oak: $1,040.53, <$1,199.87, $881.72> White oak : $368.13, <$419.20, $313.18> Ash : $227.66, <$258.69, $194.19> Mxd Hwd: $299.84, <$334.50, $259.65> If timber income is important then managing for species and log quality are important.

31 TABLE 6. Hypothetical stocking and diameter distribution, with estimated development and yield per acre, for wellmanaged uneven-aged southern hardwoods on average or better sites. After cutting; beginning of new Midway of cycle; or average stand End of cycle; ready for cutting Cut cycle D.b.h. (inches) Trees B.A. Volume Trees B.A. Volume Trees B.A. Volume Trees B.A. Volume No. Sq.ft. cords No. Sq.ft. cords No. Sq.ft. cords No. Sq.ft. cords TOTAL Bd.ft. (D) Bd.ft. (D) Bd.ft. (D) Bd.ft. (D) TOTAL ALL TREES The cycle of development illustrated by this tible will usually be completed in about 10 years but may require 8 to 15 years, depending upon site quality. Additional cordwood volume in tops of saw-log trees, not shown, is equivalent to about one cord per thousand board feet log scale or 40 percent of the total cubic volume of such trees.

32 6000 VOLUMES BY PRODUCT GIVEN LOWER % SAWTIMBER COMPOSITION Sawtimber Bd.ft. (D) Pulpwood Cords Bd.ft. (D) Cords % Sawtimber 0

33 D.b.h. D.b.h. After cutting; beginning of new Discount rate in decimal form (inches) Cut (inches) cycle 0.04 Trees B.A. Volume Trees B.A. Volume Mixed hardwood product prices No. Sq.ft. cords No. Sq.ft. cords Avg PW Avg ST $19.78 $ Revenue Pulpwood $ Sawtibmer $ Topwood $ TOTAL TOTAL Bd.ft. (D) Bd.ft. (D) Cutting Cycle (Year N) Net Value in Year N $ 1, Land Expectation Value $ 1, Land Expectation Value Cutting Cycle $ 1, Growth Rate 4.80% Starting Volume Revenue Pulpwood $ Sawtibmer $ Topwood $ Total Value $ 1, TOTAL TOTAL LEV less starting volume vlaue Cutting Cycle ALL TREES ALL TREES $

34 After cutting; Discount rate in decimal form 0.04 Cut Volume beginning of new Volume Mixed hardwood cords cords Avg PW Avg ST TOTAL 1.1 TOTAL 3.3 $19.78 $ Bd.ft. (D) Bd.ft. (D) TOTAL 5211 TOTAL 5287 Revenue Pulpwood $ Sawtibmer $ Topwood $ Cutting Cycle (Year N) 15 Net Value in Year N $ 1, Land Expectation Value $ 1, Land Expectation Value Cutting Cycle $ 1, Growth Rate 4.80% Starting Volume Revenue Pulpwood $ Sawtibmer $ Topwood $ Total Value $ 1, LEV less starting volume vlaue Cutting Cycle $

35 After cutting; Discount rate in decimal form 0.04 Cut Volume beginning of new Volume Mixed hardwood cords cords Avg PW Avg ST TOTAL 5.01 TOTAL 7.27 $19.78 $ Bd.ft. (D) Bd.ft. (D) TOTAL TOTAL Revenue Pulpwood $ Sawtibmer $ Topwood $ Cutting Cycle (Year N) 15 Net Value in Year N $ Land Expectation Value $ 1, Land Expectation Value Cutting Cycle $ 1, Growth Rate 4.80% Starting Volume Revenue Pulpwood $ Sawtibmer $ Topwood $ Total Value $ LEV less starting volume vlaue Cutting Cycle $

36 After cutting; Discount rate in decimal form 0.04 Cut Volume beginning of new Volume Mixed hardwood cords cords Avg PW Avg ST TOTAL 8.92 TOTAL $19.78 $ Bd.ft. (D) Bd.ft. (D) TOTAL TOTAL Revenue Pulpwood $ Sawtibmer $ Topwood $ Cutting Cycle (Year N) 15 Net Value in Year N $ Land Expectation Value $ Land Expectation Value Cutting Cycle $ Growth Rate 4.80% Starting Volume Revenue Pulpwood $ Sawtibmer $ Topwood $ Total Value $ LEV less starting volume vlaue Cutting Cycle $

37 250 LEV FOR UNEVEN- AGED MGT. GIVEN LOWER % SAWTIMBER COMPOSITION $ $ $ 150 $ % Sawtimber

38 LEV BY SPECIES AND MANAGEMENT TYPE (EVEN- AND UNEVEN-AGED ) $1, Even-aged Uneven-aged 800 $ $ $ $ $ $ $ RO WO Ash Mix UE 50% UE 75% UE 100% Speices / Mgt. Type

39 Limitations Putnam et al. (1960) does not provide information on log grade/quality. Timber price data also does not account for log grade/quality. Pure species even-aged stands are not likely.

40 Future Research Valuation based on Matney and Shultz (MSU FWRC) hardwood G&Y model that indicates log grade/quality with timber volume.

41 Questions? Thank You! Photo from Meadows and Skojac Jr. 2008

2.4 MANAGING FOR HIGH-VALUE TREES

2.4 MANAGING FOR HIGH-VALUE TREES BACKGROUND Quality timber trees are important to the region s wood products industry. Quality is determined by tree size and the amount of clear, knot-free lumber the