Road Map. Scenarios. Results. Some what-ifs

Transcription

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2 Road Map Scenarios Results Some what-ifs

3 SCENARIOS

4 Gulf Coastal Plain standard intensity Scenarios Gulf Coastal Plain high intensity A geometric thin performed by removing every 5th row in a 14-year-old slash pine plantation in Georgia. Photo Credit: David Moorhead, UGA, Bugwood.org North fringe of Gulf Coastal Plain poor pulpwood market

5 Economics Evaluation by rate of return Annual returns from leasing valued at $2.5/acre above annual taxes and management costs. Land appreciation excluded from analysis Using 2013 stumpage prices and costs for silvicultural activities as starting point Will inflate all costs and returns by consumer price index average rate of inflation Rates of return will be pre-tax

6 What can you do with your money if not trees? Typical comparison is with long-term medium risk investment grade bond yields Type Issue Maturity YTM(%) Current Yield(%) Corp DTE ENERGY CO 15- Apr BBB Corp APPALACHIAN PWR CO 15- May BBB Corp VIACOM INC 15- May BBB Corp Corp US WEST COMMUNICATIONS INC US WEST COMMUNICATIONS INC 15- Sep BBB 15- Sep BBB Corp TELECOM ITALIA CAP 15- Nov BBB Corp UNITED STATES CELLULAR CORP Fitch Ratings 15- Dec BBB Corp BRAZIL FEDERATIVE REP 20- Jan BBB Corp FIRST TENN CAP II 15- Apr BBB Corp GENWORTH FINL INC 15- Jun BBB

7 RESULTS

8 Gulf Coastal Plain - Standard Intensity Single chop and herbaceous weed control banded spray - $150 / acre Hand plant on 8 x10 spacing (545 tpa) of good quality bareroot seedlings $80/acre Fifth row and low thin at age 13 Low thin at age 19 Regeneration felling at age 30

9 Yields and Returns Standard Intensity Age Pulp tons CNS tons Saw tons Cash Flow $ $ $3935 Total Rate of Return is 12.28%

10 Gulf Coastal Plain High Intensity Site preparation includes shear, rake, pile and bed and banded herbicide at $190/acre Hand planting of advanced genetic clonal variety at $240 per acre Thinning at ages 12 and 18 Fertilization with DAP/urea at ages 14 and 19. at $250 per acre Final harvest at age 25

11 Yields and Returns High Intensity Age Pulp tons CNS tons Saw tons Cash Flow $ $ $7121 Total Rate of Return is 13.88%

12 Gulf Coastal Plain poor pulpwood Single chop and herbaceous weed control banded spray - $150 / acre Hand plant on 10 x12 spacing (363 tpa) of good quality bare-root seedlings $55/acre Additional competition control at age 8 aerial application of herbicide $60/acre market

13 Yields and Returns High Intensity Age Pulp tons CNS tons Saw tons Cash Flow $ $ $5530 Total Rate of Return is 11.56%

14 WHAT-IFS

15 Fertilization Current prices for urea in USA reported at $531 to $776 per metric ton At these prices, fertilization must be evaluated carefully At prices of $450/ton, late fertilization in stands returning 14-17% At prices > $700 per ton, ROR less than 10%

16 Rates of price growth Assumed that timber prices grew at rate of inflation (3.2%) annually from current prices. Pulpwood today at $9.96 became $24.83 in 30 years Chip-n-Saw today at $15.14 became $37.74 in 30 years Sawtimber today at $23.55 became $58.71 in 30 years

17 What if pulpwood and chip-n-saw grow slowly in value? If pulpwood and chip-nsaw prices only increase at 1% per year, then rates of return decrease: Standard intensity plantation % to 11.2% High intensity plantation 13.88% to 12.9% North coastal plain market 11.56% to 10.85%

18 What if sawtimber prices grow faster in value? If sawtimber prices increase at 4.2% per year, then rates of return increase: Standard intensity plantation % to 12.75% High intensity plantation 13.88% to 14.6% North coastal plain market 11.56% to 12.24%

19 What if stumpage prices didn t increase at all! Standard intensity plantation still earns 7.8% High intensity plantation 10.5% North coastal plain poor pulpwood market 8.2%

20 What if we included land value? If we assume land values are: $800/acre for North Gulf Coast lands with poor pulpwood market $950/acre for standard intensity Gulf Coast scenario $1400/acre for high intensity scenario Then the assumed rate of land value growth really drives the overall rate of return. If we assume land appreciates at 4% per year Standard intensity plantation project with land returns 7.2% on land and timber High intensity plantation returns 8.1% North Gulf coast plantation returns 7.0% Land value appreciation becomes the major driving force in the investment decision.

21 Questions?