Thursday, March 13, 2008

Funding Fire Control

I live in a 20 year loblolly pine plantation in the Lowcountry of South Carolina. Fire has long been a part of life here. From the fire ecosystem implemented by Indians centuries ago to the cooperative (S.C. Forestry Commission, U.S. Forest Service, International Paper and Westvaco Corp.) fire control efforts of a decade ago, fire has been an important part of life and forest management here. As industry disposed of it's timberland, the burden shifted to the Forestry Commission and, to a lesser degree, the U. S. Forest Service (Francis Marion National Forest). As smoke related lawsuits from prescribed burning increased, prescribed burning declined and fuel loads have increased. This all has happened in the face of declining budgets for both fire control organizations. What has happened in the Lowcountry is a microcosim of the situation in the entire South and, to a lesser degree, the entire nation.

In recommendations to the Subcommittee on Interior, Environment, and Related Agencies regarding the FY2009 Budget for the U.S. Forest Service, George M. Leonard - Chairman, Board of Directors, National Association of Forest Service Retirees had this to say:

"The most critical issue that needs to be addressed in the Forest Service budget is the funding of fire suppression. The current procedure of including the ten-year average cost of fire suppression within the agency’s discretionary budget is destroying the capability of the Forest Service to carryout the remainder of its statutory missions. From 25 percent in FY2000, fire funding is now approaching 50 percent of the budget. The suppression cost trend means the ten-year average is going to continue to grow, further cannibalizing funding for other programs. While the overall Forest Service budget has increased nine percent over the last six years, the diversion of funds to fire suppression has had a major impact on the workforce available to carry out the multiple-use mission of the agency. The number of foresters, biologists, and other resource specialists, along with supporting technicians, is a good measure of the capability of a resource management agency to carry out its mission. As illustrated in the following table, the capability of the Forest Service has been seriously compromised."

You get the point, but if you want to read more, go here.

The SC Forestry Commission's situation is equally as bad, perhaps worse. Here are a few facts.

When adjusted for inflation, the current budget is 30% less than it was in 2001.
• Aging firefighting equipment is not being replaced on a timely schedule.
• Fuel costs are soaring.
• Hiring and retaining qualified firefighters is difficult due to a more urban economy and changing demographics.
• Forest industry changes have led to a loss of cooperator capacity, both personnel and equipment.
• Recent housing development has expanded into wooded areas, creating communities with very high fire risk.
• Forestry has a tremendous impact on SC’s economy: #1 employer, #2 payroll, #1 harvested crop, $1 billion in exports, $17 billion total economic impact.
• The Commission’s $18 million baseline budget investment is supporting a $17 billion industry economic impact, a multiplier of almost 1000.

If you have a home in SC, or own/manage timberland here, now would be a good time to contact your Senators in support of this years budget request, in particular, the members of the Senate Finance sub-committee responsible for reviewing the request. Those are Senators Yancy McGill from Williamsburg county, Larry Grooms from Berkeley county, Phil Leventis from Sumter county, and John Drummond from Greenwood county. By the way, these senators have been very supportive of forestry and fire control. Something to keep in mind the next time you go to the polls!

This post may appear to be somewhat local in nature but be assured that the words that you have read apply right outside your door, to your timberland and to your National Forest as well. What are you going to do about it? --Brian

Monday, March 3, 2008

Longleaf Pine

If you read my Blog through email subscription rather than visiting the Blog site, you probably have forgotten the byline. So..., The Timberland Blog: Examining the changes in timberland ownership and what those changes might mean. The pulp and paper industry was very focused on maximizing growth as opposed to the financial return focused on by the institutional investors. Management objectives are a primary key to what the future forest will look like. That's fact.

Way back in '67 while working on a major cruise/appraisal for the West Virginia Pulp and Paper Company, I remember vividly a sign near Washington, Georgia that said “Wilkes County, Gone to Grass”. I was with friend and mentor Kenney P. Funderburke, who said wryly “the sign should say, Gone to Loblolly Pine!”. Times change, economics change, landowners change, management objectives change, the forest changes. Like Wilkes County, the South went from natural forest, to cotton, to pasture, to loblolly pine for fiber production to whatever is next. What is next? For some of the Southern forest, maybe a return to the longleaf pine that once dominated this landscape. Management objective of optimizing financial return permitting.
If you are familiar with the longleaf and loblolly, the comparisons jump into your head very quickly. Longleaf is straight. Loblolly is crooked. Loblolly grows faster (at least initially). Loblolly occupies a broader range of sites. Longleaf is straight.

The lower pulpwood prices, combined with a focus on financial return of the new owners, provides an opportunity for longleaf to reassert itself. Back in the days when the land was managed by Native Americans, the objective of management was to burn the forest to prepare it for agriculture, provide nitrogen fertilization, reduce ticks and chiggers, improve hunting, grow broomstraw for housing, and to be able to see enemies lurking in the forest. That's some pretty powerful reasons to burn. At that time, the EPA was less concerned with smoke, environmentalists were less concerned with pine monoculture, and there were fewer lurking lawyers in the forests. The point here, is that the longleaf forest was not “natural”, it was created by its managers based on the objectives of management. These managers created a pine forest of an estimated 60 – 90 million acres that was reduced to less than three million acres in 1996 by a series of landowners whose objectives were cotton, rice, beef, soybeans, and wood fiber production. If longleaf is to expand replacing some of the loblolly acreage, that expansion must fit with the objectives of the new management – that being financial performance as opposed to the fiber productivity objective of the pulp and paper industry. I think it can do it. So do the sawmilling families that have owned and managed the longleaf remnants for the past 75 years.

The fact that longleaf is so straight can go a long way in a comparative economic analysis. The Longleaf Alliance has some financial analysis on its web site which illustrates the gains from increased pole production and the increased value of the poles over sawtimber. I didn't notice the increase in proportion of sawtimber to pulpwood characterized by longleaf stands although it may have been there. The growth and yield models do show that loblolly's growth advantage diminishes or disappears as the rotation age increases. In addition, nursery and silvicultural improvements have reduced the amount of time it takes to get the seedlings up and out of the grass stage thereby reducing the rotation age and improving the financial performance of longleaf. At any rate, it looks to me like the economics are there, at least on some sites.

I don't want to forget us Family Forest owners. Collectively, we own a lot more of the former longleaf forest than the institutional investors by a long shot. And our “management objectives” are generally broader than those of the investment community. The Feds are working to help us understand and to put money in our pockets if we will convert to longleaf and do it their way. So far, it seems to be working with a couple of hundred thousand acres being planted each year. That's enough to turn the tide and longleaf acreage is actually increasing now. It may not be increasing much but at least the decline has been arrested.

So..., what does all this mean? We are in the early stages of a change in the South's forest which will in fact see more of the landscape revert to the beauty of the historic longleaf pine forest that defined the “pineywoods” of the Old South. There is something about longleaf that stirs the soul, loblolly doesn't. --Brian

Saturday, March 1, 2008

Meetings, Global Reports and More Pricing Services

There are three upcoming meetings that readers may be interested in attending. The first, scheduled for March 19 & 20 in Waukesha, WI, is an SAF program entitled The Effects of Change in Forest Ownership. The registration fee is $100 and the list of topics and speakers (see below) is outstanding. For more information, call Julie Peltier at 262-670-3404, John Eschle at 262-264-5705 or Hank Kleppek at 414-463-1991. There is no web site that I am aware of. This looks like an excellent program at an excellent price.

Here is the list of presentations

  • What Happened to Industrial Land Ownership – Sam Radcliffe

  • Forest Fragmentation – Susan Stewart

  • The Role and Tools for Conserving Lands – Tom Duffus

  • The Impact of Forest Certification –Bill Rockwell

  • Banquet Guest Speaker – Miles Benson “A Historical Perspective”

  • The Next Generation of Family Forest Owners – Catherine Mater

  • Future Wisconsin Forest Land Markets – Ed Steigerwaldt

  • The Role of Bioenergy – Lew McCreery

  • Carbon Credits – David Miller

  • Changes in Traditional Forest Products Markets – Peter Ince

The second meeting is the 4th Timberland Investing World Summit taking place June 9th-11th in San Francisco, CA. The registration fee for the conference is $1599 until March 7th. Call 646.253.5526 for details (no web link provided). The list of speakers will include:

  • Liane Luke-Managing Director of Four Winds Capital Management

  • David Bischel-President for The California Forestry Association

  • Corey Brinkema-President for The Forest Stewardship Council

  • Klas Sander-Natural Resource Economist for The World Bank

  • Jacques Beadry-Loisque-Program Manager for the U.S. Department of Energy BioMass Program

  • Jose Rente Nascimento-Senior Natural Resource Specialist for Inter-American Development Bank

  • Burl Carraway-Program Manager for The Texas Forest Service

The third program is in September and is hosted by the World Forest Institute which focuses on the shift in forestlands and its implications. They are holding their fourth such event this September (last year's sister event focused mainly on international investing). You can check out last year's agenda at: This year's theme is "What Next?"

The World Forest Institute also has many “Country Reports” available in addition to past conference proceedings and special reports. Here is a link to their publications. Another source of global data is RISI. Here is a link to some of their publications.

Some time ago, I provided info on some of the available pricing services that are available to timberland owners. Following that Blog, RISI sent me the following note and links to some of their stumpage pricing services which may be of value to you.

“I wanted to let you know that RISI also provides a stumpage pricing service called Timber Transaction Pricing Service (TTPS). We currently offer comprehensive online stumpage pricing for the entire US South and are actively working to expand our footprint into the northeast as well as a few other areas of the country.”

“Here are several links that you might find interesting.
The first is the link to our TTPS description.
But, I also wanted to send you an example of a stumpage pricing report we have developed for northern Pennsylvania, where we have begun to look at providing hardwood stumpage pricing.
Finally, here is a link to another service we provide that while not a stumpage pricing service, does include stumpage prices and does help landowners, or prospective landowners determine the investment attractiveness of specific timberland tracts.
There seems to be several good stumpage pricing services available. The key is to match the cost with the value that you will receive. --Brian