The debate

Ron Wenrich woodtick at
Wed Dec 3 18:09:28 EST 1997

Anders Axelsson wrote:

> Ron Wenrich <woodtick at> wrote in article
> <34844A22.4984E7B4 at>...
> >
> > I've done this in management plans.  However, how far out are you going
> to predict
> > prices?  30 yrs ago red oak stumpage was about $50.  Today about $600.
> Conversely,
> > tulip poplar was about $70, and today about $200.  White pine was about
> $50, today
> > you can get all you want at $100 (PA prices).  When you predict timber
> prices too
> > far in advance, you may be astounded at how it has either risen, or
> failed to
> > rise.  Hardwoods are a different game than softwoods, for the most part.
> >
> > RDW
> >
> Price fluctuations are normal business risks.You allow for these risks and
> the cost of capital by using a discount rate for future net income.If the
> risks are high you use a high discount rate,say 15-20%,and assume that
> prices will stay as they are.
> Piece of cake really,at least theoretically.Practically,I`ve bid for a
> small property and I`ll know by Friday if someone else used a lower rate
> than I did.
> AA

A piece of cake it ain't.  Hardwood markets can fluctuate wildly.  What is in
favorone decade may not be in favor the next.  Maple prices have remained flat
oak took off.  Same with most other hardwoods.  Walnut has even remained flat,

just recently picking up.  Historically, hardwoods outstrip inflation by 3%,
but not
every year.  Oak went up 1200%, but I wouldn't bank on that for the next 25
yrs.  A
heavy discount rate would lessen the impact.  With this type of appraisal
a management plan), you're either a champ or a chump.  The markets will let
you know.


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