woodtick at lebmofo.com
Sun Jun 1 20:23:42 EST 1997
Karl Davies <kdavies at igc.apc.org> wrote in article
<APC&1'0'80ab25f0'bf7 at igc.apc.org>...
> Hello Joe-
> 2) PP Prune asks for present lumber prices in all grades, and
> estimated prices at the end of the simulation, to determine rate
> of return. I went with recent price lists from a kiln in
> Greenfield, and figured the highest grades would triple or quadruple
> in real value in 30 years while the lower grades would roughly double.
Why go with kiln prices? Why not go with green market prices? These will
be closer to the stumpage plus milling. It also eliminates several
middlemen. Kiln prices vary, depending on the amount of material the buyer
is seeking. 100 bf of lumber is much higher than 10 Mbf.
Figuring a tripling or quadrupling of higher grade lumber prices is over
optimistic. If you are figuring low grade to double, figure the same on
high grade. That's assuming the demand stays the same. 20 years ago,
tulip poplar FAS sold for $550/Mbf, green.. today it sells around $700/Mbf.
Red oak sold for about $200/Mbf.. today it sells around $1100/Mbf.
Predicting demand is really tough. I doubt red oak will triple. I think
it will fall in relationship to maple and poplar.
> INFORM asks for stumpage prices. I used the same values for pine
> as for red oak--with the past 15 year real rates of red oak
> market value increase for the simulation. This may be
> conservative since oak lumber prices have been lagging behind
> clear pine lumber prices in recent years.
This is an inflated rate. To assume that red oak will retain this rate of
value increase is not very wise. Oak lumber prices have been lagging due
to the lack of demand. Markets are tending to go towards the tighter
grained species. After the next recession, I doubt that oak will rebound.
Oak never caught on until maples priced themselves out of the market in the
mid 70s. I remember walking past 24 inch red oak to get to 20 inch poplar.
I've been told by furniture manufacturers that lumber demand is cyclical,
and comes in about 30 year cycles. If this is true, than oak demand should
be on the decline.
> 3) I figured the cost of pruning and thinning at $1 per tree,
> which is roughly the consulting forester's cost after
> cost-sharing from the SIP program. But if you increase the cost
> to $2, the IRR only goes down 2% (to 10-11%).
Are you pruning just crop trees or all the trees?
More information about the Ag-forst