What to do?

Larry Caldwell larryc at teleport.com
Thu Sep 3 03:18:06 EST 1998


In article <35ec2d99.2562888 at nntp.a001.sprintmail.com>, ddd at hi.there.com 
says...

> OK, I got my $.02 worth from this group.  I originally was
> interested in finding out the investment potential of timber
> and got the following type of responses:

> 1. Buy land that already has an established young group of
> trees.  Grow from there.

Yup.

> 2. Setting up from scratch (clear-cut) will take a
> tremendously long time, unless using some aggressive
> management and using genetically enhanced seed.

Also yup.
 
> 3. Instead of growing for timber, grow for pulp - quicker
> turn around to market, low return, but get into the next
> cycle quicker.

That's a qualified maybe.  Pulp logs are a very low-margin operation.  
Typically, anything that can go for saw logs does go for saw logs.  
That's where the money is.  

At $25 a ton, a 12" pulp log is going to be worth about $5.50, and out of 
that you have to fall it, buck it, yard it and haul it to the mill.  
Obvously, you are going to need a hundred thousand of these to make much 
money.  In real pulp areas they don't even do it by hand, they run huge 
"wood processors" in that just grab the tree, shear it off, strip the 
branches and slap it on the carrier in one motion.  Most non-industrial 
owners harvest pulp as a byproduct of thinning operations, or as a market 
for defective logs that won't saw into lumber.  That same 12" tree as a 
saw log is worth about $25.
 
> 4. Cottonwood trees are quick growers, good for pulp.

Cottonwood is a poplus species.  The fastest growing poplus is hybrid 
poplar, which is grown and irrigated as a row crop.  You can get a pulp 
crop off of it in an 11 year cycle with intensive management.  You have 
to irrigate, fertilize and suppress competing vegetation to do it.
 
> 5. Cottonwood also decomposes quickly - fostering a side
> income potential from mushrooms.

Several species of trees can be used to culture mushrooms.  Cottonwood is 
a favorite for this because so much of it is worthless anyway.
 
> 6. Someone in India has a big pulp mill and is going to
> dominate the world pulp market (?)

Indonesia.

> Well, I've sure gotten a lot of feedback from my original
> question.  With the way today's market is behaving, land is
> looking more and more attractive.

For long term investment, that is certainly the case.  In the PNW, timber 
land nets about $50 per acre per year, with some minimal management.  
Over the life of a 20 year investment, you can realize $1000 per acre 
over and above the land itself.  100 acres and a house with a 20 year 
mortgage will provide you with a place to live, which you had to have 
anyway, the occasional deer for the freezer, more firewood than you ever 
wanted to split, and space for a garden and some fruit trees.  At the end 
of 20 years, you have 100 acres free and clear, with $100,000 worth of 
timber on it.

Of course, you are always faced with fire, windstorms, insect attack, and 
the possibility that the construction industry will be in the dumpster 
and nobody will want sawlogs.  Don't sell *all* your mutual funds. ;>

-- Larry



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