This is part 1 of a 5 part series on Timber.
In North Carolina, timber production is one of the most common land uses. And in the western portion of the state, that production is primarily in the form of hardwoods that naturally grow on our mountainous terrain. With so much valuable timberland available, this article series will focus on how landowners can understand timber practices, how to value it as an investment, how to use it as a tool to save property taxes, and what the processes are to work with a forester to manage timber based on a landowner’s specific goals.
What Affects Timber Value on a Parcel?
There are many factors that affect the value of timber on a specific parcel. These include supply and demand, logging costs, landowner objectives, and volume of timber in the forest to be harvested.
SUPPLY AND DEMAND
Supply and demand affect the price of timber just like it affects other agricultural crops including corn, soy, and others. Demand for timber products and supply fluctuate over time and this impacts the value significantly. Natural disasters such as hurricanes and floods increase demand due to rebuilding. Increased new housing starts add new demand, and increased foreign demand are all factors that increase demand for timber. An article in the Asheville Citizen-Times noted that hardwood timber export to China in our region increased from $5.7M in 2000 to over $150M last year. On the supply side, factors like pine beetles in the Rocky Mountains reduced available timber volumes in the region by destroying millions of acres of timber. That loss of supply increases the demand for softwoods in other regions such as the Southeast. Additionally, since trees take decades to grow, it can be difficult to quickly create new timber supplies.
Logging costs are costs related to cutting and removing the trees. These can vary greatly in our region due to topography, access (Do new roads need to be created?), and how densely the trees are growing. The more volume of timber that can be harvested over a smaller area and larger trees will generally have higher values. And the less steep the slope, the easier it will be to add roads, and remove the trees.
The desires of the landowner will also affect the price. A long-term or short-term investment return objective and factors like prioritizing wildlife habitat or conservation will all constrain the type and amount of timber that may be harvested. These decisions will also affect the value of the timber that can be harvested on a parcel.
Generally speaking, the size and species of trees will determine how volume is calculated. Larger trees, or saw timber, will normally be measured in board feet (how much lumber can be made from the trees) and smaller trees or pulpwood will be measured in tons since they are normally not cut into lumber and are ground into pulp for paper and other products.
Also related to volume is basal area which helps determine density. Basal area is an estimated area in sqft of all the tree trunks at breast hight across an acre. For instance, a Basal Area of 70 would indicate that if all the marketable trees on an acre were cut at breast height and all the stumps were measured and added together, that area would cover 70 sqft. That equals about 129 ten inch diameter trees or 66 fourteen inch diameter trees per acre.
If you are buying land with trees, even if you don’t plan to harvest them, it’s important to understand these factors as they do contribute to the value of a property. Trees take decades to grow, and large healthy timber stands add value to any land purchase.
In the next article, I’ll discuss a Timber Cruise and how foresters estimate the volume of timber on a parcel.
I help my clients understand land and provide them with education and knowledge to make informed decisions. If you’re looking for a professional land broker or need help understanding land issues like this, let me know! Pat Snyder, firstname.lastname@example.org, www.nationalland.com