By Jim Griffith
I can’t tell you the number of times I’ve heard people say, “If I can’t get any more money than that for my timber, I’m just going to let it die and rot on the ground!” I’ve also heard timber owners refuse to sell because of the amount of taxes they would owe. These statements are usually stated with considerable passion. I understand a timber owner’s desire to get a maximum price for his timber and his displeasure at having to pay taxes. However, letting a stand of timber go to waste because you aren’t getting as much money as you would like or to avoid paying taxes is foolish.
It’s much better to get something for your timber than nothing. I don’t think I have ever heard anyone say, “If the bank is not going to give me any more interest than that on my money, then I’m just going to let them deduct fees from my account until my money is all gone.” If you did this, the result would be the same as letting your timber rot. A valuable asset would dwindle, little by little, until it was all gone.
One case to consider might be a timber harvest I just completed. In this particular instance, the owner sold his timber below the market-price peak in order to capture as much value as he could from his timber rather than lose all of the timber’s value while he waited for the market to go up.
When I use the term peak, I am referring to an all-time peak and not a peak for the current market conditions. It was a really nice stand of sawtimber that had been growing for many years. The stand was mature and would not grow much any more. The recent drought and other growing conditions had put this stand under stress and led to a beetle infestation. A significant number of the trees were dead already, and many others were in the process of dying. If this owner had refused to sell because they were not getting the peak price for their timber, then they would have watched their investment fall to the ground and rot. This landowner favored maximizing their return under unfavorable conditions, which was the best choice.
Timber owners also often lose money by not thinning an older stand of planted pine because they don’t think they are getting a high enough price for the pulpwood being removed. Timber owners would come out way ahead by thinning their stands when it is time to thin and not waiting for some upward swing in the price of pulpwood that may or may not come anytime soon.
When timber owners delay a thinning, they not only lose the money and the interest they could have earned from the proceeds of the timber thinning, but they also lose the value of volume growth that the remaining higher value trees would experience after the inferior trees are thinned out.
There are plenty of reasons to manage your timber. It is your professional forester’s job to understand these reasons and recommend a management strategy that will move you toward a healthy stand of timber and maximize your income return at the same time.
Jim Griffith is general manager of the GFB Timber and Real Estate Companies.
Georgia Farm Bureau Neighbors – March 2008