RATE OF GROWTH AND PROBABLE RETURNS
Of all factors in calculating the financial possibilities of second forest crops, the growth to be expected is the easiest to determine with fair accuracy. Future stumpage value, tax burden and fire risk are all subject to uncertain influences, but the approximate yield of a given species under given natural conditions will be the same in the future that it is now. To predict it requires only study of existing stands without being misled by the influence of conditions which will not be repeated.
On the other hand, an immense amount of misinformation is circulated because of superficial observation. Enthusiasts discovering individual trees which have made prodigious growth, or even fairly extensive stands on fertile soil with heavy rainfall, will compute sawlog yields at 40 or 50 years which are much too optimistic for general application. Others, remembering some stand they have seen in unfavorable localities, or noting shade-suppressed trees which will not be paralleled after the virgin forest is removed, are unduly discouraged. It is most essential that yield tables be made by trained observers who know how to reach the true average, and that the figures either actually come from the region to which they are to be applied or are accompanied by a systematic analysis of climatic and other conditions which permits intelligent comparison.
In calculating another yield on cut-over land, the system for an even-aged new growth, such as will follow clean cutting of Douglas fir, for example, is quite different from that necessary if the cutting amounts only to selection of the merchantable trees and leaves a fair stand of smaller ones. In the latter case, yield tables based on average acreage production are of little use because so much depends upon the character of the stand which remains on the tract in question. Here the basis must be the rate of growth of the average individual tree. An estimate by the number in each present diameter class may be made of the trees which will escape logging, showing, let us say for example, about five trees of each diameter from 6 to 12 inches, or thirty-five in all which are over 6 inches. If the growth study indicates that in 20 years there will have been added 6 inches in diameter we can estimate a crop of five trees each of classes extending from 12 to 18 inches. Actually the process will not be so simple, for the different aged trees will not grow with equal rapidity, and several other factors must be reckoned with, but the general principle is to apply rate of growth knowledge to the material on hand, and study of this material is essential.
For predicting even-aged crops resulting from entire restocking, the acquisition of necessary basic information is as difficult, or more so, but its application is far simpler. That the ground will be fully stocked by natural or artificial means must be assumed, but we can also assume that the result will be influenced only by normal locality conditions and not by accidental condition of the present forest. Therefore we use a yield table and not a growth table. This can be made by actual measurement of existing second growth stands of different ages, which proves not only the growth rate but also the number of trees which the natural shade-thinning process results in at different periods of the forest life. The chief danger of inaccuracy in such information lies in basing it on insufficient measurements or in applying it where soil or moisture conditions are greatly different. The latter error can be guarded against, however, by use of growth figures taken in conjunction with it. For example, if a yield table showing 25,000 feet to the acre at 50 years from seed is accompanied by one showing that the average stand it represents is 125 high at 50 years and its average 50-year-tree is 14 inches in diameter, little investigation is necessary to determine whether in any given locality the growth falls far above or below that.
An attempt to reproduce here any considerable number of growth and yield tables would be of doubtful use without more space than is allowed to explain how they are made and used. There are many technicalities, both mathematical and silvicultural, and unfortunately most of the available figures for the Northwest, obtained by the Forest Service, have not been generalized enough for wide popular value. This is particularly true of yield tables which necessarily require assuming standards of merchantability. While the best western white pine table assumes that by the time a new crop is cut 7-inch white pine will be salable, the best fir table was worked upon a 12-inch diameter basis. Obviously this would show an unfairly greater yield of a pine forest containing trees between 7 and 12 inches and be very misleading in calculating financial results at the same age and stumpage rates; yet without the original data there is no way of reducing both tables to the same basis. As an example, however, to indicate how the financial possibilities of second growth can be arrived at if a systematic study is made, let us take the Douglas fir figures referred to.
DOUGLAS FIR
These are exceedingly reliable. Measurements were taken by the Forest Service of practically pure fir on about 400 areas in thirty-five different age stands from 10 to 140 years old, ranging along the western Cascade foothills from the Canadian line to central Oregon. Since reforestation investment is likely to be confined mainly to the more promising opportunities, only such growth was measured as gave an average representation of the better class of the two should all the general territory covered be graded in two quality classes of all around ability to produce forests. On the other hand, care was taken not to represent the maximum of the better class, data being taken only from permanent forest land and not from rich potential agricultural land which might show unfairly rapid forest growth. The average areas were actually measured and the number, age, form, diameter growth, height growth, board foot contents, etc., of all the trees on them were accurately determined. Trees 12 inches in diameter 4-1/2 feet from the ground were considered merchantable, and it was assumed they could be used to 8 inches in the top. From this data were prepared tables and diagrams showing the average development of trees and stands under fairly favorable conditions in the region west of the Cascades.
This gave the following yield per acre:
| Age of Stand. | Feet, B. M. | Age of Stand. | Feet, B. M. |
| 40 | 12,400 | 90 | 70,200 |
| 50 | 28,000 | 100 | 79,800 |
| 60 | 41,000 | 110 | 90,300 |
| 70 | 51,700 | 120 | 101,500 |
| 80 | 61,100 | 130 | 113,000 |
Let us see how these figures can be used in answering the primary question of the prospective timber-grower: "Will it pay to hold my cut-over land for a second crop?"
Obviously no certain answer can be printed here, not only because no uniform stumpage prices or carrying charges can be predicted but also because individuals may differ as to what profit is necessary to make the investment "pay," so it will be necessary to analyze the situation so each may select the premises which suit his own case and judgment. The investment made by the holder of cut-over land is of two kinds; that represented by the land which otherwise he might sell, putting the proceeds at work in some other business, and the annual carrying charges which otherwise he might also invest differently. The sum obtainable by investing the money available by sale after logging, adding to it yearly the sum required for fire prevention and taxes, and compounding both at a satisfactory interest for the entire period, is practically the cost of holding the tract for any given number of years. By calculating this cost upon a basis of one acre, and dividing it by the yield board measure which the same period will produce, the cost per thousand feet of growing a second crop is arrived at.
Against this may be set the gross return from the same expected yield at any given stumpage rate. The yield at the end of a 50-year investment will not be that of a 50-year forest, however, for although the carrying cost begins at once, the new forest requires a few years to become established. No exact figure can be set for this, for some seed will sprout the first year and some blank spaces may persist several years, but in the tables to follow five years has been allowed for an average. Consequently, instead of calculating on a 28 M yield as the return at the end of 50 years, as indicated in the yield table on the preceding page, the 45-year yield of 20-1/2 M is used, and similarly for the other periods of 60, 70 and 80 years. These four rotations only will be considered here, for in less than 50 years second growth will probably be too small to be cut at the highest profit, while after 80 years the investment compounds so heavily as to make it improbable that increasing stumpage values will compensate.
Three interest rates have been used in the first table to follow: 4, 5 and 6 per cent, compound. Forest calculations at lower rates are often seen, but it is not believed that less than 5 per cent will be satisfactory to private owners and many will insist on 6 per cent. The fair standard is what the owner can make in other business today, and since he can reinvest his income in the same business, it is reasonable to figure at a compound rate. A few examples are given to show how similar calculations may be made with any set of investment and stumpage factors which appeal to individual judgment. The second table, prepared from the first, shows at a glance the price that must be received for Douglas fir to make it pay either 5 or 6 per cent compound interest under a range of sixty different conditions of original investment and annual cost.
It should be borne in mind that, although present land value is made a charge, the value of the land at the time of harvest is not considered. This value is certain to increase greatly in the long periods involved. Taxation charges will be against it as well as against the timber. Indeed much land is now held without any regard to possible second growth. It should be assumed therefore that any profit in forest investment shown will be increased by the sum obtainable for the land at the end of the same period.
| Cost per M of growing Douglas fir resulting from every $1 per acre originally invested. | Cost per M of growing Douglas fir resulting from every 1 cent per acre of annual carrying charge. | |||||||||
| At the end of | At the end of | |||||||||
| 50 Years. | 60 Years. | 70 Years. | 80 Years. | 50 Years. | 60 Years. | 70 Years. | 80 Years. | |||
| At 4% | $ .35 | $ .30 | $ .33 | $ .41 | $ .074 | $ .068 | $ .078 | $ .098 | ||
| At 5% | .56 | .53 | .65 | .88 | .102 | .101 | .126 | .172 | ||
| At 6% | .90 | .94 | 1.27 | 1.87 | .142 | .152 | .208 | .309 | ||
Example 1: With land worth $2.50 an acre at present, and an estimated carrying charge of 3 cents a year for protection and 20 cents per taxes, what stumpage price for a 50-year crop will pay 5 per cent compound interest? 6 per cent?
| 5% | 6% | |||||||||
| 2½ | × | .56 | = | $1.40 | 2½ | × | .90 | = | 2.25 | |
| 23 | × | .102 | = | 2.35 | 23 | × | .142 | = | 3.27 | |
| $3.75 | $5.52 | |||||||||
Example 2: With land worth $5 an acre at present, and stumpage estimated to reach $7.00 in 60 years, what is the maximum annual carrying charge per acre which can be paid during this period and permit a 5 per cent return? A 6 per cent return?
| 5% | 6% | |||||||||||
| Gross return | = | $7.00 | Gross return | = | $7.00 | |||||||
| 5 | × | .53 | = | 2.65 | 5 | × | .94 | = | 4.70 | |||
| $4.35 | / .101 = 43c | $2.30 | / .152 = 15c | |||||||||
Example 3: Assuming that stumpage will be worth $6.00 in 50 years, and that public enlightenment will keep the annual fire and tax charge from exceeding 20 cents, what price obtainable for cut-over land today, made to earn 5 per cent compound interest in some other business, is as profitable as keeping the land for a second crop? If other business would earn 6 per cent?
| 5% | 6% | |||||||||||
| Gross return | = | $6.00 | Gross return | = | $6.00 | |||||||
| 20 | × | .102 | = | 2.04 | 20 | × | .142 | = | 2.84 | |||
| $3.06 | / .56 = $7.07 | $3.16 | / .90 = $3.51 | |||||||||
FUTURE STUMPAGE PRICES NECESSARY TO MAKE DOUGLAS FIR SECOND CROP PAY EITHER 5 OR 6% COMPOUND INTEREST ON INVESTMENT.
| Cost per M Feet | ||||||
| Original Investment per acre. | Taxes and protection paid yearly per acre. | 50 year rotation (20.5 M per A.) | 60 year rotation (35 M. per A.) | 70 year rotation (46.6 M per A.) | 80 year rotation (56.5 M per A.) | |
| (cents) | ||||||
| 5% Compound Interest | $2.50 | 10 | $2.40 | $2.35 | $2.90 | $3.90 |
| 15 | 2.95 | 2.85 | 3.50 | 4.80 | ||
| 20 | 3.45 | 3.35 | 4.15 | 5.65 | ||
| 25 | 3.95 | 3.85 | 4.75 | 6.50 | ||
| 30 | 4.45 | 4.35 | 5.40 | 7.35 | ||
| 5.00 | 10 | 3.80 | 3.65 | 4.50 | 6.10 | |
| 15 | 4.35 | 4.20 | 5.15 | 6.95 | ||
| 20 | 4.85 | 4.70 | 5.75 | 7.80 | ||
| 25 | 5.35 | 5.20 | 6.40 | 8.70 | ||
| 30 | 5.85 | 5.70 | 7.05 | 9.55 | ||
| 7.50 | 10 | 5.20 | 5.00 | 6.15 | 8.30 | |
| 15 | 5.75 | 5.50 | 6.75 | 9.20 | ||
| 20 | 6.25 | 6.00 | 7.40 | 10.05 | ||
| 25 | 6.75 | 6.50 | 8.00 | 10.00 | ||
| 30 | 7.25 | 7.00 | 8.65 | 11.75 | ||
| 6% Compound Interest | 2.50 | 10 | 3.65 | 3.85 | 5.25 | 7.75 |
| 15 | 4.40 | 4.65 | 6.30 | 9.30 | ||
| 20 | 5.10 | 5.40 | 7.35 | 10.85 | ||
| 25 | 5.80 | 6.15 | 8.35 | 12.35 | ||
| 30 | 6.50 | 6.90 | 9.40 | 13.90 | ||
| 5.00 | 10 | 5.90 | 6.20 | 8.45 | 12.45 | |
| 15 | 6.65 | 7.80 | 9.45 | 14.00 | ||
| 20 | 7.35 | 7.75 | 10.50 | 15.50 | ||
| 25 | 8.05 | 8.50 | 11.55 | 17.05 | ||
| 30 | 8.75 | 9.25 | 12.60 | 18.60 | ||
| 7.50 | 10 | 8.15 | 8.55 | 11.60 | 17.10 | |
| 15 | 8.90 | 9.35 | 12.65 | 18.65 | ||
| 20 | 9.60 | 10.10 | 13.70 | 20.20 | ||
| 25 | 10.30 | 10.85 | 14.70 | 21.75 | ||
| 30 | 11.00 | 11.60 | 15.75 | 23.30 | ||
These tables bring out a number of very interesting primary facts:
1. The rate of interest demanded of the investment is one of the most important factors. This is because such long terms are involved. The charges compound with prodigious rapidity toward the last. In any other business paying 6 per cent, compound, the maximum investment per acre given in the preceding table, that of a land value of $7.50 and a 30-cent annual charge for 80 years, would earn $1,317. A 75-year forest then harvestable should have 56-1/2 M to the acre, but this would have to bring over $25 per M to pay as well. On the other hand, the same deposits earning 4 per cent would only amount to $338 in the same period which would be equaled by timber at $6 per M.
2. For similar reasons, the length of time before cutting has much to do with profit or loss. The compounding of carrying charges eventually outstrips the production of material to a degree which can be offset only by the most rapid rise of stumpage values.
3. The greater the investment, the more marked the above effect and consequently the tendency to market an inferior product. A 60-year rotation is indicated by a majority of the conditions shown.
4. A comparatively slight increase in annual tax or fire charges may make the difference between profit and loss. Roughly, stumpage must bring $1 per M more to compensate for each 10 cents an acre for taxes at 5 per cent or for 7 cents at 6 per cent.
5. If the land is salable for $5 an acre or more it cannot be made to pay 6 per cent compound interest under the most favorable conditions, unless the stumpage received exceeds $6. At $5 stumpage and with reasonable taxation it will pay 5 per cent if it escapes fire.
6. Thirty cents an acre is apparently about the maximum annual carrying charge which will permit a 6 per cent profit, even with very high stumpage prices. Consequently, while present taxes on cut-over land are seldom prohibitive, there must be reasonable certainty that excessive increase will not occur.
The carrying charges shown in the second table cover both fire protection and taxes, as by reading the 15-cent line to include a 10-cent tax and a 5-cent fire patrol. The investment charge may be used to represent sale value only, or sale value plus any expense incurred at time of logging in order to secure reproduction, such as leaving salable material in seed trees, or planting. If desired, any owner may make a similar calculation on any other valuation better fitting his own situation. The table is not intended for universal use but merely as an illustration of how forest calculations may be made.
WHITE PINE
Too much space would be required to give a similar table for all western species, even were as good yield figures available. Roughly speaking, however, western white pine, under conditions thoroughly favorable to it, may be expected to make as good a yield as Douglas fir, and the above fir table will not be far off for it. A probably higher stumpage value should offset any lesser production.
HEMLOCK
Western hemlock is of somewhat, but not much, slower growth when coming in on open land as an even-aged stand. No yield table based on the same merchantable standards as the fir table quoted has been prepared, but the following is fairly safe to include all trees 14 inches in diameter used to 12 inches in the top: At 50 years, 2 M per acre; at 60 years, 22 M; at 70 years, 33 M; at 80 years, 40 M. The absence of a 40-year figure, and the sudden jump between 50 and 60 years, is because very few hemlock trees reach 14 inches at 50 years, but a large number of 12 and 13-inch trees pass into that class during the ten years following. Any yield figures for an even-aged forest show a similar jump at the point where the stand as a whole reaches the determined minimum merchantable size. For the same reason these hemlock figures are not very far less promising than those given for fir, for at corresponding ages the latter include 12 and 13-inch trees and all trees are considered merchantable to a top diameter of 8 inches.
SPRUCE
Since no systematic study of Sitka spruce second growth has been made, it can only be predicted from knowledge of its habits that while in favorable situation it will yield as heavily as Douglas fir, in other localities its growth in early life is slower and less regular, making it less likely to produce a good crop before the carrying charges become burdensome. If this proves true, taxation rates and land values will be extremely important factors, offset to some degree by a smaller fire hazard and the probability of high stumpage.
REDWOOD
For redwood we also lack good figures for any considerable range of conditions and ages, for redwood growth which followed burns does not exist and there are no very old cuttings. Government studies on the northern California coast prove conclusively, however, that this is our most rapid growing native commercial tree. In thirty years, in fair soil, it will produce a tree of 16 inches diameter, 80 feet high, and some existing 45-year stands run 20 to 30 inches on the stump and about 100 feet high. Reckoning 14-inch trees as merchantable, to be used to 10 inches in the tops, a 25 to 30-year second growth after logging near Crescent City was found to have 2-1/2 M feet to the acre and the future increase should be very rapid. There is little question of the profit of growing redwood, provided the difficulties described elsewhere of getting a dense crop started are overcome.