LIBRARY
UNIVERSITY OF CALIFORNIA.
Class
The
Cost of Growing Timber
BY
R. S. KELLOGG
AND
E. A. ZIEGLER.
1911.
AMERICAN LUMBERMAN.
Chicago.
LIBRARY
OF THE
UNIVERSITY OF CALIFORNIA.
Class
The |
Cost of Growing Timber
BY
R. S. KELLOGG,
Secretary Northern Hemlock and Hardwood Manufacturers Association,
AND
E. A. ZIEGLER,
Director Pennsylvania State Forest Academy.
1911.
AMERICAN LUMBERMAN.
CHICAGO.
CONTENTS
Introduction 4
Elements of Cost 5
Land Value and Stocking 5
Administration and Protection 5
Taxes .- 6
Rate of Interest 7
The Yield 7
Present Stumpage Prices 8
White Pine 8
Loblolly Pine 9
Longleaf Pine 10
Red Oak 12
Yellow Poplar 13
Douglas Fir 13
Proportion of Different Elements in Total Cost 14
Conclusions 15
APPENDIX
Cost Tables 17
Land and Stocking 17
Taxes fc 17
n 18
FOREWORD.
At the seventh annual meeting of the National Lumber Manufacturers*
Association in Seattle, Washington, July 12-14, 1909, we presented a paper
entitled "How Much Does It Cost to Grow Timber?" The discussion
occasioned by this paper and subsequent further study of the subject have
led us to revise the original manuscript and publish it in the present form
in the belief that the principles set forth are sound and will help toward
a clearer conception of the conditions which must be established in the
United States if forest conservation is to be a reality. This statement is
made with a full realization of the difficulty in forecasting yields and
stumpage prices and with the certain knowledge that many, perhaps all,
of the assumptions necessary to the exposition will be keenly criticized by
someone — forester or lumberman. Nevertheless, it is only through such
discussions as these that clear thinking upon a highly important question
can be attained, and it is in this spirit that the following pages are offered
to the reader by THE AUTHOES,
224470
THE COST OF GROWING TIMBER.
INTRODUCTION.
Four-fifths of the timber standing in the United States today is
privately owned. Only one-fifth of it is now in State and National Forests.
and it is not likely that for many years to come even as much as half of
the total stumpage of the country will be in public forests. In the future,
as in the past, we must depend on private forests for much of our wood
supply, and the manner in which private forests is handled is therefore of
great economic importance.
Practically all of the lumber so far used in the United States has come
from natural, matured forests. Capital has found a profit, and sometimes
a great profit, in buying up virgin timber in advance of the demand and
holding it until it could be either manufactured or sold to manufacturers
at a 'heavy increase in price over that paid at the time of purchase; that is,
much of the profit made" in the lumber industry so far has been a speculative
profit. The exhaustion of the supply of virgin timber will lessen the
chances for speculation and more closely restrict profits to those which arise
from growing and manufacturing timber.
The so-called "cost of production" now calculated by manufacturers is
merely a harvesting cost, not a cost which includes the expense of growing
the timber as well as that of logging and manufacturing it. The growing
of timber is analogous to the growing of wheat or corn, except that in the
latter case the crop is sown, grown, harvested, and marketed within a year,
while in the former case the same series of operations may require from
50 to 100 years. The elements of cost are the same in both. Capital will
seek investment in raising neither wheat nor timber unless there is a reason-
able chance for profit. We have abundant data upon the cost of producing
the great agricultural staples, but few data upon the cost of growing
timber.
A permanent timber supply will not be maintained by private effort
at less than the cost of production. With sufficient knowledge of the cost
of land and stocking, growth and yield, we can estimate what the cost of
growing any kind of timber will be and compare it with the present
stumpage price. This comparison will show whether the stumpage price
may be expected to go up or down in the future and will indicate the
minimum amount we may have to pay for timber. Of course, we have no
assurance that timber will eventually sell at the bare cost of production,
for, if a great shortage results because of our general imprudence in failing
to grow timber, or because of unexpectedly heavy demands for it, the
selling price will go far above the cost of production. On the other hand,
if a certain species grows slowly and yields lightly, or if the soil which it
requires be too expensive, so that the cost becomes abnormally high, it may
be superseded by timber of other kinds, which may be grown more cheaply.
In this case, the price would never equal the cost of production.
It is the purpose of this paper to present a method of analysis of the
elements of cost in growing timber. The assumptions made are thought to
be fair and to approximate the usual conditions under which the various
species must be grown. With a right method of computation established,
those who have need to do so can supply the necessary factors and determine
the cost of production for particular cases. With these considerations in
mind,, the following discussion is given:
ELEMENTS OF COST.
There are five main elements of cost in the growing of timber. They
are: (1) The value of the land; (2) the stocking1 of it with young trees;
(3) the administration of the operation and the protection of the growing
timber; (4) the taxes; (5) the rate of interest.
The profit or loss at the end of a given period will be determined by
the relation between the combined amounts of these investments at the
proper rate of interest and the value of the stumpage of the resulting stand
of timber at prices then obtainable ; or,, the total amount of the investments
at compound interest, divided by the total yield, will give the absolute cost
of production per unit of yield.
In Tables 1 to 6 are brought together the best figures and available
estimates upon six important species — white pine, loblolly pine, longleaf
pine, red oak, yellow poplar and Douglas fir. The following basic
assumptions are made:
LAND VALUE AND STOCKING.
The land as such, regardless of what forest growth there may be on it,
and assumed to be unfit for ordinary agricultural crops, is valued uniformly
at $3 per acre.
Assuming that the land must be fully planted with young trees, a
charge of $7 per acre is allowed. The results obtained by the State of
New York and other extensive planters indicate that this amount should
be sufficient in planting operations of considerable magnitude. Of course,
if cut-over land is restocking naturally with young trees, it is worth more
than bare land, but the increased cost of the land should be approximately
equal to the amount that would have to be spent for planting. Planting-
should be unnecessary in many cases, since it is often possible to obtain
natural reproduction at low cost, if proper cutting methods are used.
Whether we assume a value of $3 per acre for bare land and a cost of
planting of $7 yer acre, or allow $10 .per acre for land naturally stocked
with young trees, the initial investment remains the same. For these
reasons the cost of land and stocking are summarized together in the tables.
Many will probably think that the charges for land value and stocking
are placed too low, and this is probably true in certain instances. It is
deemed better, however, to calculate the cost of growing timber with the
lowest possible original investment, than to run into figures which, while
entirely true for some conditions, will yet seem preposterous to the unin-
formed. There is also some merit in placing the fixed charges for all
species at the same amount. This brings out more clearly the differences
in final costs due to growth and yield.
ADMINISTRATION AND PROTECTION.
The cost of administration and protection will vary greatly with local
conditions and the size of the operation. In these calculations, they are
combined and conservatively estimated at 5 cents per acre annually. Pro-
tection means chiefly the keeping out of fire, and on large tracts, the neces-
sary labor force can be so managed as to make the amount of this item
comparatively small.
Lumbermen maintain, and often justly so, that at present conditions
are too hazardous to warrant the long time investment required to produce
timber. It is assumed in this paper that the forest owner has the benefit of
more efficient State and local measures for fire prevention than now prevail.
Until he has, he is not likely to look favorably on timber growing on a
large scale as a legitimate commercial enterprise. The risk from fire, wind
and insects cannot be closely predicted any more than can the future price
of lumber. We know that eventually fires will be controlled, though occa-
sionally forests will be destroyed, even with the best system. On the whole,
damages from wind and insects are light and local and do not lead to such
heavy losses as does fire.
There is now no insurance for standing timber in this country, nor
will there be until our forests are somewhere near as safe as the German
forests. Until conditions become such as to make either commercial or
mutual insurance feasible, there remains an element of hazard in timber
investments, allowance for which will be made by each investor as seems
to him best. Where reasonable - protection is not furnished, permanent
forest investment is impossible.
TAXES.
Two methods of taxing timber are shown: Case 1, the method now
in general use, and Case 2, a proposed tax upon the yield only, to be paid
when the timber is cut.
CASE 1.
Taxes as now levied are extremely variable, but they average about 1
per cent of the actual value of the property. Since assessors pay little
attention to young growth before it reaches merchantable size, the taxes
are assumed to be equivalent to 10 cents per acre per year (or 1 per cent
of the initial cost of land and stocking) up to the date when it is possible
to make the first cut. Thereafter they are placed at 1 per cent of the
actual stumpage value of the timber plus the original land value ($3 per
acre), with reassessments at the periods for which yields are given. With
the exception of loblolly pine, this is every ten years.
CASE 2.
If a given investment nets 4 per cent, an annual tax of 1 per cent
(one-fourth of the annual income) is equivalent to a final tax of one-fourth,
or 25 per cent of the yield. Since we do not know -what stumpage values
will be when the timber is cut, the calculation of the tax on yield is made
by simply reducing the yield by the same percentage as the percentage of
tax, and then figuring the cost of producing this reduced yield without
taxes; that is, if 25 per cent of the selling price of the stumpage goes to
the public in lieu of annual taxes, the cost of growing the timber is the
same as if 75 per cent of the given yield had been obtained with no tax
at all.
With the interest rate at 5 per cent, the final tax must be 20 per cent
to yield a return equivalent to a 1 per cent annual tax, and similarly, with
interest at 6 per cent, the final tax becomes 16% per cent. If timberland
were valued and taxed annually according to the income it produced, the
two methods would yield exactly the same amount of tax.
As a matter of fact, the present method of taxing is not applied in
the scientific manner outlined in Case 1, so that the two methods would
give still more widely divergent results in practice than those indicated in
the subsequent tables. The tax on yield (Case 2) is higher than the common
tax for the shorter periods (except for small yields and low stumpage
prices) and lover in the longer periods. Since the tax on yield is graduated
according to production, it takes the same proportion of the income at all
periods, while the general property tax takes an* increasing proportion, and
must sooner or later force cutting. In other words, the present system of
taxation tends to undertax young growth and overtax larger timber.
The tax on yield falls at a time when the owner of the timber is best
able to pay; hence, unlike the general property tax, it has no tendency
to make him cut when the market is overstocked or before the timber has
reached the most profitable cutting stage.
RATE OF INTEREST.
Kates of interest depend largely on the degree of confidence in the
investment, or the risk involved, and also upon the ease with which the
money invested can be recovered. Thus, government bonds net about 2 or
3 per cent; well-secured bonds of established corporations, 4 or 5 per cent;
real estate mortgages, from 4 to 6 per cent; industrial stocks, from 5 to 7
per cent. Farm rents in older communities are regarded as satisfactory by
local capital if they give a net income of 4 or 5 per cent.
Forest land is usually the poorest land in the region. Often it
could be used for no other purpose. A forest investment is a long time
one. With proper protection it is safe and requires little attention upon
the part of the investor during the time that it runs. Four per cent is
satisfactory in a wide variety of investments which are attended by small
risk and extend over a long time. For these reasons 4 per cent has been
chosen as conservative in forest calculations. The effect of higher rates of
interest is also discussed in connection with the tables.
THE YIELD.
For white pine, loblolly pine, and yellow poplar the yields are based
on tables compiled from actual stands on good forest soil of various ages
and fully stocked, such as should result from planting. For longleaf pine,
red oak, and Douglas fir the yields are based on extensive growth studies
and on estimates of the number of trees~per acre, calculated on a knowledge
of their requirements and carefully checked with other species of similar
requirements, whose normal stand per acre is known. The figures assumed
for both of the above groups are supported by data on growth and yield
published in the report of the National Conservation Commission. The
average sire of the timber is given in diameter at breast height, the standard
point of measurement. The yield is stated in thousands of board feet of
square-edged lumber. Thinnings which will be necessary from time to
time should pay their cost and in some cases give net returns which are
not included in the tables. The common practice in New England is to
cut round-edged lumber from second-growth white pine for the box factories.
If it is desired to calculate such material, the yields given in the tables
should be increased about 20 per cent.
Lumbermen may object that the yields are too high, since the finest
stands of virgin forest do not yield so much. The comparison of a natural
untended forest with a planted or tended one is parallel with that of a
"volunteer" crop of wheat wholly untended with one carefully drilled in
on well-plowed ground. The cultivated crop can always be expected to
give the larger yield.
PKESENT STUMPAGE PEICES.
The present stumpage prices quoted are only approximations, since a
number of factors, such as ease of logging, stand' per acre, distance from
market, etc., cause wide variations. Stumpage prices actually obtained vary
according to age only in a rough way as the timber appears to the buyer
large, medium or small. Most of the timber on the majket now is either
very old virgin stuff or young so-called "sap timber/' For consistent calcu-
lations, however, it is necessary to assume stumpage values in the tables and
grade them according to age. For this purpose they are deemed fair.
WHITE PINE.
Assuming the factors mentioned, the outlook for white pine under the
conditions specified in Table 1 is very good. Case 1 shows a stumpage cost
of $2.96 per thousand feet at 40 years and a stumpage price of $5. The
stumpage cost is below the present stumpage price to between 70 and 80
years. At 80 years the cost is $9.61 per thousand, with an estimated
stumpage price of $9 per thousand. At 90 years the cost is $3.95 per
thousand more than the estimated selling price. From 90 years on the
cost and selling price would rapidly diverge as the effect of compound
interest became greater.
Case 2,. in which there is a tax on the yield only, shows a much more
favorable condition for investors in the older age classes. Up to nearly
50 years this method makes the cost slightly greater than under Case 1,
but still much under the selling price. For older timber the tax on yield
alone gives a reduced cost as compared with the ordinary method. At 90
years the difference is $4.74 per thousand in favor of the tax on yield.
Placing the original cost of land and stocking at $15 per acre instead
of $10 gives reproduction costs under Case 1 of $4.15, $4.68 and $6.18 per
thousand feet at 40, 50 and 60 years, respectively — all well below the
stumpage prices.
Table 1. — White Pine in JVeie England.
CASE 1.
Land and stocking, $10 per acre ; administration and protection, 5 cents per acre ;
Land and stocking, $10 per acre ; administration t\
taxes, 10 cents per acre, up to 40 years ; thereafter, 1
assessment every 10 years ; interest, 4 per cent.
per cent actual value, with re-
Land Adminstra-
AGE and
YRS. stocking.
40 $ 45.01
50 68.07
60 102.20
70 152.72
80 227.50
90.. . 338.19
tion and
protection.
$ 4.75
7.63
11.90
18.21
27.56
41.40
Taxes.
$ 9.50
26.43
61.09
122.71
225.19
387.67
Total
cost.
$ 59.26
102.13
175.19
293.64
480.25
767.26
Present
stumpage
Size,
•Yield
Cos*
price
in.
M.ft.
per M.
per M.
6.7
20
$ 2.96
$ 5.00
9.0
30
3.40
6.00
10.7
38
4.61
7.00
12.0
45
6.53
8.00
12.9
50
9.61
9.00
14.5
55
13.95
10.00
Present
Administra-
Net
stumpage
tion and
Total
Size,
yield^
Cost
price
protection.
Ta&cs.
cost.*
in.
M.ft.
perM.
per M.
$ 4.75
One
$ 49.76
6.7
15.0
$3.32
$ 5.00
7.63
quar-
75.70
9.0
22.5
3.36
6.00
11.90
ter
114.10
10.7
28.5
4.00
7.00
18.21
of
170.93
12.0
33.7
5.07
8.00
27.56
yield
250.06
12.9
37.5
6.80
9.00
41.40
379.59
14.5
41.2
9.21
10.00
CASE 2.
Xo annual tax on land or timber ; final tax, 25 per cent of yield. Other factors as
in Case 1.
Land
AGE and
YRS. stocking.
40 $ 45.01
50 68.07
60 102.20
70.. 152.72
80 227.50
90 338.19
* Excluding taxes.
t Three-fourths of total yield, one-fourth deducted in lieu of taxes.
The cost of production mounts rapidly with higher rates of interest.
At 5 per cent, in Case 1, with the other factors unchanged, the taxes in
50 years amount to $32.63, administration and protection to $10.47, land
and stocking to $111.67, a total of $154.77, or $5.16 per thousand, an
increase of $1.76 per thousand over the cost at 4 per cent. At 60 years at
5 per cent, the taxes come to $76.17, administration and protection $17.68,
land and stocking $183.79, a total of $277.64, or $7.31 per thousand, $2.70
per thousand more than at 4 per cent. If a stumpage price of $7 per
thousand for 60-y ear-old timber is obtained, it will give practically 5 per
cent on the investment under the conditions above specified.
With interest at 5 per cent, and the only tax one of 20 per cent of the
yield, the stumpage cost in 50 years will be $5.09 per thousand, and in 60
years, $6.63 per thousand. Using 6 per cent interest in 'the calculation
gives for Case 1 a cost of $7.90 per thousand at 50 years, and of $11.89
per thousand at 60 years. Taxing the yield 16% per cent, with 6 per cent
interest, we get a cost of $7.83 per thousand at 50 years, and of $11.19 at
60 years. With the older-age classes, the increase in cost by using 6 per cent
is even more marked.
The growing of white pine in New England at present stumpage prices
should be profitable. On a 50-year rotation under the conditions specified
in Case 1, there is $2.60 per thousand profit above 4 per cent interest on
the investment. At 60 years, the net profit above 4 per cent is $2.39 per
thousand, and at 70 years, $1.47 per thousand feet. Judged from the
economic standpoint alone, white pine stumpage prices have gone high
enough. They leave a safe margin above the actual cost of production to
encourage the inyestor.
LOBLOLLY PINE.
The method of estimating the cost for loblolly pine (Table 2) is
identical with that for white pine, except that a reassessment is assumed
every 5 years to correspond with the yields, which are for 5-year periods.
Owing to the very rapid growth of loblolly, or old-field pine, in the coastal
region of the Carolinas, Virginia, and Maryland, the first yields can be
obtained in 25 years under favorable conditions. The figures indicate a
cut of 12,000 feet at that age from fully stocked stands. This is of timber
averaging nearly 8 inches in diameter, which is suitable for boxes and crates.
At 40 years the estimated yield is 19,000 feet per acre of timber averaging
10.6 inches in diameter, which will make small lumber or railroad ties.
The estimated cost is $3.42 per thousand under Case 1, and $3.48 under
Case 2. At 50 years, the yield is 23,000 feet of 12-inch timber, which
means a range of from 8 inches to 18 inches. The data at hand do not
furnish sufficient basis for detailed estimates beyond 50 years. For larger
material, say 70 years old, the cost would rise to about $8 per thousand.
Table 2. — LoWolly Pine in the Carolinas and Virginia.
CASE 1.
Land and stocking, $10 per acre ; administration and protection, 5 cents per acre ;
taxes 10 cents per acre, up to 25 years ; thereafter, 1 percent actual value, with re-
assessment every 5 years ; interest, 4 per cent.
Present
Land Administra- stumpage
AGE
and
tion and
Total
Size,
Yield
Gost price
YES.
stocking.
protection. Taxes.
cost.
in.
M. ft.
ver M. perM.
25
..!..$ *>3 66
$ 2.08 $ 4.16
$ 29.90
7.8
12
$ 2.49 $ 2.00
30
29 43
2.80 6.52
38^75
s!o
15
2.58 2.50
35. .
36 46
3.68 10.12
50.26
9.8
17
2.96 3 00
40
45 01
4.75 15.24
65.00
10.6
19
3.42 3 50
45
... 55 41
6.05 22.31
83.77 '
11.4
21
3.99 4.00
50
68 07
7.63 .81.86
107.56
12.2
23
4.68 4.50
CASE 2.
No annual
tax on land or
timber ; final tax,
25 percent
of yield. Other factors as
In Case 1.
Present
Land
Administra-
Net
stumpage
AGE
and
tion and
Total
Size,
yield^
Cost price
YES.
stocking.
protection. Taxes.
cost.*
in.
M.ft.
per M. perM.
25
$ 23 66
$ 2.08 One
$ 25.74
7.8
9.0
$ 2.86 $ 2.00
30
29 43
2.80 quar-
32.23
8.9
11.2
2.88 2.50
35
36 46
3.68 ter of
40.14
9.8
12.7
3.16 3.00
40
45 01
4.75 yield
49.76
10.6
14.3
3.48 3 50
45
55 41
6.05
61.46
11.4
15.7
3.90 4.00
50..
68.07
7.63
75.70
10 o
17.2
4.40 4.50
* Excluding taxes.
t Three-fourths of total yield, one-fourth deducted in lieu of taxes.
Since much of the loblolly pine grows upon soil that has considerable
agricultural value, the effect of higher priced land must be taken into
account. Allowing $15 per acre for land and stocking, under Case 1, the
cost at 40 years is $4.67 per thousand, and at $20 per acre it is $5.92 per
thousand, which is very reasonable.
With either method of taxation, the cost of producing loblolly pine is
low, and in most cases less than the present stumpage prices. It will
evidently pay to grow loblolly pine timber under such conditions as above
specified.
LONGLEAF PINE.
Longleaf pine is a slow-growing species, and it requires almost 90 years
to reach a size attained by loblolly pine in 50 years, or by white pine in 80
years. Moreover, the trees will not grow in as dense stands as white pine.
This lessens the yield. It is assumed in Table 3 that the first cutting stage
will be reached in 70 years, when the timber should average about 10 inches
in diameter and give a yield of 17,000 feet per acre, the same yield as for
loblolly pine at 35 years. In longleaf pine the first cutting diameter is set
higher than in loblolly or white pine, because longleaf is not so suitable
for box boards and other small-sized material. It will be noted how tre-
mendously the cost of growing increases with age, due to the effect of
compound interest and comparatively small yields. At 70 years under the
common method of taxation, the estimated cost is $12.20 per thousand. At
10
100 years, with timber averaging only a little more than 14 inches in
diameter, which means a range of from 10 inches to 20 inches, the cost is
$22.28 per thousand; and at 120 years, with timber averaging 16.4 inches
in diameter the cost is $42.23 per thousand. While taxes pile up heavily,
they are far from being the most important item in the investment. Most
of the cost is due to the interest upon the land and growing stock. At 70
years this amounts to more than four times as much as the taxes, and at
120 years it is over three times as much. The cost for administration and
protection ranges from $1.07 per thousand at 70 years to $3.61 per
thousand at 120 years.
With the only tax one of 25 percent of the yield, the cost is slightly
greater throughout than under Case 1. This is because the stumpage price
is low and the yield small. With higher stumpage prices and yields, the
tax on yield is more favorable to the owner than is the general property
tax.
Table 3. — Longleaf Pine in the South.
CASE 1.
Land and stocking, $10 per acre ; adminsitration and protection, 5 cents per acre ;
taxes, 10 cents per acre up to 70 years, thereafter 1 percent actual value, with reassess-
ment every ten years ; interest, 4 percent.
Present
Lfand Administra- stumpage
Aoa and tion and Total Size, field Cost price
YES. stocking, protection. Taxes. cost. in. M.ft. per M. perM.
70 $ 152.72 $18.21 $36.43 $ 207.36 9.9 17 $12.20 $2.00
80 227.50 27.56 58.36 313.42 11.4 23 13.63 2.50
90 338.19 41.40 93.64 473.23 12.9 28 16.90 3.00
100 502.05 61.88 149.03 712.96 14.2 32 22.28 3.50
110 ,744.60 92.20 234.37 1,071.17 15.3 35 30.60 4.00
120 1,103.63 137.08 364.04 1,604.75 16.4 38 42.23 4.50
CASE 2.
in Case 1.
No annual tax on land or timber ; final tax, 25 percent of yield. Other factors as
AGE
YKS.
70.,
80..
90..
100. .
110..
Land Administra-
and tion and
stocking, protection.
$ 152.72 $ 18.21
227.50 27.56
338.19 41.40
502.05 61.88
744.60 92.20
120 ; 1,103.63 137.08
Taxes.
One
quar-
ter
of
yield
Total
cost.*
\ 170.93
255.06
379.59
563.93
836.80
1,240.71
Present
Net stumpage
Size, yield^ Cost price
M. ft. per M. per M.
12.7 $13.46 $ 2.00
14.83
18.08
23.50
31.82
43.53
in.
9.9
11.4
12.9
14.2
15.3
16.4
17.2
21.0
24.0
26.3
28.5
2.50
3.00
3.50
4.00
4.50
* Excluding taxes.
t Three-fourths of total yield, one-fourth deducted in lieu of taxes.
The conclusion to be drawn from the longleaf pine table is that,
under the conditions specified, it can not be grown profitably. The stump-
age costs are higher than it is likely that stumpage prices will go. It
may be that 100 years hence longleaf pine stumpage averaging 14 inches
in diameter will sell for $22 per thousand,. but the chance that it will do so
is not great enough to lead capital to purchase bare land and plant it to
longleaf pine trees.
If we are to have longleaf pine permanently we must evidently favor
it. Since the greatest element of cost is the land and stocking, this item
should be decreased if possible. If the investor can get longleaf pine land
with sufficient young growth upon it eventually to produce a full merchant-
11
able crop for $5 per acre, instead of $10, as given in the table, he will have
a stumpage cost of $6.55 per thousand at 70 years, with the present method
of taxing, and of $7.33 per thousand, with the only tax one of 25 percent
of the yield. With land and stocking at $5 per acre, the stumpage cost at
100 years becomes $12.54 per thousand in the first case, and $12.98 in the
second. Thus, while the growing of longleaf pine is not an attractive
investment to the man who must pay from $5 to $10 per acre to start with,
the outlook becomes more favorable for the owners of large areas on which
natural reproduction can be secured at low cost by leaving a few seed trees
and keeping out fires. Under such conditions there is an opportunity for
the profitable growing of longleaf pine.
EED OAK.
The first cut for red oak is set at 40 years, with timber averaging 10.3
inches in diameter, which should give a range of from 6 inches to 16 inches
and a yield of 11,000 board feet. The estimated cost (shown in Table 4)
is $5.39 per thousand for Case 1, and $6.07 per thousand for Case 2. While
in both cases the cost of production runs above the present stumpage prices,
it is not excessive until 80 years, when it is $14.02 per thousand for Case 1,
and $13,64 for Case 2, with a yield of 25,000 feet of timber averaging 16.7
inches in diameter. At 90 years, with a tax on yield only, the cost is $18-.70
per thousand for timber averaging 18 inches in diameter, which will give
many trees running up to 24 inches or more. With the increase which may
be expected in stumpage prices, the chance for profitably growing red oak
of the smaller sizes is evidently very good.
Table 4. — Red Oak in the Southern Hardicood Region.
CASE 1.
Land and stocking, $10 per acre ; administration and protection, 5 cents per acre ;
taxes, 10 cents per acre up to 40 years, thereafter 1 percent actual value, with reassess-
ment every 10 years ; interest, 4 percent.
Present
Land Administra- stumpage
and, tion and
stocking, protection. Taxes.
AGE
YRS.
40.
50.
$ 45.01 $ 4.75 $ 9.50
68.07 7.63 17.06
102.20 11.90 31.01
152.72 18.21 55.37
227.50 27.56 95.52
90 338.19 41.40 159.74
100.. 502.05 61.88 259.47
70.
SO.
Total
cost.
59.26
92.76
145.11
226.30
350.58
539.33
823.40
Size,
in.
10.3
12.4
14.1
15.4
16.7
18.0
Yield
M.It.
11
15
19
22
25
27
19.0 29
Cost
per M.
$ 5.39
6.18
7.64
10.29
14.02
19.98
28.39
price
per M.
$ 2.00
3.00
4.00
5.00
6.00
7.00
8.00
in Case 1.
A.;K
YRS.
40.
50.
60.
70.
80.
90.,
100 . .
CASE 2.
No annual tax on land or timber ; final tax, 25 percent of yield. Other factors as
Land Administra-
and tion and
stocking, protection.
45.01
68.07
102.20
152.72
227.50
338.19
502.05
$ 4.75
7.63
11.90
18.21
27.56
41.40
61.88
Taxes.
One-
quar-
ter
of
yield
Present
Net
stitmpayc
Total
Size,
yield^
Cost
price
cost.*
in.
M.ft,
per M.
per M.
$ 49.76
10.3
8.2
$ 6.07
$2.00
75.70
12.4
11.2
6.76
3.00
114.10
14.1
14.3
7.98
4.00
170.93
15.4
16.5
10.36
5.00
255.06
16.7
18.7
13.64
6.00
379.59
18.0
20.3
18.70
7.00
563.93
19.0
21.8
25.87
8.00
* Excluding taxes.
t Three-fourths of total yield, one-fourth deducted in lieu of taxes.
12
YELLOW POPLAR.
The prospects for yellow poplar, shown in Table 5, are somewhat
better than for red oak. It grows a little more rapidly, gives a little greater
yield, and has a correspondingly lower reproduction cost. At 50 years
there is an estimated yield of 18,000 feet of timber averaging 12.8 inches
in diameter, costing $5.17 per thousand under Case 1, and $5.61 under
Case 2. Yellow poplar is such a highly useful wood that it will always be
needed by our varied industries. We can evidently obtain the smaller sizes
at a cost which is not excessive. If we want big trees we must pay a high
price for them.
Table 5. — Yellotc poplar in the southern hardwood region.
CASE 1.
Land and stocking, $10 per acre ; administration and protection, 5 cents per acre ;
thereafter 1 percent actual value, with reassess-
Land and stocking, $10 per acre ;
taxes, 10 cents per acre up to 40 years ;
ment every 10 years ; interest, 4 percent
AGK
YKS.
40 $ 45.01
50 68.07
60 102.20
70 152.72
80 227.50
90 338.19
100 502.05
Land Administra-
and tion and
stocking, protection.
. Present
stumpage
Total Size, Yield Oost price
Taxes. cost. in. M. ft. per M. per M.
5 4.75 $9.50 $ 59.26 10.5 12 $ 4.94 $2.00
7.63 17.30 93.00 12.8 18 5.17 3.00
11.90 32.44 146.54 14.7 23 6.37 4.00
18.21 59.42 230.35 16.1 25 9.21 5.00
27.56 103.31 358.37 17.3 27 13.27 6.00
41.40 172.71 552.30 18.5 29 19.04 7.00
61.88 280.34 844.27 19.5 31 27.23 8.00
CASE 2.
in Case 1.
AGE
YRS.
40.
50.
60.
70.
80.
90.
100.
No annual tax on land or timber ; final tax, 25 percent of yield. Other factors as
Land Administra-
and tion and
stocking, protection. Taxes.
45.01
68.07
102.20
152.72
227.50
338.19
502.05
4.75
7.63
11.90
18.21
27.56
41.40
61.88
One-
quar-
ter
of
yield.
Total
cost.*
49.76
75.70
114.10
170.93
255.06
379.59
563.93
Size,
in.
10.5
12.8
14.7
16.1
17..°,
18.5
19.5*
Net
yield^
M.ft.
9.0
13.5
17.2
18.7
20.3
21.8
23.2
Present
stwnpage
Cost ' price
per M. perM.
$ 5.53 $2.00
5.61 3.00
6.63 4.00
9.14 5.00
12.56 6.00
17.41 7.00
24.31 8.00
* Excluding taxes.
t Three-fourths of total yield, one-fourth deducted in lieu of taxes.
DOUGLAS FIR.
From every viewpoint, Douglas fir is one of the most interesting
species. There is more of it now standing than of any other timber in the
United States. It grows rapidly in extremely heavy stands, and can be
protected cheaply.
Table 6 gives estimates of the cost of growing Douglas fir in the
region of its best development ; that is, in western Washington and Oregon.
The first cut is placed at 40 years, with an average diameter of 10.6 inches,
and a yield of 24,000 feet per" acre. This makes the cost of production $2.47
per thousand in Case 1, and $2.76 in Case 2. At 70 years, with timber
averaging 18.4 inches in diameter and ranging from 14 inches to 28 inches,
the yield is 50,000 feet per acre, making the cost $4.50 per thousand in
Case 1, and $4.56 in Case 2. At 100 years, with timber averaging more
than 2 feet in diameter, and a yield of 70,000 feet per acre, the cost is
$11.46 per thousand for Case 1, and $10.74 per thousand for Case 2.
Table 6. — Douglas fir in western, Oregon and Washington.
CASE 1.
Land and stocking, $10 per acre ; administration and protection, 5 cents per acre ;
taxes, 10 cents per acre up to 40 years ; thereafter 1 percent actual value, with reassessment
every ten years ; interest 4 percent.
Present
Land Administra-
AGE . and tion and
YRS. . stocking, protection. Taxes.
40 $ 45.01 $4.75 $ 9.50
7.63 17.30
11.90 31:21
18.21 54.29
J7.56 91.22
41.40 149.06
61.88 238.26
50 68.07
60 102.20
70.... 152.72
80 227.50
90 338.19
100 502.05
Total
Size,
Net siumpage
Yield Cost price
cost.
in.
M.ft
. per M.
perM.
$ 59.26
10.6
24
$ 2.47
$1.00
93.00
13.7
35
2.66
1.25
145.31
16.2
43
3.38
1.50
225.32
18.4
50
4.50
1.75
346.28
20.5
57
6.08
2.00
528.65
22.5
64
8.26
.2.25
802.19
24.3
70
11.46
2.50
CASE 2.
No annual tax on land or timber ; final tax 25 percent of yield.
Case 1.
Other factors as in
AGE
YRS.
Land Administra-
and tion and
stocking, protection. Taxes.
40 $ 45.01 $ 4.75 One
50 68.07 7.63 quar-
60 102.20 11.90 ter
70 152.72 18.21 of
80 227.50 27.56 yield.
90 338.19 41.40
100 . 502.05 61.88
Total
cost.*
$ 49.76
75.70
114.10
170.93
255.06
379.59
563.93
Net
Size, yield Cost
in. M.ft.t perM.
18.0 $ 2.76
26.3 2.88
32.2 3.54
37.5 4.56
42.7 5.97
48.0 7.91
52.5 10.74
10.6
13.7
16.2
18.4
20.5
22.5
24.3
Present
stumpage
price
per M.
$1.00
1.25
1.50
1.75
2.00
2.25
2.50
* Excluding taxes.
t Three-fourths of total yield, one-fourth deducted in lieu of taxes.
Because of the rapid growth and heavy yield, there is a possibility
of getting more than 4 percent from a Douglas fir investment. At 5 per-
cent, the cost of growing 50-year-old timber is $4.15 per thousand under
Case 1, and $4.36 per thousand under Case 2. At 60 years, it is $5.70 per
thousand for Case 1, and $5.86 per thousand for Case 2. With a 6 percent
interest rate, the cost of production at 50 years is $6.49 per thousand for
Case 1, and $6.70 per thousand for Case 2. At 60 years it is $9.67 and
$9.88 per thousand, respectively.
All things considered, the outlook for Douglas fir is distinctly encour-
aging. The price of stumpage is certain to advance, and an increase of
only two or three dollars per thousand will bring it to reproduction prices
for ages up to 70 or 80 years. Such increases and far greater ones will
likely take' place before the timber can be grown. Cut-over Douglas fir
land containing a sufficient quantity of young growth is evidently an
excellent investment at $10 per acre. On the large areas of fir forests
which are still . intact, natural reproduction can be obtained at less than
planting cost and profits increased accordingly.
PEOPORTION OF DIFFERENT ELEMENTS IN TOTAL COST.
In order to see more clearly the influence of the various factors in the
cost of growing timber, the percentage of the total cost contributed by
ii
taxes, protection, and land and stocking, at ages of 50 and 90 years, under
Cases 1 and 2, are given in Table 7.
Table 7. — Proportion of total cost of growing timber caused by different factors under
conditions specified in Tables 1 to 6.
CASE 1.
FIFTY-YEAR OLD TIMBER NINETY-YEAR OLD TIMBER
Administra- Administra-
tion and Land and tion and Land and
Taxes, protection, stocking. Total. Taxes, protection, stocking. Total.
SPECIES — Percent. Percent. Percent. Percent. Percent. Percent. Percent. Percent.
White Pine 25.9 7.5 66.6 100 50.5 5.4 44.1 100
Loblolly Pine 29.6 7.1 63.3 100 ... ..
Longleaf Pine . . ... ... 19.8 8.7 71.5 100
Red Oak 18.4 8.2 73.4 100 29.6 7.7 62.7 100
Yellow Poplar 18.6 8.2 73.2 100 31.3 7.5 61.2 100
Douglas Fir 18.6 8.2 73.2 100 28.2 7.8 64.0 100
CASE 2.
All species 20.0 8.1 71.9 100 20.0 8.7 71.3 100
These percentages show unmistakably that with the exception of old
white pine, taxed according to present methods, much the largest proportion
of the total cost is due to land and stocking, as it should be. On the other
hand, if present methods of taxation are strictly carried out, they take an
increasingly larger share as the timber grows older. For 90-year white,
pine they amount to more than one-half the total cost, due to high stumpage
prices, and for red oak, yellow poplar, and Douglas fir of the same age the
taxes come to 28 to 31 percent of the total cost. The low percentage of
taxes for longleaf pine at 90 years is because at that age it has not yet
reached either a high yield or great value.
The statement for Case 2 emphasizes the point previously made that
in some instances young growth is undertaxed by present methods, while hy
the same methods older timber is almost invariably overtaxed. It maj
easily happen, therefore, that while land and stocking usually constitute
much the largest proportion of the cost of growing timber, the present
system of taxing may be the determining factor in the decision as to
whether or not forest conservation shall be practiced in a given region.
With the tax on yield alone, the proportion of taxes to the total cost is
the same in all ages.
The cost of administration and protection is low throughout. In no
instance does it equal 9 percent of the total cost of growing the timber,
and usually is less than 8 percent. Timber can be protected cheaply, and
the cost of protection should not be a serious obstacle to forest conservation.
CONCLUSIONS.
The purpose of this paper is to outline a method of investigation into
the cost of growing timber rather than to say definitely what the costs,
yields, and stumpage prices will be for the various species in particular
localities.
Certain general conclusions, however, can be drawn. It is evident
that present stumpage prices of white pine are at a point where the growing
of this timber should yield from 4 to 6 percent compound interest for a
40 to 70 year investment, with land and stocking costing not more than
$10 per acre. The growing of loblolly pine should now offer a return of
4 percent compound interest for investments of from 30 to 50 years, with
15
land and stocking at $10 per acre. At the present rate of increase in
stmnpage values, red oak, yellow poplar, and Douglas fir will shortly bring
remunerative prices. It is probable that cottonwood, red gum, southern
white ash, and redwood have a rate of growth that will include them in the
list of species which will soon reach stumpage prices covering the cost of
growing. There is little room to doubt that with all these species the
stumpage will reach a reproduction price long before the timber can be
grown.
Present virgin timber is nearly always of greater age than can be
grown with profit hereafter. This old timber usually has a larger percentage
of the higher grades than "second-growth" or young timber. Hence, in
value, virgin stumpage must be compared, not with the cost of the younger
timber, but with that of the older classes. Under present methods of taxa-
tion, and to cover a 4 percent investment, virgin timber values should
eventually rise to at least the cost of growing saw timber from 12 to 24
inches in diameter, say averaging 16 inches, except in cases where cheaper
woods or other materials will furnish satisfactory substitutes.
This entire discussion has assumed an intelligent public conception
of the value of forest property and the necessity for its protection from
fire. Until such a sentiment crystallizes into efficient measures, rigidly
enforced, many forest investments will continue to be hazardous. In some
localities conditions are already such that forest investments on a moderate
scale are reasonably safe.
Because of the long investments required, the cost of growing timber
becomes unreasonable when high rates of interest are demanded. If private
capital is unwilling to engage in it for an income of 4 to 5 percent, then
the sooner a large proportion of the permanent timber land of the country
comes into possession of the state or national governments, the more
hopeful will be the outlook for, future timber supplies. The chief concern
of the state and national governments is the public welfare, and, moreover,
they can profitably engage in operations at an even lower rate of interest
than 4 percent.
APPENDIX.
COST TABLES.
. To facilitate calculations of the cost of growing timber, the following
tables, which show the charges for land and stocking, taxes and protection
by decades from thirty to one hundred years, at various rates, have been
prepared. The amounts for the several items are identical with those given
for the corresponding items in Tables 1 to 6 of the text, except that in the
latter tables the value of the bare land, assumed to be $3 per acre, is
deducted from the totals, since the land remains an asset at the end of the
operation. For strict calculations, therefore, the value of the land after
cutting takes place should be deducted from the totals for land and stocking
shown below :
LAND AND STOCKING.
ORI
Amount
at 3
YEARS — • percent.
30 $12.14
GINAL COS!
Amount
at lt
percent.
$ 16.22
24.01
35.53
52.60
77.86
115.25
170.60
252.52
:, $5 PER
Amount
at 5
percent.
$ 21.61
35.20
57.34
93.40
152.13
247.81
403.65
657.51
ACRE
Amount
at 6
percent.
$ 28.72
51.43
92.10
164.94
295.39
528.99
947.35
1,696.56
ORIC
Amount
at 3
percent.
$ 24.27
32.62
43.84
58.92
79.18
106.41
143.01
192.19
40
16 31
50
00
. 21.92
29.46
70
39 59
80
53.20
90
71.50
100. .
96.09
Amount
at k
percent.
$ 32.43
48.01
71.07
105.20
155.72
230.50
341.19
505.05
$10 PER
Amount
at 5
percent.
; 43.22
70.40
114.67
186.79
304.26
495.61
807.30
1,315.01
ACRE —
Amount
at 6
percent.
$ 57.44
102.86
184.20
329.88
590.77
1,057.99
1,894.70
3,393.13
— ORIG
Amount
at 3
YEARS — • percent.
30 $ 3fl.4t
INAL COST
Amount
at /,
percent.
$ 48.65
72.02
106.60
157.79
233.57
345.75
511.79
757.57
•, $15 PER
Amount
at 5
percent.
$ 64.83
105.60
172.01
280.19
456.40
743.42
1,210.96
1,972.52
ACRE
Amount
at 6
percent.
$ 86.15
154.29
276.30
494.82
' 886.16
1,586.98
2,842.05
5,089.69
ORIGINAL COST, $20 PER
Amount Amount Amount
at 3 at 4 at 5
percent, percent. percent.
$ 48.55 $ 64.87 $ 86.44
65.24 96.02 140.80
87.68 142.13 229.35
117.83 210.39 373.58
158.36 311.43 608.53
212.82 461.00 991.23
286.01 682.39 1,614.61
384.37 1,010.10 2,630.02
ACRE
Amount
at 6
percent.
$ 114.87
205.71
368.40
659.77
1,181.54
2,115.97
3,789.40
6,786.25
40. ...
48.93
50 ....
65.76
60
88 37
70 ...
118.77
SO
159 61
90
214.51
100...
. . 288.28
TAXES.*
A ill \J U *x i. A j. o r r> ivu r- *> A
Yearly Yearly Yearly Yearly
AJAWUOTJfc AA
Yearly Yearly
1 rJMM*MUVJ
Yearly
Yearly
cost per
cost pet-
cos* per
cost per
cost per
cost per
cost per
cost per
acre,
acre,
acre,
acre,
acre,
acre,
acre,
acre,
YEARS —
10 cents.
15 cents.
20 cents.
25 cents.
10 cents.
15 cents.
20 cents.
25 cents.
oO
$ 4.76
$ 7.14
$ 9.52
$ 11.89
$ 5.61
$ 8.41
$ 11.22
$ 14.02
40
7.54
11.31
15.08
18.85
9.50
14.25
19.01
23.76
50 ....
11 28
16.92
22.56
28.20
15.27
22.90
30.53
38.17
60
16 31
24.46
32.61
40.76
23.80
35.70
47.60
59.50
70 ....
23.06
34.59
46.12
57.65
36.43
54.64
72.86
91.07
SO ....
32.14
48.20
64.27
80.34
55.12
82.69
110.25
137.81
<)0
44 33
66.50
88.67
110.84
82.80
124.20
165.60
207.00
100. .
60.73
91.09
121.46
151.82
123.76
185.64
247.52
309.41
* If it is desired to compute the taxes at some rate not given above, the amount may
be obtained by using either the figures given in the table for protection or by combining
them with those in this table. For example, the total tax at a rate of 19 cents for sixty
years at 3 percent is equivalent to the total tax at 4 cents ($6.52 in the protection table)
plus the total tax at 15 cents ($24.46 in the tax table), or $30.98.
IT
\. i i / c > - X : -i-t-^4¥PtfNt W 5 PERCENT
AMOUNT AT
6 PERCENT
Yearly
Yearly
Yearly
Yearly
Yearly
Yearly
Yearly
Yearly
cost per
cost per
cost per
cost per
cost per
cost per
cost per
cost per
acre,
acre,
acre,
acre,
acre,
acre,
acre,
acre,
YEARS —
10 cents.
IS cents.
20 cents.
25 cents.
10 cents.
15 cents.
20 cents.
25 cents.
30
$ 6.64
$ 9.97
$ 13.29
$ 16.61
$ 7.91
$ 11.86
$ 15.81
$ 19.76
40
. 12.08
18.12
24.16
30.20
15.48
23.21
30.95
38.6!)
50
20.93
31.40
41.87
52.34
29.03
43.55
58.07
72.58
60
. 35.36
53.04
70.72
88.40
53.31
79.97
106.63
133.28
70
, 58.85
88.28
117.71
147.13
96.80
145.19
193.59
241.99
80
97.12
145.68
194.25
242.81
174.66
262.00
349.33
436.66
90
, 159.46
239.19
318.92
398.65
314.12
471.17
628.23
785.29
100
261.00
391.50
522.01
652.51
563.85
845.78
1,127.71
1,409.64
ADMINISTRATION AND PROTECTION.
Yearly Yearly Yearly
Yearly Yearly
Yearly
Yearly
Yearly Yearly
Yearly Yearly Yearly
cost
cost
cost
cost
cost
cost
cost
cost
cost
cost
cost cost
per
per
per
per
per
per
per
per
per
per
per per
acre,l
acre, 2
acre,S
acre, it
acre, 5
acre, 6
acre, 1
acre, 2
acre, 3
acre,}
acre, 5 acre, 6
YRS.
cent.
cents.
cents.
cents.
cents.
cents.
cent.
cents.
cents.
cents.
cents, cents.
30..
.$0.48
$0.95
$1.43
$1.90
$2.38
$2.85
$0.56
$1.12
$1.68
$2.24
$2.80 $3.37
40..
. .75
1.51
2.26
3.02
3.77
4.52
.95
1.90
2.85
3.80
4.75 5.70
50..
. 1.13
2.26
3.38
4.51
5.64
6.77
1.53
3.05
4.58
6.11
7.63 9.16
60..
. 1.63
3.26
4.89
6.52
8.15
9.78
2.38
4.76
7.14
9.52
11.90 14.28
70..
. 2.31
4.61
6.92
9.22
11.53
13.84
3.64
7.29
10.93
14.57
18.21 21.86
80..
. 3.21
6.43
9.64
12.85
16.07
19.28
5.51
11.02
16.54
22.05
27.56 33.07
90..
. 4.43
8.87
13.30
17.73
22.17
26.60
8.28
16.56
24.84
33.12
41.40 49.68
100.
. 6.07
12.15
18.22
24.29
30.36
36,44
12.38
24.75
37.13
49.50
61.88 74.26
Yearly Yearly Yearly
*> PERCENT
Yearly Yearly
Yearly
Yearly
AM 0 U NT AT
Yearly Yearly
6 PERCENT
Yearly Yearly Yearly
cost
cost
cost
cost
cost
cost
cost
cost
cost
cost
cost cost
per
per
per
per
per
per
per
per
per
per
per per
acre,!
acre, 2
acre, 3
acre,}
acre, 5
acre, 6
acre, 1
acre, 2
acre, 3
acre,}
acre, 5 acre, 6
YRS.
cent.
cents.
cents.
cents.
cents.
cents.
cent.
cents.
cents.
cents.
cents, cents.
30..
.$0.66
$1.33
$1.99
$2.66
$3.32
$3.99
$0.79
$1.58
$2.37
$3.16
$3.95 $4.74
40..
. 1.21
2.42
3.62
4.83
6.04
7.25
1.55
3.10
4.64
6.19
7.74 9.29
50..
. 2.09
4.19
6.28
8.37
10.47
12.56
2.90
5.81
8.71
11.61
14.52 17.42
60..
. 3.54
7.07
10.61
14.14
17.68
21.22
5.33
10.66
15.99
21.33
26.66 31.99
70..
. 5.89
11.77
17.66
23.54
29.43
35.31
9.68
19.36
29.04
38.72
48.40 58.08
80..
. 9.71
19.42
29.14
38.85
48.56
' 58.27
17.47
34.93
52.40
69.87
87.33 104.80
90..
.15.95
31.89
47.84
63.78
79.73
95.68
31.41
62.82
94.23
125.65
157.06 188.47
100.
.26.10
52.20
78.30
104.40
130.50
156.60
56.39
112.77
169.16
225.54
281.93338.31
18
UNIYERSm OF OALJFOKNIA LIBRARY
THE 1AW
THIS BOOK IS
STAMPED BELOW
SF? 10
OCT 21
-.,?ERKELEY
Live Music Archive
Librivox Free Audio
Metropolitan Museum
Cleveland Museum of Art
Internet Arcade
Console Living Room
Books to Borrow
Open Library
TV News
Understanding 9/11