5% 6% Gross return = $7.00 Gross return = $7.00 5 X .53 = 2.65 5 X .94 = 4.70 ----- ----- $4.35/.101 = 43c $2.30/.152 = 15c

Example 3: a.s.suming 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 X .102 = 2.04 20 X .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.

Maximum Original Investment $7.50 an Acre. Maximum Annual Carrying Charge 30c an Acre.

------------Cost per M Feet----------- Taxes and 50 year 60 year 70 year 80 year Original protection rotation rotation rotation rotation investment paid yearly (20.5 M (35 M. (46.6 M (56.5 M per acre. per acre. per A.) per A.) per A.) per A.) (cents) - - 10 $2.40 $2.35 $2.90 $3.90

15 2.95 2.85 3.50 4.80

$2.50 < 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="" -="" 10="" 3.80="" 3.65="" 4.50="" 6.10="" 5%="" 15="" 4.35="" 4.20="" 5.15="" 6.95="" compound="">< 5.00="">< 20="" 4.85="" 4.70="" 5.75="" 7.80="" interest="" 25="" 5.35="" 5.20="" 6.40="" 8.70="" -="" 30="" 5.85="" 5.70="" 7.05="" 9.55="" -="" 10="" 5.20="" 5.00="" 6.15="" 8.30="" 15="" 5.75="" 5.50="" 6.75="" 9.20="" 7.50="">< 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="">

- - 10 3.65 3.85 5.25 7.75

15 4.40 4.65 6.30 9.30

2.50 < 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="" -="" 10="" 5.90="" 6.20="" 8.45="" 12.45="" 6%="" 15="" 6.65="" 7.80="" 9.45="" 14.00="" compound="">< 5.00="">< 20="" 7.35="" 7.75="" 10.50="" 15.50="" interest="" 25="" 8.05="" 8.50="" 11.55="" 17.05="" -="" 30="" 8.75="" 9.25="" 12.60="" 18.60="" -="" 10="" 8.15="" 8.55="" 11.60="" 17.10="" 15="" 8.90="" 9.35="" 12.65="" 18.65="" 7.50="">< 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 ill.u.s.tration of how forest calculations may be made.

WHITE PINE

Too much s.p.a.ce 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 pa.s.s into that cla.s.s 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.

PROFITABLE THINNINGS

In addition to the yield of saw timber to be expected when the second crop reaches manufacturing size, there will be a market in many cases for material obtained by thinning. It is perfectly fair to compound for the remainder of the rotation any net profit so obtained and to set it against the carrying charges. In many cases it will go far to turn an apparently losing investment into a very profitable one. Moreover, the proper thinning of growing stands not only utilizes material which would otherwise die and be lost before the main harvest, but actually improves the quality of the first yield.

In obtaining the figures previously quoted the Forest Service found that the average Douglas fir stand at 40 years contains 410 living trees, most of them between 6 and 15 inches in diameter. At 60 years there are but 265 trees, 145 having died and decayed in the 20-year interval which were suitable for ties or other small timber products. The remaining trees would have been improved by thinning to prevent this loss, for the greatest diameter growth is made when the stand is open, and the ideal is to have just the density which will get the greatest wood production and still result in proper pruning and clearing of the trees.

Commenting along this line Mr. T. T. Munger, who conducted the investigation, says:

"That thinnings are silviculturally practicable and financially profitable in the Pacific Northwest has been demonstrated. In the vicinity of Cottage Grove, Oregon, many fully stocked even-aged Douglas fir stands now about 50 years old, most of them forming a part of ranches. Many of these stands have been cut over in the last 10 years and all the material then large enough for piling or mine timber cut out. This removed about 20 per cent of the stand.

At the present time many of these same stands now contain much material valuable for small piles, ties and mine timber, yet the crown canopy is as dense and the trees as close and fine quality as though no cutting had ever been done in the stand. In fact, some of the 50-year old stands have already been cut over a second time, and each time with decided profit to the owner and no damage to the forest. From one 10-acre block of second growth now 50 years old, situated 7 miles from the railroad, already 32,000 feet of mining timber and about 100 50-foot piles have been taken out, yet the stand is now in good condition, and in a few years more of the smaller trees can be removed without infringing on the yield of the final crop. The material from these thinnings was worth at the railroad about $80 per acre."

CONCLUSIONS

Throughout the preceding pages on the financial promise of timber-growing in the West, the attempt has been not to give conclusions but to state certain known facts regarding tree growth and indicate how these may be used in arriving at conclusions based largely upon the conditions and judgment of the individual owner. In many cases they will do little more than suggest further investigation necessary. The Western Forestry & Conservation a.s.sociation and, doubtless, the District Foresters for the Forest Service, will be glad to discuss such work and a.s.sist if possible.

There are, however, several conservative deductions to be made:

1. The Pacific coast states contain large areas having species and climatic conditions peculiarly favorable for forest-growing as a business. The rapidity and quant.i.ty of yield insure profit under conditions which would be prohibitive elsewhere.

2. In many cases, perhaps in most, a second crop can be started with little initial expense.

3. There is much land of no value for any other purpose.

4. Even if the owner does not care to hold his land long enough for another crop, or if he is prevented from doing so at some future time by excessive taxation or other prohibition, its disposal value will be greater if it bears young forest growth than if it does not.

5. Stumpage values are certain to advance greatly and their advance will be governed largely by these factors:

a. Speculative influence necessarily accompanying the lessening of the nation's and the world's timber supply.

b. The carrying charges of fire prevention and taxation imposed by the community upon virgin timber, which, since they represent an investment which must be recouped, will either be added in the long run to the price of stumpage exactly in the measure of their severity and so transferred to the consumer, or result in rapid cutting and consequently raise the speculative value of that which escapes cutting. (This the consumer will pay also.)

c. The quant.i.ty of new timber grown.

6. It is probable that future demand for timber will reimburse the cost of growing it, be this cost high or low _within reasonable limits_.

7. This does not mean, however, that the timberland owner will or can generally engage in the business when the cost is excessive.

While he could probably make a good profit eventually, such an investment is too heavy and prolonged to be inviting; besides there is the possibility of entire loss by fire. He will naturally compare it with other investments having less disadvantages. For example, since conditions which discourage the growing of new competing forests tend for this very reason to enhance the value of existing forests, he might invest further in the latter instead, with equal ultimate profit and with easier access to his money at any time.

8. Consequently the growing of timber is promising to the private owner only when the investment can be borne easily. Since it has three forms--land value, fire protection, and taxation--all must be moderate or, if one or more is high, the rest must be low.

9. With the fire hazard great at present, and taxation so uncertain as to require allowing for its being excessive, the initial investment must be insignificant.

10. This confines it to land of low sale value and precludes much expense to insure the second crop.

11. To secure the perpetuation of forests on the scale essential to public welfare, the public must provide the private owner better fire protection and an equitable taxation system. _Or else it must purchase sufficient cut-over land and engage in forestry itself, bearing the cost and taking the risk._

12. Nevertheless there are several practical exceptions to the somewhat unfavorable situation theoretically outlined above:

(a) Many owners are warranted in holding cut-over land for some time, if not indefinitely, because of the upward trend of land values generally. Unless clearly most useful for agriculture, such land will be made more valuable by a growth of young timber. However indefinite the profit of encouraging this growth and protecting it from fire may be if the present sale value and taxes are computed against such outlay, _the two latter charges are being carried anyway_ and are the most important ones. Merely that it cannot be proved that they can be more than offset is no reason for not trying to compensate as far as possible at slight further expense.

While this may not often permit any great effort to reforest, it will usually warrant protection of the natural new growth that will follow if given a chance.