The Importance of Forest Management for Timber Investments

Here at AcreTrader, we have a saying about timber: “A kept forest is a happy forest.”

Many asset classes are primarily financial, building up value based on market conditions. Timberland is one of just a few asset classes where value can actually be created through responsible oversight and intervention on the property itself.

Not only can active forest management enhance returns on your timberland investment, it can also increase the sustainability of a forest and the health of the ecosystem.

This article explores the importance of forest management in timber investing from both an economic and ecological angle, and offers some tips on how to find the right forest manager.

Contents

• What Is Forest Management?
• Why Is Forest Management Important?
• An Example of Forest Management in Action
• How to Choose a Professional Forest Manager
• Final Thoughts

What Is Forest Management?

Forest management is a broad collection of silvicultural practices aimed at controlling the composition, growth, health, and harvest of forests in order to increase the value and sustainability of forests and their products, such as timber.

You may be thinking, don’t trees just grow on their own? So why would forests require management?

Forests are integral to human life for many reasons. In order to make use of their products and services, we need to make sure that human use doesn’t compromise their health, longevity, and usability.

It’s not as simple as just avoiding overharvest. There’s much more that can be done in order to maintain forest health and productivity.

Forest management encompasses a host of activities. Which activities are necessary depends on the goals for the property as well as the tree species; softwoods like pine receive drastically different management than hardwoods.

Some major silvicultural activities include:

• timber harvesting and thinning,
• stand regeneration (e.g. planting and replanting),
• prescribed burning,
• input application (i.e. of herbicides or fertilizers),
• wildlife habitat preservation and improvement,
• water quality preservation and improvement, and
• access and operability improvements.

A representation of the forest management lifecycle with common forest products made from trees at different stages.

Why Is Forest Management Important?

Ecological Importance

Speaking generally, forest management is crucial to the long term sustainability of healthy forests. Clean air and water, wildlife habitat, climate regulation, and natural beauty are just a few of forests’ important functions.

Sustainable forest management is defined by diversity of:

• composition, meaning variety of species of not only trees but all forest flora, and
• structure, meaning multiple ages and sizes of both hardwood and softwood stands.

Species and structural diversity via active management increases a forest's ability to defend itself from threats such as fire, pathogens, insects, and in the longer term, climate change.

It’s worth noting that timber can offer ESG (Environmental, Social, and Governance) benefits to investors looking to make a positive impact with their investment dollars. In addition to their well-known environmental benefits, forests are starting to be used and measured as carbon sinks.

Economic Importance

In the case of timber, ecological benefits are economic benefits.

• Age class and species diversity means you have options when it comes to harvest and thinning activities, which typically generate returns for landowners.
• Well-managed forests can be more appealing to buyers when it’s time to exit the investment.
• Active management is imperative to mitigate risk factors.

“Active silvicultural management can help the landowner manage risk,” says Mark Foley, AcreTrader Director of Timber Acquisitions.

“Efforts to maximize tree growth may make the timber more robust and better able to deal with insect or pathogen risks, while also improving returns. Planting density and thinning strategies will help to control brush and fuel build up within the forest, lowering the risk of fire damage.”

An Example of Forest Management in Action

This aerial shot of Saline River Timber Tract shows a planted pine tract surrounded by naturally regenerating hardwood stands.

One of AcreTrader’s 2022 timber offerings, Saline River Timber Tract, included a forest of mixed native hardwoods, including some mature white oaks that were ready for harvest.

The first planned thinning event on that property is expected to be a select harvest to remove those mature trees. This activity will be key to opening up the canopy for younger hardwoods to release, allowing sunlight for them to emerge and grow into the existing stand.

Without active management to disperse resources (in this case, space and sunlight), the forest wouldn’t be capable of producing steady tree growth of different sizes and species.

Many oaks like these are used in the making of whiskey barrels. In fact, U.S. law stipulates that whiskey must be aged in oak barrels. This is just one example of an industry that relies on a steady supply of forest products, which in turn relies on timber management.

How to Choose a Professional Forest Manager

“In the timberland space, active management often is tied back to ‘boots on the ground’ inspections by qualified forestry professionals,” says Mark Foley. “This allows the landowner to identify issues early enough to be appropriately managed with minor impact.”

In general, a good timber manager or management company will have experience and expertise that is both local and lengthy.

• Local: Timber is a highly localized business because of regional differences in tree species, climate, environment, markets, infrastructure, and more. Make sure your forest management professionals are deeply familiar with each sub market within the investment’s region.
• Lengthy: Because trees grow slowly and steadily, forestry is a long game, so you want to work with forest managers who have knowledge and understanding of a forest’s life cycle. From an investment perspective, harvests (that is, cash flow events) only happen intermittently. Make sure your management team is able to plan for the long term and capitalize on these events when they occur.

Final Thoughts

• Active, involved forest management is the best way to maximize both the health of your forest investments and their return potential.
• Diversity of tree composition and structure make forests more resilient and flexible for harvest.
• A strong timber management team will be able to adapt a management strategy to the local environment, current market conditions, and your individual goals.

Interested in building out a portfolio of well-managed forest assets? Create your account to see past timber offerings on the AcreTrader platform and be notified of new ones.

The above content is not intended to be a comparison between products, but is intended for general, educational and informational purposes only. Any performance noted is historical and there is no guarantee any trends will continue. All investing involves risks, including the complete loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. It is important for each investor to review their investment objectives, risk tolerance, tax liability and liquidity needs before investing. Investment vehicles have differences in fee structure, risk factors and objectives. Investments are considered speculative, involve a high degree of risk and therefore are not suitable for all investors.

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