January's Woodlots Column: Invest in Timberlands - Discuss!

[EditorBob]

Below is an excerpt of January's column. Feel free to post comments and questions!

by Thom J. McEvoy

For those investors who made a conscious decision to buy forestland, witness the wisdom of that decision today. The stock market is falling with no bottom in sight, the auto industry in America is about to go belly-up and more than a quarter of homeowners with mortgages are in risk of default. The Internet bubble of last century has morphed into the real estate bubble of 2008, and signs point to even more serious and lasting economic troubles.

Following Black Tuesday in 1929, the market languished for three years before bottoming out in 1932. Guess how long it took to reach its precrash peak? The Dow Jones Industrial Index took 25 years--and a World War--to surpass its inflation-adjusted precrash peak in 1954. Few economists are willing to speculate on where the economy goes from here, nut if you own forestland, hang on to it no matter what. Timber prices may be a little soft for a while, but your money is safe in forests (and not necessarily buried in a tin can under your favorite tree).

Just how good are forest investments? It depends on a number of factors, such as: How much did the forestland cost, and what was the value of timber on the date of acquisition? How much has it cost to maintain the timber investment (property taxes are one of the big expenses in most states)? What is the investment period (in silvicultural terms; the ‘rotation’)? What is the time-value of money or the opportunity cost? And, finally, What are the markets like at the time of harvest?

Read the entire column at Farming: The Journal of Northeast Agriculture.

The author is a professor and extension forester with the Rubenstein School of Environment and Natural Resources at the University of Vermont.