University of Georgia Researchers to Timberland Owners: Improve Forest Inventories or Risk Losing Billions in Timber Value

MORGANTOWN, W.Va., July 22, 2008 — Researchers at the University of Georgia’s Warnell School of Forestry and Natural Resources (Warnell) say that inaccurate forest inventories can be causing timberland owners to lose some $70 an acre, according to a study published today in the Canadian Journal of Forest Research.

“With some 350 million U.S. timberland acres in private hands, even a small portion of poorly managed and inaccurately assessed acreage could amount to tens of millions, if not billions, of dollars in diminished value,” said Bruce Borders, Ph.D., the author of “The value of timber inventory information for management planning.”

Dr. Borders said that his research team undertook a large simulation study to evaluate current timber-inventory methods, focusing on the usefulness of stand level (defined as 50 to100 hundred acres of timberland whose trees share similar characteristics) inventory data typical of a commercial forest owner in the southern United States.

“Our findings indicate that, with current methodology, timber management organizations that view collecting inventory data as a cost to be minimized are producing management plans that fail to maximize the profitability of their holdings,” Dr. Borders said. “Our study indicates that it is likely that they are experiencing expected losses in net present value (NPV) of close to $70 an acre on a large proportion of the acreage found on typical plantation timberland parcels in the southern United States.”

A recognized specialist in forest management, biometrics and mensuration (the process of determining dimensions, quantity or capacity), Dr. Borders explained that, typically, only about one to three percent of a forest is actually sampled through field cruises, during which foresters manually record the diameter, height, species, product and grade of a small sample of trees. Then appropriate sample expansion techniques are used to estimate the composition and value of an entire forest.

“By its nature, this method is costly in human and financial resources and produces imprecise results at the stand level with sampling errors of 25 percent or greater,” he continued.

“We showed what can happen to decisions about thinning and harvesting when foresters and owners rely on imprecise stand data. Basically, their management plans do not accurately reflect the condition of standing timber, so they cannot achieve an accurate assessment of its worth, or the maximum return on their investment through development of optimal management regimes,” he said.

“Today, with new technology, it is possible to have real-time data about the location, dimensions and health of trees, all of which lead to more-informed decisions about forest management and investment,” Dr. Borders noted. “The methodology we used in this study can help improve timberland management by showing the effects of precise inventory data at the stand level.”

Warnell researchers assisting Dr. Borders in the research were Dr. Michael Clutter, Warnell’s dean; William Harrison, forest biometrician; and Dr. Barry Shiver, professor emeritus. Also assisting was Dr. Ray Souter, research forester, USDA Forest Service in Stoneville, Miss. Borders noted that ImageTree commissioned the report.

Select report highlights:

Although foresters differentiate timber inventory information used for management planning from that used for timber sales, it is the high-sampling-error “management cruise” (25% error or greater at the stand level) that is applied to help guide management decisions.
Timber inventory data should not be viewed as a cost center but rather as a vital asset, crucial for maximizing timberland value; improved inventories will have a profound effect on forestry management and asset evaluation.
- A company that buys acreage based on a timber inventory indicating 8,000 standing tons of stumpage valued at $40/ton when, in fact, only 6,000 tons of stumpage is present, overpays by $80,000.
- For a hypothetical 10,000-acre forest of pine and hardwood, if stand level sampling error is reduced from 25% to 10%, the additional expected net present value (NPV) realized from the forest would be about $325,000 at a discount rate of 6% and about $537,000 at a discount rate of 4%.
- Additionally, with the likelihood that overall forest management was not as effective with poor inventory practice, the actual value increase in realized returns will be substantially larger than these expected gains in NPV indicate.
Timberland management organizations should reduce stand level sampling error below 15% when developing management plans to optimize financial returns.
Future studies should address:
- The effect that error in individual inventory variables has on expected NPV.
- The effect that improperly timed and missed silviculture (care and cultivation) and harvest decisions can have upon expected NPV when based upon faulty inventory information.

To review or obtain a copy of Dr. Borders’ complete study, please go to this page.

About University of Georgia, Warnell School of Forestry and Natural Resources
Warnell provides students with five degree-path programs in forestry and natural resource science and management, including majors in forestry, fisheries and aquaculture; natural resources recreation and tourism; water and soil resources; and wildlife management and ecology. With more than 23,000 acres of teaching lands, Warnell is the Southeast’s oldest, and one of the most respected, forestry and natural resource education providers in the United States.

About the Canadian Journal of Forest Research
Published since 1971, the Canadian Journal of Forest Research is a peer-reviewed journal of the National Research Council Canada covering many research topics related to forest resource management. The monthly journal features articles, reviews, notes and commentaries by internationally respected scientists on all aspects of forest science.

About ImageTree Corporation
ImageTree is “the precision forestry company” that provides accurate and consistent assessment of forest assets, significantly improving both forestland management practices and investor returns. Its patented process, which combines remote sensing, automated software, and advanced mathematics and analysis, enables superior site-specific economic, environmental and sustainable-forest decision making. ImageTree’s ForestSense evaluation platform provides precise, timely and cost-effective forest inventory analysis and its process can reduce a typical five-year inventory-cycle time up to 80 percent, as well as enable a carbon-sequestration assessment, including qualification and monitoring. The company, whose customers include timber investment management organizations (TIMOs) and real-estate investment trusts (REITs), has academic relationships with the Forest Nutrition Cooperative; University of Georgia’s Warnell School of Forestry and Natural Resources; Yale Global Institute for Sustainable Forestry; and Davis College of Agriculture, Forestry and Consumer Sciences at West Virginia University.

Note: ImageTree, ForestSense and The Precision Forestry Company are trademarks of ImageTree Corporation. The names of other actual companies, organizations and/or products/services mentioned herein may be the trademarks of their respective owners.