20 



HARDWOOD RECORD 



by logs of ditEerent diameters, per unit o£ con- 

 tents. 



3. The price increment, depending solely on 

 the difference o£ value which the same log will 

 exhibit in different years. This latter increment 

 is influenced by increase of population and 

 wealth, cheapened facilities of transportation, 

 exhaustion of the virgin woods and declining 

 purchasing power of gold. 



As an illustration of price increment, the fol- 

 lowing figures may be of interest : 



Wholesale I'rices of Yellow Poplar, 4/4 Lumber, 



at Biltmorc, N. C. 



Qualitv. In 180U. In 1907. 



I?as • .$21.00 ?:43.00 to $52.00 



Saps 16.00 33.00 



(^1 12.00 28.00 



c' 2 6.50 10.00 



The expense of production, with modern mills 

 and improved transportation, is as high in 1907 

 as it was in 1S96, viz. : $0 per 1.000 feet b. 

 m. Assuming that certain trees have turned 

 out 2."i per cent of fas, 25 per cent saps, 25 per 

 cent L'. 1 and 25 per cent C. 2. the stumpage 

 values in such trees was per J, 000 feet b. m., 



in 1896 ? 300 



in 1007 ^2.00 



and has increased, consequently, at the rate of 

 .'iO per cent (simple interest, equalling 14 per 

 cent of compound interest) per annum. 



The increase in the value of many other for- 

 est products has been similarly phenomenal ; 

 and the question arises ; Why is the owner of 

 forests unwise enough to reduce this stumpage 

 as long as the rise continues to be pheno.menal — 

 in excess of any dividend deri\ able from other 

 investments? The answer frequently lies in 

 three svords : poverty, impatience, ignorance. 



The enormous increase of gold production 

 during the last twenty years promises to con- 

 tinue and to become more phenomenal. The 

 director of the United States Mint reports (in 

 1904, p. 41) that the rise of wages does not act 

 as an automatic check to gold production, and 

 that the tendency of the expense of gold pro- 

 duction continues to be downward. The effect 

 of increasing gold supplies on commodity prices, 

 wages, land values, mortgages, bonds, etc., is 

 easily perceived. The owner of bonds and mort- 

 gage's sinks to a lower level of revenue, whilst 

 the owner of forests and farms remains (at 

 least) equally wealthy. 



The question will be asked, naturally : Does it 

 pav to strive towards the establishment of an 

 ■■ideal forest" . . ■ towards the establish- 

 ment of an impossibility ■; European foresters 

 are iipt to answer the question by an emphatic 

 ■■Yes." The American forester might consider, 

 before answering, four points : 



(1) The great variety of conditions existing in 

 the various sections of the various states from 

 which the financial prospects of conservative 

 forestry depend. 



(2) The fact that conservatism in the forest 

 cannot lie expected, in the long run, to be as 

 remunerative in this country as it is abroad 

 unless the forest is rendered as safe as the 

 German forests from fire, taxes and whimsical 

 legislation. 



(3) The fact that an ideal forest represents 

 a large investment yielding a small fate of sur- 

 plus revenue. 



(4) The possibility that a forest now consid- 

 ered ■■ideal" as to rotation, composition, species, 

 roads and so on, is apt to be considered deficient 

 when the lapse of years has caused a change of 

 the economical conditions surrounding the for- 



As long as our country develops by leaps and 

 bounds, as long as the immediate future of our 

 forests is dark, as long as other investments seem 

 safer, simpler, better than forestal investments, 

 the time has not arrived to strive toward ■'ideal 

 forests." 



The American forester can consider the forest 

 only as '■so much money invested." That forest 

 is ideal which can be expected to yield, for a 

 long time and perhaps forever, a safe, steady 

 and" high dividend on every dollar invested. In 

 such a forest the various items of value (as 

 trees, soil, roads, sawmills) appear as proper 

 shares of the aggregate value. 



The following may serve as an illustration : 



Per acre. 



Value of stumpage $ 7.75, or 77 M; per cent 



Value of soil 1.00, or 10 percent 



Value of roads 50, or 5 per cent 



Value of sawmills 75, or 71/0 per cent 



Total investment .... $10.00, or 100 per cent 



The form of the ideal revenue depends on the 

 owner's wish. The owner may or may not prefer 

 an annual revenue of 40 cents per acre, obtained 

 without decreasing the value of the stumpage, 

 to a revenue of $2, exhausting the forest in a 

 dozen years. The owner alone can decide 

 whether a dividend is safe enough, steady 

 enough and high enough ; his decision is based, 

 naturally, on a comparison between forest reve- 



nue and revenues obtainable from other invest- 

 ments. J.-, ^ 1. 



The investor stakes his money on that enter- 

 prise in which he has the greatest confidence ; 

 and it is usual that the farmer puts his money 

 in farms- the miner in mines: the railroad man 

 in railroad stock ; and the lumberman in for- 



The American lumberman is apt to consider 

 investments in forestry (be it destructive or con- 

 servative) as ideal investments ; outsiders are 

 not prone to share this view. 



As long as this country abounds in merchant- 

 able woods, the lumberman has an easy chance, 

 after exhausting the stumpage on a given tract 

 completely, to shift his capital to another tract, 

 purchasing the stumpage thereon out of the 

 moneys obtained by his operations conducted on 

 the preceding tract. Usually he prefers, for 

 obvious reasons, the purchase of timbfr to the 

 purchase of the forest in fee simple. Under 

 such conditions, the lumberman cannot be inter- 

 ested in the production of a second growth, nor 

 in operations merely withdrawing trees working 

 at a small rate of revenue. 



The owners of the fee simple— farmers, towns- 

 folk aliens — do not command any knowledge of 

 forest investments; having paid the taxes on 

 the land for a number of years without any re- 

 turns they embrace readily the first chance at 

 obtaining ''big returns." These big returns usu- 

 ally exceed the price by far at which the land 

 was bought. Nevertheless, and .iust as usually, 

 such ■■big returns" are a mere pittance. 



The I'-orest Service of the United States has 

 before it an enormous task ; the task of proving 

 to the owners of woodlands, who are ignorant 

 of present and of prospective value of timber, 

 the advisability of conservative lumbering. 



Unfortunately, there do not exist anywhere 

 associations of forest owners through which the 

 members might be enlightened. 



FOKESTAL INVKSTMENTS. 



In the United States, no private actlvtty hav- 

 inf the forest for its object (id est. any forestry 

 in a broad sense), is conceivable which does not 

 mean to result in good financial returns. Fores- 

 try is business, and in business there is no room 

 for sentiment. That forestry must be considered 

 best which pays best. . 



Compared with other investments in realties 

 (e g, farms, mines, houses), forest invest- 

 ments show several undesirable features. They 

 are difficult to control ; they fail continuously to 

 vield annual cash dividends : they are endan- 

 gered bv fires and cannot be insured against de- 

 struction ; their products are not as absolutely 

 Indispensable to mankind as farm products, 

 mine products or the shelter of a house : subdi- 

 vision, joint ownership, sale in fee are difficult 

 to arrange ; mortgages or bonds on forests are 

 hard to secure, and theft of timber is hard to 

 prevent. , „ . 



There are. on the other hand, many factors 

 speaking in favor of forest investments : Nota- 

 bly the phenomenal increase in the value of 

 timber brought about by an increase in popula- 

 tion and continuous prosperity ; the certamty 

 of wood production, year in and year out, with 

 which tires only can Interfere ; the strong possi- 

 bility of more extended use of wood products in 

 the manufacture of paper, packages, yarns, alco- 

 hol, sugar and food stuffs ; the tact that the for- 

 est stores its own products away, free of charge, 

 until it mav please the owner to place them 

 on the market ; the rapid advance in the value 

 of soil, etc. „ ^ , . 



According to the location of the forest and in 

 a higher degree, according to species of trees 

 and age of trees, the disadvantages connected 

 with forest investments vary from case to case 

 Thev seem to weigh heavily on a second growth 

 which yields no dividend whatever, is seriously 

 endangered hv fire, contains assets of prospec- 

 tive value only and offers no chance at extraordi- 

 nary results. There exist in the United States 

 enormous areas covered with second growth for- 

 ests • What sense can there be, consequently, in 

 investments tending to produce still more second 



^' It is obvious that (he chances of first growth 

 to be remunerative are, generally speaking, very 

 good. This first growth does not increase in 

 volume, the death rate of timber offsetting the 

 birth rate ; its increase in value, however, is 

 certain : heavy logs are getting scarce, and they 

 alone furnish lumber commanding the highest 

 price : the degree to which the trees are utilized 

 without waste increases from year to year ; the 

 difficulties of transportation are declining con- 

 tinuously. Is it to be wondered at. then, that 

 many investors— and notably all lumbermen- 

 are 'eager to invest in first growth whilst ut- 

 terly unwilling to stake their money on second 



^"^Tlie^ question might be asked: Why are the 

 owners reluctant to practice "conservative lum- 

 bering," a modus of logging which tends to se- 

 cure the maximum smu total formed of net 

 present returns and pn.specUve values lef t '; To 

 take an illustration from the South: Why does 

 the owner insist on cutting every pine making 

 a log of over inches at the small end .' Why 



does he refuse to leave all trees having a diam- 

 eter under 20 inches and yielding over seven per 

 cent of latent annual interest? , . 



The explanation lies in the following points : 

 1 No seer can actually foretell the latei* 

 annual interest which trees of various diameters 

 will yield in the immediate and in the more dis- 

 tant "future. The forest dividend consists largely 

 of price increment ; the price increment of big 

 trees is (veneer business!) particularly good. 

 There is little financial advantage in the utili- 

 zation of big trees (if they are sound), as long 

 as an annual price increment of ten per cent 

 and more can be counted upon. A big tree hav- 

 ing a stumpage value of 5il2 per 1,000 feet b. m 

 is not mature per sc. The fine poplars, oaks and 

 chestnuts of the Southland must be considered 

 immature, since their value is absolutely sure 

 to increase at an annual rate of over ten per 

 cent. .... 



The assumption of the principle is wrong, it 

 seems that conservative lumbering should leave 

 the smaller trees and remove the big trees ; or 

 that maturity can be determined by diameter 



The owner of woodlands (and the forester) 

 can only venture a forecast, guessing at the 

 future condition of the lumber market ; big trees 



have to say the least — the same chance with 



small trees to be money makers. And it is nat- 

 ural that the owner is inclined to either remove 

 or to leave ull of his trees. 



'' Let us suppose that the owner leaves in 

 the course of lumbering all trees having under 

 18 inches diameter representing a stumpage of 

 1 500 feet per acre. The reduction of the cut by 

 1500 feet per acre has increased the logging 

 expense per 1,000 feet of stumpage removed— 

 •m increase which can he considered only as a 

 new investment added to the value of 1,500 feet 

 per acre left. 



For a number of years to come the small 

 trees are non-removable, since it cannot pay in 

 the near future to remove a handful of inferior 

 lumber from an acre of ground. In the mean- 

 time, the property must be watched and taxes 

 must be paid. 



The owner leaving small trees embarks in a 

 new venture which cannot be countermanded nor 

 altered, for years to come, without serious loss ; 

 and which is subject to more serious dangers 

 than the old venture. . 



Small trees form, prior to the removal of tne 

 big trees mixed with them, a tangible, mer- 

 chantable asset. After the removal of the big 

 trees, however, thev can be considered only as 

 an intangible asset, an asset of merely prospec- 

 tive value, an asset impossible to realize on. 



3 After lumbering, small trees left are much 

 more endangered by fire, windfall, insects, fungi 

 than liefore lumbering. Where fires cannot be 

 controlled at a reasonable expense, conservative 

 lumbering is. under almost any circumstances, 

 absolutely absurd. , ,^ ■ 



4 The soil on which small trees are left — in 

 order to grow into better dimensions and in 

 order to act as seed trees for a third growth — 

 cannot be used for pasture without interference 

 with the object at stake. 



5. Conditions may arise, before a second 

 growth of small trees becomes merchantable, ren- 

 dering the soil occupied by them valuable for 

 farming purposes. In that case the small trees 

 must he removed without any benefits accruing 

 to the owner from such removal. 



I! The taxes on land completely stripped are 

 lower than the taxes on land conservatively lum- 

 bered. When a long number of years is required 

 to convert a second growth left into a mer- 

 chantable stand, the taxes annually paid -'ad 

 lalui-cm" and increasing at a compound ratio, 

 form a countercharge against the slowly in- 

 creasing value of the second growth ditticult to 

 countenance. . . ., ^ 



Considering these various points, the financier 

 cannot be called unwise when he prefers invest- 

 ments in first growth forest to those possible in 

 second growth. .^ ■, cj. ^ j • 



Many a man in the United States and in 

 Canada has made a fortune by clever invest- 

 ments in first growth, whilst no one, prac- 

 tically has had a chance to show dividends ob- 

 tained from second growth forest ( exceptions : 

 farm wood lots : second growth pine in ^ ir- 

 gin la ) . , , J 



' Under what conditions, it may be asked, can 

 or does conservative lumbering pay in primeval 

 w'oods? ^ , . . ^„^ 



The conditions are those under which any 

 business proves to be remunerative . . . be 

 it a liverv business, a hotel, a railroad or a 

 music store : that business alone can be remu- 

 nerative in which the parts composing the busi- 

 ness investments are at hand in proper propor- ■ 

 tions ■ that business alone can he remunerative 

 which is established in an economically proper 

 site ■ that business alone can be remunerative 

 whicli is safe from overtaxation and — by insur- 

 ance or otlierwise — safe from accidental destruc- 

 tion of its assets. 



Properly arranged within, properly arranged 

 without ■ 'properly insured against accidents a 

 business must be remunerative. Applying this 

 logic to conservative lumbering as a business it 



