ANOTHER LONGLEAF PINE PROBLEM (FLA.) 



PREMISES : Near Pensacola, Florida, a tract of 50,000 acres 

 stocked with longleaf pine, not boxed for turpentine, is for sale, the 

 stumpage averaging 3000 feet board measure per acre. The present 

 owner offers the stumpage alone at $1 per thousand feet, or else is 

 willing to sell the fee simple (soil and trees together) at $3.50 per 

 acre. 



Under conservative lumbering, the annual production of timber 

 is 133 feet board measure per acre, to be drawn from a growing 

 stock of 1500 feet board measure per acre. The land itself is prac- 

 tically unfit for farming. No damage is to be feared from forest 

 fires, as long as turpentine is not obtained from the forest. Figure 

 at 6 per cent, interest, and at ic taxes per acre per annum. 



QUESTION : Is it advisable for a Pensacola mill firm, of 

 twenty-five million feet annual capacity, to buy the stumpage alone, 

 or is it more profitable for it to acquire stumpage and land together 

 with a view of practicing forestry ? 



POINTS : 



1. When buying the fee simple, the firm can cut, within three 

 years, .1500 feet per acre— the biggest trees— leaving the balance of 

 1500 feet on the ground, and obtaining from that balance henceforth 

 on an annual average as much as the annual accretion, namely 133 

 feet board measure (worth 13.3 cents) per acre. 



2. Thus the firm obtains from the forest 



(a) For three years annually 500 x 50,000 feet board measure 

 worth $25,000. 



(b) From the fourth year on, annually 133 x 50,000 feet board 

 measure worth $6,650. 



3. The expense for taxes will, for the whole tract, amount to 

 $500 annually. 



4. The firm paying $3.50 x 50,000 equal to $175,000 cash 

 obtains assets worth 25000 (1.06'— i) 6650 500 



0.06 X 1.06' ' 1.06° X 0.06 0.06 



EQUATION : Entrepreneur's Gain 

 25000 (i.o6°— i) ^ 6650 500 



0.06 X 1.06' ' i.o6»x 0.06 0.06 175000 



= 25000 X 2.67 -}- 6650 X 14.0 — 500 X 16.7 — 175000 

 = 66750 + 93100 — 8350 — 175000 



RESULT : Bent on forestry, the firm seemingly incurs an 

 undertaker's loss of about $25,000, paying more for the forest than 

 the forest is able to refund. 



If, however, the prices of stumpage can be expected to rise by 

 50 per cent, in the course of the next 20 years (corresponding with a 



