ARTICLE IN PRESS

Contents lists available at ScienceDirect

Journal of Forest Economics

Journal of Forest Economics 16 (2010) 101–112

1104-6doi:10

� Corr

E-m

journal homepage: www.elsevier.de/jfe

Financial analysis of intensive pine plantationestablishment

Phillip D. Jones a,�, Stephen C. Grado b, Stephen Demarais a

a Department of Wildlife and Fisheries, Mississippi State University, Box 9690, Mississippi State, MS 39762, USAb Department of Forestry, Mississippi State University, Box 9681, Mississippi State, MS 39762, USA

a r t i c l e i n f o

Article history:

Received 17 December 2007

Accepted 3 September 2009

JEL classification:

Q230

Q570

Keywords:

Cost-share

Herbaceous weed control

Intensive management

Land expectation value

Net present value

NIPF landowners

Pine plantation

Site preparation

899/$ - see front matter & 2009 Else.1016/j.jfe.2009.09.001

esponding author. Tel.: +1662 325 3498; fax:

ail address: pdj34@msstate.edu (P.D. Jones).

a b s t r a c t

We analyzed the financial impacts of intensive loblolly pine

(Pinus taeda) plantation establishment in the southern United

States using projected growth data. Optimized management

yielded positive net present values (NPVs) at all combinations

of management intensity and discount rate except for the most

intensive management at the highest discount rate. Cost-share

payments for site preparation improved the performance of

higher intensity treatments relative to lower intensity treat-

ments, and yielded positive NPVs in all combinations of

management intensity and discount rate. Landowners can

choose among a suite of management intensities covering a

wide range of capital commitments. Monetary returns may be

improved by additional management actions, and by taking

advantage of additional cost-share programs and tax benefits.

& 2009 Elsevier GmbH. All rights reserved.

Introduction

Because demand for wood product is projected to remain strong for the foreseeable future,intensively managed pine (Pinus spp.) plantations on private land will continue to be a significantcomponent of the landscape in the southern US (Prestemon and Abt, 2002). Intensive managementincludes such actions as mechanical site preparation, herbicide application(s), fertilization, and useof genetically improved seedlings (Siry, 2002). Growth response to elements of intensive manage-ment have been incorporated into growth and yield models, allowing for financial analyses basedon growth projections under varied scenarios. Such analyses have been performed for decisions

vier GmbH. All rights reserved.

+1662 325 8726.

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112102

regarding single elements of intensive management, such as chemical site preparation or herbaceousweed control (HWC) (Busby 1992; Busby et al., 1998), mid- to late-rotation fertilization (Stearns-Smith et al., 1992, Williams and Farrish, 2000), improved genetics (McKeand et al., 2006), andthinning (Huang and Kronrad, 2002). However, financial analyses involving the use of multiplemanagement elements during the stand establishment phase are lacking.

Intensive management strategies have been shown to drastically increase pine growth (Milleret al., 1995, Borders and Bailey, 2001). Gains from separate management actions, such as fertilizationand weed control, are often additive (Zutter and Miller, 1998, Jokela et al., 2000, Miller et al., 2003),making greater intensity management more economically feasible. Monetary returns for intensivelymanaged plantations are consistently greater than those from unmanaged or lightly managed stands(Yin and Sedjo, 2001, Siry, 2002, Allen et al., 2005, Cubbage et al., 2007). In spite of greater potentialreturns, intensive pine plantation management is not widely practiced by non-industrial privateforest (NIPF) landowners relative to forest industry and timber investment management organiza-tions (Siry, 2002, Arano and Munn, 2006). Although NIPF landowners control 71% of the 81 million haof timberland in the US South and are responsible for 67% of annual timber harvest (Conner andHartsell, 2002), the relative lack of forest management may close off a potential income stream.

Greater regeneration costs reduce the likelihood that NIPF landowners will actively regenerateharvested stands (Kline et al., 2002, Beach et al., 2005). In Mississippi, USA, only half of NIPFlandowners actively regenerated forest stands following harvest (Gunter et al., 2001) and o10% ofMississippi NIPF landowners incurred expenses for site preparation activities (mechanical, chemical,prescribed fire, or fertilization) during 1998–2000 (Arano and Munn, 2004). However, cost sharingtends to increase planting by NIPF landowners (Alig et al., 1990, Hardie and Parks, 1996, Kline et al.,2002). Establishment costs have the longest wait for return on investment of any stand managementaction, and cost-share programs reduce capital requirements and shift risk away from the landowner.Federal cost-share programs, such as the Forestry Incentive Program and the Stewardship IncentiveProgram, make cost-share funds available for reforestation, afforestation, or improved forestmanagement; in addition, 8 of 13 southern states offer cost-share programs (Granskog et al., 2002).The monetary benefit associated with available cost-share programs is therefore an importantconsideration if NIPF landowners are to be fully informed of their management options for forestregeneration. The purpose of this study was to investigate the financial returns associated withinvestments in alternative management regimes commonly used to establish pine plantations in thesouthern United States. Given the high percentage of NIPF landowners eligible for cost-shareprograms, we included cash-flow analyses both with and without a cost-share payment for sitepreparation and planting costs.

Data source

We measured loblolly pine (Pinus taeda) growth on 5-year-old stands established at 4 industrialforest sites owned by 3 timber companies in southern Mississippi, USA. Stands were harvestedbetween June 2000 and February 2001, averaged 66 ha in size, and treatment plots were delineatedsuch that each was uniformly influenced by topography and drainages. Residual vegetationcommunities in post-harvest stands were characterized by 39% coverage of herbaceous plants, 15%coverage of vines, and 19% coverage of woody plants (Edwards, 2004). Two soil associations commonto the Mississippi Lower Coastal Plain (Pettry, 1977) occurred on the 4 stands (United StatesDepartment of Agriculture, 1995). The McLaurin–Heidel–Prentiss association was common to 2stands and comprises gently sloping, moderately well-drained sandy and loamy soils. ThePrentiss–Rossella–Benndale association occurred on 2 stands and was characterized by loamy andfine sandy loam soils.

Treatments were designed to reflect the range of operational intensities used by forest industry,and consisted of combinations of mechanical site preparation (MSP), chemical site preparation (CSP),and banded or broadcast herbaceous weed control (HWC). Intensive management is often associatedwith chemical competition control (McCullough et al., 2005), so we correlated treatment numberwith the amount of herbicide used during stand establishment to assign treatments ranging from

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112 103

least (treatment 1) to most (treatment 5) intensive. We randomly assigned each of the 5 treatmentsto an area Z8 ha, each treatment occurring once per stand, for a total of 4 replications per treatmentin a randomized complete block design. Chemical site preparation was performed duringJuly–August 2001, MSP during September–December 2001, and HWC during March–April 2002(year 1) and March–May 2003 (year 2).

Treatment 1 consisted of MSP using a combination plow to subsoil, disk, and bed, pulled behind abulldozer with a V-blade attached to the front to clear debris. We applied year 1 HWC consisting of0.9 kg ha�1 of Oustars (E. I. du Pont de Nemours and Company, Inc., Wilmington, Delaware;sulfometuron methyl and hexazinone; 13 oz ac�1) in a band of 1.5 m width centered on rows ofplanted pines.

Treatment 2 consisted of CSP using a mixture of 2.4 L ha�1 Choppers Emulsifiable Concentrate(BASF Corp., Research Triangle Park, North Carolina; imazapyr; 32 oz ac�1), 3.5 L ha�1 Accords (DowAgroSciences LLC, Indianapolis, Indiana; glyphosate; 48 oz ac�1), 3.5 L ha�1 Garlon 4s (Dow AgroS-ciences LLC, Indianapolis, Indiana; triclopyr; 48 oz ac�1), and 1% volume to volume ratio of Timberland90s surfactant (UAP Timberland LLC, Monticello, Arkansas) in a broadcast spray solution of 93.6 L ha�1

(10 gal ac�1). We applied year 1 banded HWC as per treatment 1. Although treatment 2 was lower incost and produced less timber than treatment 1, we considered it as more intensive due to the impact ofherbicide on the plant community as a whole (Jones et al., 2009b).

Site preparation for treatment 3 consisted of MSP as described for treatment 1 combined with CSPas per treatment 2. Additionally, we applied banded HWC in year 1 identically to treatments 1 and 2.Treatment 4 consisted of MSP and CSP followed by a year 1 broadcast HWC using 0.9 kg ha�1ofOustar. Treatment 5 was identical to treatment 4 with the addition of a second broadcast HWCtreatment in year 2.

Apart from these treatments, we standardized management across all plots. We planted loblollypines on each site during the winter of 2001–2002 on a 3.0 m�2.1 m spacing (1551 trees ha�1), witheach timber company using its own 1–0 bare root seedlings. Two sites were machine planted, and 2sites hand planted due to prohibitive amounts of coarse woody debris. We fertilized all stands with abroadcast application of 280 kg ha�1 di-ammonium phosphate in April 2002.

Methods

We measured diameter at breast height (dbh) of pines and competing hardwoods in 5 0.01-haplots within each experimental unit in January 2007. From these data we estimated composite dbhdistributions for pines, basal area (BA) of hardwoods, and number of crop trees ha�1 for eachtreatment. We entered these data, along with information regarding stand establishment actions,into the PTAEDA3.1 growth and yield program (Burkhart et al., 2004) and projected growth to the endof the rotation (21–26 years) for all 5 treatments. We selected PTAEDA3.1 because it is based on datafrom sites throughout the southeastern United States, the development of the program in its variousiterations is well documented in the literature, and because earlier versions of the program havebeen widely used in research on environmental issues (e.g., Schroeder, 1991, Luxmoore et al., 1997,Baldwin et al., 2001) and economic projections (e.g., Reisinger, 1985, VanderSchaaf and South, 2004,Huang et al., 2005). We used a site index of 21.33 m (base age 25), which was equivalent to theaverage site index on our study sites. The program provided data on yields of pulpwood, Chip-n-Saw(CNS), and sawtimber from each harvest event. We selected the option to include tops of CNS andsawtimber trees as pulpwood. Due to potential concerns regarding juvenile wood, we classified allmaterial o18 years of age as pulpwood.

We attempted to maximize land expectation value (LEV) for each combination of treatment anddiscount rate by allowing some latitude in management strategy and harvesting the stand when itreached financial maturity. Stands were commercially thinned during the first year in whichremovals Z56 Mg ha�1 using a fifth row removal and low thinning would yield a residual BA of16.1 m2 ha�1. The second thinning was performed when the stand was both Z18 years old and againhad adequate volume to support removals Z56 Mg ha�1 using a low thinning to a residual BA of16.1 m2 ha�1. This ensured that the second thinning was both financially attractive for potential

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112104

loggers and that CNS-sized timber would receive full stumpage value. We calculated LEVs for harvestscenarios at 1-year intervals following second thinning. Alternatively, we eliminated the secondthinning and tested harvest scenarios annually beginning at age 18. In all cases, we mandated finalharvest when BA Z32.2 m2 ha�1.

We entered treatment costs and projected revenues into a cash-flow model by task and year ofoccurrence. Costs included stand establishment, fire protection, and property taxes; returns includedincome from harvest events and from a generic hunting lease (Table 1). We used regional marketdata from 2006, averaging across quarters, to determine values for timber products (TimberMart-South, 2007). The value of the hunting lease was a conservative estimate from an internetsurvey of leases offered by 2 corporations with large land holdings in the US South, and lease ratesreported for NIPF landowners in Mississippi (Munn et al., 2007) and Alabama (Zhang et al., 2006).Property taxes were a weighted average of rates within the 3 counties which contained our studysites. We estimated establishment costs from Smidt et al. (2005), input from industry foresters, andprice lists from a major distributor of forestry chemicals in southern Mississippi. We based fireprotection costs on a South-wide average from Smidt et al. (2005). All costs and prices were adjustedto 2006 dollars.

Several financial metrics are available to guide decisions by potential investors regarding timbermanagement (Bullard and Straka, 1998). Net present value (NPV) is calculated by subtracting thepresent value of project costs from the present value of project revenues, using a discount raterepresenting the desired minimum rate of return using the following equation:\eqno\text (1)

NPV ¼X Rn

ð1þ iÞn�X Cn

ð1þ iÞn; ð1Þ

where R is a revenue, C is a cost, i is the discount rate expressed in decimals, and n is the year inwhich the transaction takes place. A negative NPV indicates that the investment did not meetminimum return requirements. Land expectation value (LEV) is a special case of NPV that does notconsider land costs, operating on the assumption that land will be used for growing timber inperpetuity. It is calculated as\eqno\text (2)

LEV ¼NPVð1þ iÞt

ð1þ iÞt � 1; ð2Þ

Table 1.Costs and revenues ($ Mg�1 or $ ha�1) for forest management activities used to project monetary returns from intensively

established loblolly pine (Pinus taeda) plantations in Mississippi, USA (2006 dollars).

Source Cost Net revenue Timing

Cost-share

Treatment 1 263.66 Year 1

Treatment 2 221.49 Year 1

Treatments 3–5 406.81 Year 1

Fertilizer 74.13 Year 1

Fire protection 1.85 Annually

Harvest

Chip-n-Saw 22.14 Variable

Pulpwood 6.56 Variable

Sawtimber 38.25 Variable

Hunting lease 22.00 Annually

Planting 156.66 Year 0

Property tax 10.18 Annually

Site preparation

Mechanical 370.65 Year 0

Chemical 286.31 Year 0

Weed control

Banded 89.57 Year 1

Broadcast (Year 1) 154.44 Year 1

Broadcast (Year 2) 146.41 Year 2

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112 105

where NPV is calculated without land costs, i is the discount rate expressed in decimals, and t is therotation length. For investors buying land for forest management, LEV is equivalent to the maximumprice that will allow the owner to have a rate of return equal to the declared discount rate, and is alsoused to rank investment alternatives. We calculated NPV and LEV in FORVAL (Straka and Bullard,2006) using real, before-tax discount rates of 5%, 7%, 9%, and 11%, a range that brackets expectationsof return on investment for investment in forest management by Mississippi NIPF landowners(Bullard et al., 2002). To evaluate the potential effect of cost-share programs, we conducted allanalyses both with and without a 50% cost-share payment for site preparation and planting,including the payment as a return in year 1.

Results

Harvest yields averaged across rotation length ranged from 12.3 to 15.1 Mg ha�1 yr�1; they werelowest in treatment 2, and then increased with treatment intensity (Table 2). As discount rateincreased, rotation lengths decreased, with concomitant reductions in the proportion of total harvestin sawtimber and increased proportions of pulpwood and CNS. Greater establishment costs in moreintensive treatments were mitigated by superior growth rates that produced greater volumes of themost valuable product class (sawtimber). Faster growth in treatment 5 resulted in optimalmanagement regimes with only one thinning across all discount rates.

Net present values were positive for all combinations of treatment and discount rate with theexception of treatment 5 at 11% (Table 3), and thus provided opportunity for acceptable investment.Land expectation values indicated treatment 4 was superior to all other treatments at 5% and 7%discount rates, but was surpassed by treatment 2 at 9% and by treatments 2 and 1 at 11%. Althoughtreatment 3 represented a middle ground between treatments 2 and 4 and might have been expectedto compare favorably at either the 7% or 9% rates, it did not. This indicated that increasing treatmentintensity by expanding the HWC application from banded (treatment 3) to broadcast (treatment 4)was financially justifiable, but that addition of MSP to CSP without also implementing broadcast

Table 2Commodity production (Mg ha�1) over 1 rotation from projected growth of loblolly pine (Pinus taeda) plantations managed for

financial maturity following establishment under different levels of intensity ranging from low (1) to high (5) in Mississippi,

USA.

Treatment Rotation length (years) Discount rate (%) Pulpwood Chip-n-Saw Sawtimber

1 26 5 108.0 75.5 172.3

24 7 102.6 66.3 137.8

23 9 101.7 70.3 123.2

22 11 99.9 80.0 104.6

2 26 5 97.7 52.0 169.1

24 7 95.0 68.3 133.5

24 9 95.0 68.3 133.5

22 11 89.2 88.0 90.3

3 23 5 101.0 84.2 150.5

23 7 97.7 65.0 149.2

21 9 97.0 69.4 121.0

21 11 97.0 69.4 121.0

4 24 5 98.8 67.6 175.2

22 7 99.2 67.6 150.5

21 9 99.5 67.6 138.2

21 11 99.5 67.6 138.2

5 23 5 114.2 35.6 197.1

23 7 114.2 35.6 197.1

23 9 114.2 35.6 197.1

21 11 109.1 57.6 146.3

ARTICLE IN PRESS

Table 3Financial analysesa from projected growth of 5 loblolly pine (Pinus taeda) plantations managed for financial maturity following

establishment under different levels of intensity ranging from low (1) to high (5) in Mississippi, USA, without cost-share (2006

dollars).

Treatment Harvestb Discount rate (%) LEVc ($ ha�1) NPVd ($ ha�1)

1 12, 26 5 3,278.48 2,356.44

12, 19, 24 7 1,570.04 1,260.51

12, 19, 23 9 742.49 640.19

12, 19, 22 11 271.41 244.10

2 12, 18, 26 5 3,288.88 2,363.91

12, 18, 24 7 1,612.11 1,294.29

12, 18, 24 9 791.14 691.14

12, 18, 22 11 324.48 291.82

3 11, 23 5 3,319.86 2,239.01

11, 18, 23 7 1,517.98 1,197.77

11, 18, 21 9 619.99 518.50

11, 18, 21 11 111.50 99.04

4 11, 18, 24 5 3,588.81 2,476.04

11, 18, 22 7 1,686.53 1,305.86

11, 18, 21 9 724.74 606.10

11, 18, 21 11 165.33 146.86

5 11, 23 5 3,481.48 2,348.01

11, 23 7 1,506.81 1,188.95

11, 23 9 510.47 440.14

11, 21 11 �38.75 �34.42

a Calculations are before tax considerations.b Numbers indicate age of stand at harvest. Bolded numbers indicate age at final harvest.c Land expectation value.d NPV – net present value.

P.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112106

HWC (i.e., treatment 2 to treatment 3) was not. Application of a second broadcast HWC wascontraindicated, as treatment 5 never ranked as a superior investment alternative to treatment 4.Likewise, in a choice between the 2 least intensive alternatives, CSP was preferred to MSP, astreatment 1 was never superior to treatment 2.

Addition of cost-share yielded greater improvements in LEVs in treatments 3–5 than intreatments 1 and 2, particularly at the 9% and 11% discount rates (Table 4). Consequently, treatment 4was indicated as the superior investment across all discount rates. Net present values were positivefor all combinations of treatment and discount rate, indicating that all potential investments wereacceptable. Optimal harvest schedules were altered only slightly in treatments 4 and 5, whilemanagement in treatments 1–3 remained unchanged.

Discussion

Treatment elements

Given the incremental increases in establishment intensity, it is possible to examine the financialefficacy of individual management actions used in the establishment phase by comparing treatmentswhich differ in 1 management element. Treatments 1 and 2 differed only in choice of site preparationmethod. Mechanical site preparation cost $84.34 ha�1 more than CSP, yet produced greater woodvolume through improvement of site-specific soil physical properties. However, the marginal costs ofMSP exceeded the marginal revenues, making CSP the preferred of the 2 methods. The combinationof MSP and CSP again increased production over either single site preparation method (treatment 3vs. 1 and 2), but was advantageous only at the lower discount rates.

ARTICLE IN PRESS

Table 4Financial analysesa from projected growth of 5 loblolly pine (Pinus taeda) stands managed for financial maturity following

establishment under different levels of intensity ranging from low (1) to high (5) in Mississippi, USA, with cost-share (2006

dollars)b.

Treatment Harvestc Discount rate (%) LEVd ($ ha�1) NPVe ($ ha�1)

1 12, 26 5 3,627.84 2,607.54

12, 19, 24 7 1,876.96 1,506.92

12, 19, 23 9 1,023.04 882.08

12, 19, 22 11 535.54 481.63

2 12, 18, 26 5 3,582.35 2,574.85

12, 18, 24 7 1,869.94 1,501.29

12, 18, 24 9 1,023.75 894.34

12, 18, 22 11 546.36 491.36

3 11, 23 5 3,894.33 2,626.45

11, 18, 23 7 1,999.82 1,577.96

11, 18, 21 9 1,066.27 891.72

11, 18, 21 11 524.10 465.54

4 11, 18, 24 5 4,150.37 2,863.48

11, 18, 21 7 2,181.25 1,654.45

11, 18, 21 9 1,171.02 979.33

11, 18, 20 11 581.94 509.76

5 11, 23 5 4,055.95 2,735.45

11, 23 7 1,988.65 1,569.15

11, 22 9 947.22 804.96

11, 18, 22 11 375.61 337.80

a All calculations are before tax considerations.b Cost-share payments were 50% of site preparation and planting cost.c Numbers indicate age of stand at harvest. Bolded numbers indicate age at final harvest.d Land expectation value.e Net present value.

P.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112 107

Increasing establishment intensity by moving from banded to broadcast HWC (treatment 3 vs. 4)was beneficial under all discount rates, with or without cost-share. Single-year broadcast HWCshowed consistently better returns than the 2-year application (treatment 4 vs. 5). The comparativeease with which increases in site preparation costs were overcome compared with increased HWCcosts may be attributed to the lack of cost-share payments for HWC applications. However, cost-share for HWC is commonly available and, if used, would likely make the second broadcastapplication at least cost-neutral.

No single management regime will be appropriate for all potential site conditions. For example, theplantations in this study were established on recently harvested sites with a large residual component ofwoody plants that was largely controlled by CSP (Edwards et al., 2006, Jones et al., 2009c). However,plantations established on retired agricultural fields or pastures are unlikely to benefit substantially fromCSP targeting woody competitors, and application would be wasteful. Mechanical site preparation may bemost appropriate on sites where managers need to address site-specific issues related to soil properties.Mechanical treatment on our sites was designed to break compacted soil layers and create raised beds,improving both drainage and rooting environment. Regardless of initial conditions, even the least intensivemanagement regime was sufficient to successfully establish a fully stocked plantation on our sites.Increasing establishment intensity beyond that point may still be financially advantageous, if growth isimproved enough to justify additional investment.

Financial considerations

The rate of wood production improved enough with increasing management intensity to more orless keep pace with rising costs when site preparation and planting were cost-shared. However,

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112108

financial restrictions or aversion to risk may prevent some landowners from meeting the highercapital demands of the more intensive regimes, in which case viable alternatives were still affordedby less costly treatments. Treatments 1 and 2 performed well at all discount rates, yet hadestablishment costs as much as $581.93 ha�1 less than treatment 5. Land managers therefore canchoose lower cost options with little or no reduction in investment viability.

Costs associated with intensive management are in constant flux. Increasing natural gas priceshave resulted in fertilizer costs greater than when these stands were originally fertilized in 2002(Huang, 2007), and increasing fuel costs will likely result in greater application costs for machine-applied treatments (Bair and Alig, 2006). Conversely, costs for some chemicals may decrease asgeneric forms become available following the loss of patent protection. Given that herbicide costsaccounted for 74% of the cost of CSP, a substantial drop in herbicide price may increase the financialattractiveness of CSP or early rotation release treatments.

NIPF landowners tend to manage less intensively than industrial landowners and timberinvestment management organizations (Siry, 2002, Arano and Munn, 2006), and southern NIPFlandowners hold only 10% of their forest in plantations (Conner and Hartsell, 2002). Cost sharing maybe an important incentive for NIPF landowners to actively regenerate and manage harvested stands(Alig et al., 1990, Kline et al., 2002). Several federal and state cost-share programs exist which mayprovide 40–60% of the cost of site preparation, tree planting, and stand improvement activities suchas HWC (Granskog et al., 2002). Federal tax law allows for the deduction of reforestation costs forqualifying timber property up to $10,000 yr�1 with amortization of remaining costs over thefollowing 8 years, thereby increasing after-tax LEVs (Straka and Greene, 2007). Tax incentives forreforestation may also be available from various states; for example, Mississippi currently offers anincome tax credit of up to $10,000 for reforestation under appropriate conditions (Gaddis, 1999).While we only considered the benefits of cost-share payments for site preparation and planting, NIPFlandowners who make use of additional cost-share opportunities and tax incentives should be ableto further improve their monetary returns.

Economies of scale dictate that highly mechanized harvest crews will be less efficient as harvestunits become smaller (Cubbage, 1983, Toms et al., 2001). Average tract size of private forest land inthe US is decreasing as more ownerships are created from a relatively static forest land base(DeCoster, 1998, Mehmood and Zhang, 2001). As a result, smaller tracts, such as those typicallyowned by NIPF landowners, may receive less interest in the marketplace (Greene et al., 1997). Small-scale equipment may suffer from lower productivity, but can be more cost-efficient than large-scaleequipment on small tracts (Updegraff and Blinn, 2000). The success of intensive management onsmall tracts may hinge on the availability of low-capital harvesting systems to serve this niche in aneconomically efficient fashion. Harvesting firms in other portions of the US have adapted to servingNIPF landowners (Rickenbach and Steele, 2005, 2006), and mechanized systems specializing insmaller tract harvest are in development and testing (Wilhoit and Rummer, 1999). Some NIPFlandowners also have been served by companies using animal-powered logging (Toms et al., 2001) ormodified agricultural or construction equipment (Office of Technology Assessment, 1983).

Stand management considerations

The strictures we placed on managing for financial maturity were designed to be a realisticreflection of management and market realities facing NIPF landowners. While lower tonnagethresholds would have allowed for earlier thinning, we considered the 56 Mg ha�1 requirement areasonable threshold for making logging operations financially attractive to prospective bidders onsmaller properties (Johnson et al., 2003). We imposed delaying the second thinning to Z18 years toensure that most mills would treat trees 20.5 – 31.0 cm dbh as CNS, rather than relegating them topulpwood status with the consequent loss of 70% in value. We considered the upper BA limit of32.2 m2 ha�1 reasonable, as such a stand would probably be considered overstocked and subject toincreased risk from disease and insect pests (Hedden, 1978, Brown et al., 1987). During growthprojections without a second thinning, this upper limit was reached in all treatments during a periodwhere CNS-sized trees were rapidly progressing to more valuable sawtimber. If allowed to continue

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112 109

beyond this limit, LEVs would have been slightly higher in all treatments for the 5 and 7% discountrates, resulting in more optimal management regimes without a second thinning.

We used a SI based on the average of our study sites. Stands with a lower SI would almostcertainly produce lower returns if managed identically to our sites, and stands with a higher SI mightproduce high-value products earlier in rotation, improving their rate of return (Huang et al., 2005).

The generalized management strategies we employed following the initial differences in standestablishment allow for further management actions to improve returns on investment. Mid- or late-rotation fertilization may improve the growth rate of higher value sawtimber, effectively increasingNPV (Williams and Farrish, 2000, Fox et al., 2007). Chemical removal of substantial hardwoodcompetition in post-thinning stands may also increase pine growth (Clason, 1984, Shelton and Murphy,1997, Caulfield et al., 1999), and might have proved beneficial in treatments 1 and 2, which had 10% and8% hardwood BA, respectively, at age 5. Also, we did not test across different planting densities, whichcould alter thinning regimes and development of different timber products (Huang et al., 2005).

Non-timber products

Both timber and non-timber products are produced by NIPF landowners (Newman and Wear,1993, Pattanayak et al., 2002, Kendra and Hull, 2005), who commonly mention such benefits aswildlife habitat, aesthetics, and a sense of stewardship as important reasons for owning theirproperty (Kluender and Walkingstick, 2000, Kendra and Hull, 2005, Butler, 2008). Intensivemanagement may be perceived as negatively impacting such services (Gan et al., 2000), especiallygiven the general public perception of herbicide use as environmentally unsound. However, non-timber values can be provided by intensively managed stands (Miller and Miller, 2004). By reducingthe amount of land needed to produce a given income, intensive management may enablelandowners to manage smaller portions of their holdings primarily for timber, leaving the remainderavailable for other management objectives (Allen et al., 2005). Additionally, many intensivemanagement techniques focus on vegetation control, and can be used to improve timber yield whilesimultaneously targeting wildlife habitat improvements (Edwards et al., 2004, Wagner et al., 2004).

The period between stand establishment and crown closure is important for wildlife speciesdependent on early seral stages, and stand establishment procedures used in this study resulted in awide range of habitat structures (Hanberry, 2007, Jones, 2008). Retention of snags and remnantunmerchantable trees in stands with CSP only may provide vital habitat structure for many bird species,increasing avian species richness and abundance compared with mechanically prepared sites (Darden,1980, O’Connell and Miller, 1994, Hanberry, 2007). In this study, banded HWC provided very nearlyequivalent tree growth to broadcast treatment, but also exhibited a better winter foraging environmentfor northern bobwhite (Colinus virginianus) comparable to results from less intensively established stands(Jones, 2008). Nutritional carrying capacity for white-tailed deer (Odocoileus virginianus) benefited fromCSP, which allowed the development of nutritious forbs in treatments limited to banded HWC(treatments 2 and 3); by contrast, treatment 1 promoted the quick reestablishment of low-qualitybrowse, with consequently lower nutritional carrying capacity (Jones et al., 2009a).

Conclusions

Intensive pine plantation management can be a financially viable source of income for NIPFlandowners in the Mississippi Lower Coastal Plain. Selection of appropriate methods for standestablishment will vary in accordance with landowner objectives, site characteristics, and capitalavailability. Landowners with more limited capital could safely use the lower cost methodsillustrated by treatment 2 (i.e., CSP and banded HWC) to establish productive, well-stockedplantations. If capital availability is greater or can be enhanced by cost-share payments, the moreintensive management alternative demonstrated by treatment 4 should be considered. Lowerintensity treatments may be more appropriate for those with concerns over wildlife habitat andbiodiversity, but may still provide returns competitive with higher intensity establishment methods.

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112110

Measells et al. (2005) found that NIPF landowners in 4 southern states were underserved andrecommended comprehensive outreach programs targeting landowners within reasonable distancesof educational programs. Programs emphasizing the potential non-timber benefits of intensivemanagement could help eliminate misconceptions as to its impacts on characteristics important toNIPF landowners. The availability of cost-share programs and tax benefits for defraying regenerationcosts and improving financial performance should also be stressed (Greene et al., 2004).

New technologies are needed to serve the growing numbers of small forest landowners (DeCoster,1998). Technical progress toward efficient harvesting systems for small tracts should be pursued toprovide financially attractive alternatives to conventional high-capital options. Logging companiesand entrepreneurs should be encouraged to invest in equipment and training that will enable themto compete in this growing market. Increasing interest in cellulosic biofuels may provide greaterincentives for harvesting smaller tracts and consequent investment in appropriate equipment.

Acknowledgments

This study was funded by Federal Aid in Wildlife Restoration (W-48-Study 57), The NationalCouncil for Air and Stream Improvement, Inc., and the McEntire-Stennis Fund. Plum Creek TimberCompany, Molpus Timberlands, and Weyerhaeuser Company provided study sites and treatmentinstallation. We thank D. Miller, K. Hart, J. Bullock, and B. Wigley for input regarding study design,logistical support, and manuscript review. This manuscript is contribution number WF276 of theMississippi State University Forest and Wildlife Research Center.

References

Alig, R.J., Lee, K.J., Moulton, R.J., 1990. Likelihood of timber management on nonindustrial private forests: evidence fromresearch studies. US Forest Service General Technical Report SE-60, Asheville, North Carolina, USA.

Allen, H.L., Fox, T.R., Campbell, R.G., 2005. What is ahead for intensive pine plantation silviculture in the South?. SouthernJournal of Applied Forestry 29, 62–69.

Arano, K.G., Munn, I.A., 2004. Forest management activities and expenditures of Mississippi NIPF landowners: 1998–2000data. In: Proceedings of the 2003 Annual Southern Forest Economics Workers, 17–18 March 2003, New Orleans, Louisiana,USA, pp. 161–175.

Arano, K.G., Munn, I.A., 2006. Evaluating forest management intensity: a comparison among major forest landowner types.Forest Policy and Economics 9, 237–248.

Bair, L.S., Alig, R.J., 2006. Regional cost information for private timberland conversion and management. US Forest ServiceGeneral Technical Report PNW-GTR-684, Portland, Oregon, USA.

Baldwin, V.C., Burkhart, H.E., Westfall, J.A., Peterson, K.D., 2001. Linking growth and yield and process models to estimateimpact of environmental changes on growth of loblolly pine. Forest Science 47, 77–82.

Beach, R.H., Pattanayak, S.K., Yang, J.-C., Murray, B.C., Abt, R.C., 2005. Econometric studies of non-industrial private forestmanagement: a review and synthesis. Forest Policy and Economics 7, 261–281.

Borders, B.E., Bailey, R.L., 2001. Loblolly pine – pushing the limits of growth. Southern Journal of Applied Forestry 25, 69–74.Brown, M.W., Nebeker, T.E., Honea, C.R., 1987. Thinning increases loblolly pine vigor and resistance to bark beetles. Southern

Journal of Applied Forestry 11, 28–31.Bullard, S.H., Gunter, J.E., Doolittle, M.L., Arano, K.G., 2002. Discount rates for nonindustrial private forest landowners in

Mississippi: how high a hurdle?. Southern Journal of Applied Forestry 26, 26–31.Bullard, S.H., Straka, T.J., 1998. Basic Concepts in Forest Valuation and Investment Analysis. Second ed. Preceda, Auburn,

Alabama, USA.Burkhart, H.E., Amateis, R.L., Westfall, J.A., Daniels, R.F., 2004. PTAEDA3.1: Simulation of individual tree growth, stand

development and economic evaluation in loblolly pine plantations. Department of Forestry, Virginia Tech, Blacksburg,Virginia, USA.

Busby, R.L., 1992. An economic evaluation of the use of Oust for herbaceous weed control in loblolly pine plantations. SouthernJournal of Applied Forestry 16, 40–47.

Busby, R.L., Miller, J.H., Edwards Jr., M.B., 1998. Economics of site preparation and release treatments using herbicides in centralGeorgia. Southern Journal of Applied Forestry 22, 156–162.

Butler, B.J., 2008. Family forest owners of the United States, 2006. US Forest Service General Technical Report NRS-27,Newtown Square, Pennsylvania, USA.

Caulfield, J.P., Shiver, B.D., Pienaar, L.V., Quicke, H.E., 1999. Estimating financial returns from mid-rotation release in CoastalPlain loblolly pine plantations. Southern Journal of Applied Forestry 23, 94–99.

Clason, T.R., 1984. Hardwood eradication improves productivity of thinned loblolly pine stands. Southern Journal of AppliedForestry 8, 194–197.

Conner, R.C., Hartsell, A.J., 2002. Forest area and conditions. In: Wear, D.N., Greis. A.G. (Eds.), Southern forest resourceassessment. US Forest Service General Technical Report SRS-53, Asheville, North Carolina, USA, pp. 357–402.

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112 111

Cubbage, F., 1983. Economics of forest tract size: theory and literature. US Forest Service General Technical Report SO-41, NewOrleans, Louisiana, USA.

Cubbage, F., Mac Donagh, P., Sawinski Junior, J., Rubilar, R., Donoso, P., Ferreira, A., Hoeflich, V., Morales Olmos, V., Ferreira, G.,Balmelli, G., Siry, J., Noemi B�aez, M., Alvarez, J., 2007. Timber investment returns for selected plantations and native forestsin South America and the Southern United States. New Forests 33, 237–255.

Darden Jr. T. L., 1980. Bird communities in managed loblolly-shortleaf pine stands in east-central Mississippi. Thesis,Mississippi State University, Mississippi State, USA.

DeCoster, L.A., 1998. The boom in forest owners – a bust for forestry?. Journal of Forestry 96 (5), 25–28.Edwards, S. L., 2004. Effects of intensive pine plantation management on wildlife habitat quality in southern Mississippi.

Thesis, Mississippi State University, Mississippi State, USA.Edwards, S.L., Demarais, S., Watkins, B., Strickland, B.K., 2004. White-tailed deer forage production in managed and

unmanaged pine stands and summer food plots in Mississippi. Wildlife Society Bulletin 32, 739–745.Edwards, S.L., Ezell, A.W., Demarais, S., 2006. A comparison of planted loblolly pine (Pinus taeda) growth in areas receiving

different levels of establishment regime intensity. Journal of Sustainable Forestry 23 (2), 1–16.Fox, T.R., Allen, H.L., Albaugh, T.J., Rubilar, R., Carlson, C.A., 2007. Tree nutrition and forest fertilization of pine plantations in the

southern United States. Southern Journal of Applied Forestry 31, 5–11.Gaddis, D.A., 1999. Mississippi’s reforestation tax credit. MTN-14C. Mississippi State University Extension Service, Department

of Forestry, Mississippi State, USA.Gan, J., Kolison Jr., S.H., Miller, J.H., 2000. Public preferences for nontimber benefits of loblolly pine (Pinus taeda) stands

regenerated by different site preparation methods. Southern Journal of Applied Forestry 24, 145–149.Granskog, J.E., Haines, T., Greene, J.L., Doherty, B.A., Bick, S., Haney Jr., H.L., Moffat, S.O., Speir, J., Spink, J.J., 2002. Policies,

regulations, and laws. In: Wear, D.N., Greis, J.G. (Eds.), Southern forest resource assessment. US Forest Service GeneralTechnical Report SRS-53, Asheville, North Carolina, USA, pp. 189–223.

Greene, W.D., Harris Jr., T.G., DeForest, C.E., Wang, J., 1997. Harvest cost implications of changes in the size of timber sales inGeorgia. Southern Journal of Applied Forestry 21, 193–198.

Greene, J.L., Straka, T.J., Dee, R.J., 2004. Nonindustrial private forest owner use of federal income tax provisions. Forest ProductsJournal 54 (12), 59–66.

Gunter, J.E., Bullard, S.H., Doolittle, M.L., Arano, K.G., 2001. Reforestation of harvested timberlands in Mississippi: behavior andattitudes of non-industrial private forest landowners. FWRC Research Bulletin FO 172, Forest and Wildlife Research Center,Mississippi State University, Mississippi State, USA.

Hanberry, B.B., 2007. Birds and small mammals, intensively established pine plantations, and landscape metrics of the CoastalPlain. Dissertation, Mississippi State University, Mississippi State, USA.

Hardie, I.W., Parks, P.J., 1996. Program enrollment and acreage response to reforestation cost-sharing programs. LandEconomics 72, 248–260.

Hedden, R.L., 1978. The need for intensive forest management to reduce southern pine beetle activity in East Texas. SouthernJournal of Applied Forestry 2, 19–22.

Huang, C.-H., Kronrad, G.D., 2002. Financially optimal thinning and final harvest schedules for loblolly pine plantations onnonindustrial private forestland in east Texas. Southern Journal of Applied Forestry 26, 13–17.

Huang, C.-H., Kronrad, G.D., Morton, J.D., 2005. The financially optimal planting density and management regime fornonindustrial private forestland in East Texas. Southern Journal of Applied Forestry 29, 16–21.

Huang, W.-H., 2007. Impact of rising natural gas prices on US ammonia supply. US Department of Agriculture, EconomicResearch Service, WRS-0702, Washington, DC, USA.

Johnson, W.F., Goerlich, D.L., Haney Jr., H.L., 2003. Reforestation in the Absence of Cost-share: Does it Pay?Virginia CooperativeExtension Service Publication 420-407, Blacksburg, Virginia, USA.

Jokela, E.J., Wilson, D.S., Allen, J.E., 2000. Early growth responses of slash and loblolly pine following fertilization andherbaceous weed control treatments at establishment. Southern Journal of Applied Forestry 24, 23–30.

Jones, P.D., 2008. Effects of five different intensities of stand establishment on wildlife habitat quality and tree growth in loblollypine (Pinus taeda) plantations in southern Mississippi. Dissertation, Mississippi State University, Mississippi State, USA.

Jones, P.D., Edwards, S.L., Demarais, S., 2009a. White-tailed deer foraging habitat in intensively established loblolly pineplantations. Journal of Wildlife Management 73, 488–496.

Jones, P.D., Edwards, S.L., Demarais, S., Ezell, A.W., 2009b. Vegetation community responses to different establishment regimesin loblolly pine (Pinus taeda) plantations in southern Mississippi, USA. Forest Ecology and Management 257,553–560.

Jones, P.D., Ezell, A.W., Demarais, S., 2009c. Growth response of loblolly pine 3–5 years after plantation establishment usingdifferent management intensities. Journal of Sustainable Forestry 29(1), in press.

Kendra, A., Hull, R.B., 2005. Motivations and behaviors of new forest owners in Virginia. Forest Science 51, 142–154.Kline, J.D., Butler, B.J., Alig, R.J., 2002. Tree planting in the South: what does the future hold?. Southern Journal of Applied

Forestry 26, 99–107.Kluender, R.A., Walkingstick, T.L., 2000. Rethinking how nonindustrial landowners view their lands. Southern Journal of

Applied Forestry 24, 150–158.Luxmoore, R.J., Pearson, S.M., Tharp, M.L., McLaughlin, S.B., 1997. Scaling up physiological responses of loblolly pine to ambient

ozone exposure under natural weather variations. In: Mickler, R.A., Fox, S. (Eds.), The Productivity and Sustainability ofSouthern Forest Ecosystems in a Changing Environment. Springer-Verlag, NY, USA, pp. 407–428.

McCullough, S.D., Straka, T.J., Dubois, M.R., 2005. Identifying intensively managed pine plantation acreage in the South.Southern Journal of Applied Forestry 29, 163–166.

McKeand, S.E., Abt, R.C., Allen, H.L., Li, B., Catts, G.P., 2006. What are the best loblolly pine genotypes worth to landowners?.Journal of Forestry 104, 352–358.

Measells, M.K., Grado, S.C., Hughes, H.G., Dunn, M.A., Idassi, J., Zielinske, B., 2005. Nonindustrial private forest landownercharacteristics and use of forestry services in four southern states: results from a 2002–2003 mail survey. SouthernJournal of Applied Forestry 29, 194–199.

ARTICLE IN PRESSP.D. Jones et al. / Journal of Forest Economics 16 (2010) 101–112112

Mehmood, S.R., Zhang, D.W., 2001. Forest parcelization in the United States: a study of contributing factors. Journal of Forestry99 (4), 30–34.

Miller, J.H., Zutter, B.R., Zedaker, S.M., Edwards, M.B., Newbold, R.A., 1995. A regional framework of early growth response forloblolly pine relative to herbaceous, woody, and complete competition control: the COMProject. US Forest Service GeneralTechnical Report SO-117, New Orleans, Louisiana, USA.

Miller, J.H., Zutter, B.R., Zedaker, S.M., Edwards, M.B., Newbold, R.A., 2003. Growth and yield relative to competition for loblollypine plantations to midrotation – a southeastern United States regional study. Southern Journal of Applied Forestry 27,237–252.

Miller, K.V., Miller, J.H., 2004. Forestry herbicide influences on biodiversity and wildlife habitat in southern forests. WildlifeSociety Bulletin 32, 1049–1060.

Munn, I.A., Hussain, A., Byrd, J.D., Grado, S.C., Jones, J.C., Jones, W.D., Loden, E.K., Miller, J.E., West, B.C., 2007. Landownerinvolvement and attitudes: fee access wildlife and fisheries recreation. Mississippi State University Forest and WildlifeResearch Center Research Bulletin FO332, Mississippi State, USA.

Newman, D.H., Wear, D.W., 1993. Production economics of private forestry: a comparison of industrial and nonindustrial forestowners. American Journal of Agricultural Economics 75, 674–684.

O’Connell, W.E., Miller, K.V., 1994. Site preparation influences on vegetative composition and avian and small mammalcommunities in the South Carolina Upper Coastal Plain. Southeastern Association of Fish and Wildlife Agencies 48,321–330.

Office of Technology Assessment, 1983. Wood use: US competitiveness and technology. US Congress, Office of TechnologyAssessment, OTA-ITE-21O, Washington, DC, USA.

Pattanayak, S.K., Murray, B.C., Abt, R.C., 2002. How joint is joint forest production? An econometric analysis of timber supplyconditional on endogenous amenity values. Forest Science 48, 479–491.

Pettry, D.E., 1977. Soil resource areas of Mississippi. Mississippi Agricultural and Forestry Experiment Station InformationSheet 1278, Mississippi State, USA.

Prestemon, J.P., Abt, R.C., 2002. The southern timber market to 2040. Journal of Forestry 100 (7), 16–22.Reisinger, T.W., 1985. A simulation-based approach to evaluating commercial thinning decisions in loblolly pine plantations.

Southern Journal of Applied Forestry 9, 211–216.Rickenbach, M., Steele, T., 2005. Comparing mechanized and non-mechanized logging firms in Wisconsin: implications for a

dynamic ownership and policy environment. Forest Products Journal 55 (11), 21–26.Rickenbach, M., Steele, T., 2006. Logging firms, nonindustrial private forests, and forest parcelization: evidence of firm

specialization and its impact on sustainable timber supply. Canadian Journal of Forest Research 36, 186–194.Schroeder, P., 1991. Can intensive management increase carbon storage in forests?. Environmental Management 15, 475–481.Shelton, M.G., Murphy, P.A., 1997. Growth after thinning a 35-year-old natural stand to different loblolly pine and hardwood

basal areas. Southern Journal of Applied Forestry 21, 168–174.Siry, J.P., 2002. Intensive management practices. In: Wear, D.N., Greiss, J.G., (Eds.), Southern forest resource assessment. US

Forest Service General Technical Report SRS-53, Asheville, North Carolina, USA, pp. 327–340.Smidt, M., Dubois, M.R., du Silveira Folegatti, B., 2005. Costs and cost trends for forestry practices in the South. Forest

Landowner 64 (2), 25–31.Stearns-Smith, S.C., Jokela, E.J., Abt, R.C., 1992. Thinning and fertilizing southern pine stands in the Lower Coastal Plain:

biological and economic effects. Southern Journal of Applied Forestry 16, 186–193.Straka, T.J., Bullard, S.H., 2006. An appraisal tool for valuing forest lands. Journal of the American Society of Farm Managers and

Rural Appraisers 69, 81–89.Straka, T.J., Greene, J.L., 2007. Reforestation tax incentives under the American Jobs Creation Act of 2004. Southern Journal of

Applied Forestry 31, 23–27.Timber Mart-South., 2007. Market conditions. Timber Mart-South Market News Quarterly 12 (1), 3–4.Toms, C.W., Dubois, M.R., Bliss, J.C., Wilhoit, J.H., Rummer, R.B., 2001. A survey of animal-powered logging in Alabama.

Southern Journal of Applied Forestry 25, 17–24.United States Department of Agriculture, 1995. State Soil Geographic (STATSGO) Data Base: data use information. US

Department of Agriculture Miscellaneous Publication 1492, Fort Worth, TX, USA.Updegraff, K., Blinn, C.R., 2000. Applications of small-scale forest harvesting equipment in the United States and Canada. Staff

Paper Series Number 143, College of Natural Resources and Minnesota Agricultural Research Station, University ofMinnesota, Minneapolis, USA.

VanderSchaaf, C.L., South, D.B., 2004. Rectangular spacing: an economic benefit?, In: Connor, K.F., (Ed.), Proceedings of the 12thBiennial Southern Silvicultural Research Conference. US Forest Sevice General Technical Report SRS–71, Asheville, NorthCarolina, USA, pp. 437–440.

Wagner, R.G., Newton, M., Cole, E.C., Miller, J.H., Shiver, B.D., 2004. The role of intensive management for enhancing forestproductivity and conserving land for biodiversity in North America. Wildlife Society Bulletin 32, 1028–1041.

Wilhoit, J., Rummer, B., 1999. Application of small-scale systems: evaluation of alternatives. American Society of AgriculturalEngineers Paper Number 99-5056, St. Joseph, Missouri, USA.

Williams, R.A., Farrish, K.W., 2000. Response of loblolly pine plantations to late-rotation fertilization and herbicideapplications in north Louisiana. Southern Journal of Applied Forestry 24, 166–175.

Yin, R., Sedjo, R.A., 2001. Is this the age of intensive management? A study of loblolly pine on Georgia’s Piedmont. Journal ofForestry 99 (12), 10–17.

Zhang, D., Hussain, A., Armstrong, J.B., 2006. Supply of hunting leases from non-industrial private forest lands in Alabama.Human Dimensions of Wildlife 11, 1–14.

Zutter, B.R., Miller, J.H., 1998. Eleventh-year response of loblolly pine and competing vegetation to woody and herbaceousplant control on a Georgia flatwoods site. Southern Journal of Applied Forestry 22, 88–95.