While the housing meltdown and subsequent economic recession have cast a pall on demand for forest products, trends already in motion point to brighter times for tree farmers, says Dick Molpus.
“The long range health of this business will be controlled by just two factors: demographics and an expanding economy,” he says.
And research and development programs will continue to provide landowners with genetically superior trees that grow faster and more efficiently utilize water and nutrients.
Molpus, president of Molpus Woodlands Group, a timberland investment/management group at Jackson, Miss., was the 2010 Carlton N. Owen Lecturer at Mississippi State University’s College of Forest Resources.
“Between 2010 and 2050, the U.S. population is projected to grow from 307 million to 420 million,” he says. “We’re going to need more houses, more apartments, more baby diapers, more of everything made from wood products. This trend is already under way.”
Of the nation’s total Gross Domestic Product, he notes, the U.S. auto industry represents about 7 percent.
“We all know what a huge industry that is. By contrast, timber products represent 6 percent of GDP — an enormous part of our economy. It’s not just cutting down trees and sawing them into lumber; there are literally thousands of products made from trees. As the economy strengthens and expands, the timber industry’s portion of the GDP will also grow.”
In Mississippi, forestry is the second most valuable agricultural product and the second largest source of jobs. Forest inventory continues to increase, despite heavy damage from Hurricane Katrina. The USDA reports the state’s total tree volume increased 25 percent from 2004-2006, with even the row crop-heavy Delta showing a 13 percent increase in forestland area. Nearly 80 percent of the state’s forest land was privately owned.
Molpus’ family has been in the timber business for more than 100 years, eventually becoming the 10th largest independently-owned lumber manufacturer in the U.S., and he started working in the business “when I was 12.”
In 1983, he was elected Mississippi’s secretary of state, a position he held for 12 years, and which included oversight of 600,000 acres of 16th section school lands.
In 1996, he launched Molpus Woodlands Group as a private investment organization, which has 14 offices in the U.S. and a tree nursery in Elberta, Ala. It has purchased more than 1.8 million acres on behalf of clients and is currently managing more than 850,000 acres, valued at nearly $1 billion.
“In 1980, we began to see a huge disengagement of corporate timberlands,” Molpus notes. “Now, in 2010, all the major forest companies have divested themselves of their land except Weyerhaeuseur, and they will do so this year.
“Most timberland now is owned by TMOs (timberland management organizations) as investment vehicles for pension funds, college endowment funds, real estate investment trusts, and other groups.”
These run the gamut from Harvard University to Citigroup. Some 41 percent of timberland is owned by pension funds.
For all of these, Molpus says, “the motivation is to obtain a return on investment for their clients — more money for scholarships, for pension recipients, etc. But at the same time, they want the land to be managed in a sustainable fashion, never cutting more timber than is being grown, and maintaining a vibrant, alive forest.”
In previous decades, he says, there were only seven variables in forest management. Today there are 46, ranging from wind power to mitigation banks to residential areas to conservation and wildlife management/preservation.
“There has also been a major shift in the attitudes of private woodlands owners. Their No. 1 interest now is not income, but esthetics — enhancing natural resources and preserving a family legacy.
“Right this minute, a paradigm shift is under way. In the past, the focus was on managing land for timber production; now the focus is on woodlands management — a more holistic outlook that encompasses everything the landowner wants from that land.”
North Georgia “used to be the hottest timber production area in the U.S.,” Molpus says. “Now, that area is mostly suburbs of Atlanta. Such costly land can’t be used to grow trees. Increasing urban sprawl will mean we will need to grow more wood on the land we have.”
There will be “dramatic changes” in the genetics of southern pine plantations,” he says, with much superior trees that offer insect resistance, higher Btu values, and other desirable characteristics.
More research is being done on clonal trees, “which are genetically identical, grow like crazy, and more efficiently utilize water and nutrients — an exciting part of the future of woodlands.”
There will be increased emphasis on precision application technology to vary rates of chemicals and nutrients according to specific location and need, Molpus says. “We’ll see more use of nitrogen-producing vegetation to contribute to forest fertility, and other organic techniques that will help to comply with stricter environmental, wildlife, and water quality issues.
There has been a big push in recent years to integrated pine plantations, he says, “but we’re also seeing investor interest in hardwoods and other species over a broader geographic area.”
“We’ll also see greater interest in wildlife as an asset of woodlands for hunting, fishing, and other recreation. We just arranged a 99-year lease on 63,000 acres for conservation purposes and public hunting and fishing.” Conservation groups are partnering with TMOs to manage ecologically sensitive land, Molpus says.
“Carbon sequestration could be increasingly important for woodlands, but right now, at $1 per ton, it just isn’t economically viable; we feel it needs to be at least $6.”
Cap and trade has been highly controversial, he notes, and “it’s anybody’s guess whether it will ever happen.”
Ten years from now, he says, “we’ll see more pulpwood being used for biofuels and small saw timber products. We’re now doing plot work with 1,200 trees per acre to see how much wood fiber we can produce for electricity generation.
“Under European Community regulations, 25 percent of their energy must come from natural sources by 2020. I’ve never seen so many people with British and European accents coming through our offices to talk about wood supplies, and we’re going to see an increasing interest in our part of the world by Europeans because of this.”
Rural land is becoming more valuable, Molpus notes. “In 2000, the average price for rural land was $1,090 per acre; today, it’s $2,100. You can’t just grow trees on $2,100 per acre land — you’ve got to have other benefits to make it pay.”
In a question-and-answer session, Molpus said, “I think we’re going to see mandated best management practices” and other regulations for the timber industry. “In the Northeast now, it’s unbelievable all the agencies you have to work with just to harvest timber.”
Increasingly, he said, “We will have to balance a fiduciary responsibility to clients with environmental and conservation requirements. Our agreement with clients is that we’ll grow more timber than we cut. Every decision will be based on return on investment — but at the same time, we will set aside a certain percentage for wildlife management, recreation, and other purposes.”