Andy Kerr - Money Grows Faster than Trees

By Andy Kerr

Column #10 - Go to next column

Length: 745 words

Published: 5 December 1996, Wallowa County Chieftain

Economically, it doesn't pay to invest in trees for fiber for one very simple reason: trees grow slower than money.

Even in western Oregon, big multinational companies are selling out because they've found that growing trees yield only a 1-2% return on investment. Originally, they bought timber as feedstock for their mills. Once the trees were cut, it makes no sense economically to grow them back.

Why replant then? If it is done, it is for moral and public relations reasons. Foresters believe it as a matter of faith. Accountants see it as a cost of doing business to keep the public pacified to show that timber companies weren't cutting and running.

A passbook savings account is safer and more lucrative than growing trees. Investing in timber production is full of uncertainty and the yields, if they come at all, come in decades. Natural forces such as wind, fire, insects and disease may wipe out the investment.

Foresters incorrectly use an agricultural economic model (plant, harvest, plant, harvest ...). The first clue that something was amiss is the model is reversed (cut, plant, harvest, plant, harvest ...). You cannot reap what you do not sow.

Because of the extraordinary time it takes for a return on investment, forestry actually operates under a mining economics model. A raw material source is secured and utilized. For the last century, industry has been buying fiber and mining it.

Two technological advancements allowed humans to efficiently mine these vast stockpiles of fiber ("forests") during the last century: the chainsaw and the chemical pulping process. Forest mining will soon end, either because of government policy saves the last, or because industry got the last.

If virgin forests were bought at all, the cost was no where near the replacement cost. No one invested money in planting trees in 1492 and is now expecting a return on their investment. If they had, each tree would have to be worth billions today.

After fiber mining declines, economics dictate a return of production to the farm. With modern technologies, fiber is fungible. Panels, boards and studs can be made of annual fibers like kenaf, sisal, flax, hemp, and bamboo. They can be made stronger and/or lighter than their wood counterparts.

Papers made from annual fibers are more recyclable because of longer fibers than those from wood. Annual fibers contain less lignin, so less chemicals and energy must be used to convert the plant into pulp. Such paper is naturally brighter, obviating the need for as much, if any bleaching, especially the use of deadly chlorine.

The transition back to the farm from the forest for our fiber supplies is underway by the largest fiber products companies.

Many are increasingly growing poplar-cottonwood hybrid trees on farmlands. From planting to harvest is 7-10 years. Three major factors dictate this time scale:

1. Technology allows them to manufacture products out of the fast-growing young trees.

2. The timeframe meets the demands of modern capital for high and rapid return on investment.

3. State law defines such plantations as "farms" rather than "forests" precluding limitations on rate, kind and amount of cutting of trees.

The smarter companies see that even waiting 7-10 years for return on investment is too long. With annual fibers the return in 7-10 months.

There are compelling ecological and moral reasons to grow private forests in ways to sustain watershed, fish and wildlife, recreation and other values, with the byproduct of quality wood for those products that won't be made of annual fibers (musical instruments, solid wood furniture, etc.). There are not economic reasons.

Let's say that a sustainable forest is a 300-year rotation during which time, ecological and social values are provided. What are the odds that the trees won't be cut before three centuries? If this forest is owned by a corporation, the time span is 1,200 quarterly reporting periods, for each of which the manager is under a fiduciary obligation to maximize profits. After the first 100 quarters, a profit may be posted by cutting the trees. Is a manager going to defer profits in the name of sustainability 1,100 times in a row?

If the forest is individually owned, the time span is 10-12 generations. What are the odds that 9-11 generations of landowners are going to defer profit today in the name of sustainability?

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