I talked to George Parker with the extension service. He is a silvaculturist at Purdue. He mentioned that the soil in Indiana is generally better for trees than it is for traditional farming, though it depends on the particular area. The benefits of planting trees include carbon sequestration, providing habitats for many useful species, protecting soil, and providing fuel and construction materials. It is curious to me why there isn’t more investment in such a wonderful product, especially in Indiana where it appears that we may have a comparative advantage in doing so.
The reasons that come to mind for me is that either it’s not profitable or that there is no financial mechanism set up to make it easy for people to do. On the first count, some of the benefits of trees are not taken into account by the market, so we may need some help from the government to make it more profitable. I understand that there are grants and subsidies for tree plantations, but perhaps they need to be augmented. On the second count, it seems that there is a problem with the lag time between when the plantation is planted and when it begins generate revenue.
If you think of a tree plantation in investment terms, it has an initial value based on an expected return at some time in the future. As the date of revenue generation gets closer, the value of the asset grows. Thus, value, if not income, is generated even before the first tree is harvested. Suppose we set up a cooperative where people could buy shares with either land or money. The money would be kept in a trust and used not just to plant the trees but also to run the plantation. The value of the shares would increase over time and eventually pay dividends once the plantation matured. Folks like Paul and Rosie could invest in such a cooperative with the land they have around their house, and folks like me and Jill could chip in the some of the capital necessary to maintain the plantation. If at any time we wanted out, we could just sell our shares at market value, incurring some profit from the investment depending on the projected market value of wood at the projected harvest date.
Such an investment would have both economic and environmental benefits. It would encourage investment in rural areas and stem suburban sprawl. With well placed plantations around Madison, it could raise the value of property in the city center as there becomes less available for development. Ultimately, this is good for the area; it would increase population density and drive down the energy costs per capita to live here.
Does such a mechanism as this exist already? How are current tree plantations funded? What is their profitability? What other obstacles can you see to the development of trees in rural Indiana? My initial research suggests that one could plant approximately 130 black walnut trees per acre, each worth about $4,000 and taking 35 years to mature. At that time, all the trees would be worth approximately $520K per acre. Dividing by 8% yearly income growth for that time period gives you a present value of $7,324 per acre. Add to this the present value of a continuous stream of income of $16,000 per year (from harvesting four trees per year). My college economics is a bit rusty; I forget how to do this calculation. I’m not sure if these numbers are accurate, and even so, I’m not sure if this would make it profitable. It seems on the low side to me. Perhaps you have some advice on the matter or some influence over political matters that would make such an endeavor be more feasible.
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My college economics is non-existent so I'll touch on that only briefly. As we discussed the other day, this is a big and complex opportunity and I'd like to weigh in on some of the issues.
The main thing I want to talk about is the myth of American forests. Except in the well protected parks, most trees are on plantations that may even have hiking trails or in stands placed to serve human needs. They're not a true forest because they typically have only one type of tree of nearly the same age. Thus the amount of biodiversity that they can support is quite small. As Emeka would more eloquently say, the market forces do not recognize the long-term benefits of a "space-efficient" biosphere. For whatever reasons, large scale farmers feel this is the most cost-effective way to manage their farms (Emeka has more on that). There is a major risk to this type of farming as well. Pests (like the Chinese nematode that infected northwest forests, causing the Chinese government to kiln-dry American soft-woods before importation, but I'm not bitter) and disease can spread very quickly. Recently, some apple farmers have had to burn the majority of their orchards for one infestation by government mandate.
I think the addition of small scale tree growers provides benefits to us. Some are not obvious and some are not strictly economic. Firstly, biodiversity and economic need can converge nicely. If a stand of black walnut takes 35 years to mature, then growing some faster growing trees amongst them will provide some income while the late bloomers take their time. Pressing trees closer together also creates straighter trunks for mills to work with.
Secondly, much is being made now about connecting isolated forests so that species that have ranges can connect. A recent study (I don't have details, but I heard it on NPR) showed that even plant species benefit greatly from these forest corridors.
Next, smaller farmers can be more nimble, rotating crops at need and responding to market forces.
They can take pressure off of old growth forests, for which the loggers constantly push to get because they provide large planks of clear-grained material. Anyone who has tried to buy hardwood floors like our grandparents day knows that the industry standard is four feet now instead of 10 or 12. The outgoing Clinton administration banned the government practice of building logging roads in parks specifically to protect these old growth stands. The Bush administration promptly rescinded it but it's been locked in the courts ever since.
Waterways also need buffer zones to protect fish. Is there a way to harvest trees near streams that prevents runoff pollution?
I saved this one for last. In the past few years, the mayor and county exec have created a program for us to meet or exceed the goals of the Kyoto accord. They are converting the ferry system to biodeisel and creating what some residents feel are draconian restrictions on building and planting in the unincorporated areas. They have challenged local governments across the country to do the same. They feel that the national government is dragging their heels on the issue and they hope to influence the process at the grass root; sort of the way California is able to mandate national emissions standards. While there may be some economic risk, it's also quite clear that the Seattle port will be under water in 50 to 100 years if things don't change quickly. Is there an opportunity for small cooperatives to help create a metro area with carbon balance of zero?
In the past few years, Weyerhaeuser has sold off a few parcels to individuals who want to live close to the city, but still live off the land. I don't think this idea is so pie in the sky.
Well, forgive my paraphrasing and lack of sources, but I hope this helps.
Uncle Dick
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