Ownership of Southern forestland dramatically changing

12/09/05

New reports document dramatic changes in the ownership of southern forestland

Two new research studies document dramatic changes in the ownership of Southern forestland and declining markets for its forest products. The Southern Group of State Foresters (SGSF), with the help of scientists from the USDA Forest Service and their university cooperators, recently reviewed the findings of two year-long research projects aimed at understanding trends crucial to the future of southern forests and private forest landowners.

One report, Strategic Factors Driving Timberland Ownership Changes in the U.S. South, documents the extent, reasons for, location, and nature of forest industry land transactions to non-industrial ownership. According to the report, more than half of the 37 million acres of timberland owned by forest industry was sold to institutional investors, such as Timber Investment Management Organizations (TIMOs). Primary reasons for divestiture include poor stock performance, the need to increase shareholder returns, debt reduction, increased tax efficiencies though Real Estate Investment Trusts and sub-chapter S Corporations, and the development of tax strategies that minimize capital gains.

"It is our expectation that these types of timberland divestitures will continue for a long time," said Michael Clutter, project coordinator and professor of forest finance at the University of Georgia-Warnell School of Forest Resources. He continued, "In fact, our study indicates that in three years' time it's possible there will be only one forest products company with timberland holdings exceeding one million acres in the U.S. South."

Likewise, The U.S. South's Timber Sector in 2005: a Prospective Analysis of Recent Change report captured significant forces of change driving markets for timber production across the South. The report shows a steep decline over the past 10 years in international demand for U.S timber products. Industry consolidations, landownership changes, and depreciation and closure of older processing facilities are all contributors.

"In spite of these changes, Southern forest landowners continue to invest in and expand their capacity to produce timber," said David Wear, lead author and economics project leader for the Southern Research Station of the Forest Service. "The South's ability to produce quality timber is strong. The big question is, will demand for Southern products increase in the future."

This week, during their annual winter meeting in Atlanta, the Southern Group of State Foresters accepted the research reports and findings. According to Steve Scott, SGSF Chair, "Now that we have received the results of the research studies, we will search for opportunities to share this information with industry leaders, policy makers, and other interested partners as we work to make sure Southern forestry interests remain strong in the national and global economy." Individually, state forestry agencies are evaluating how these findings can be considered within existing landowner assistance programs and identifying opportunities for increasing forest management activities and improving local markets within their States.

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