South Carolina’s most valuable agricultural crop isn’t baled, spun into fabric or served up with a pat of butter. The state’s top crop is timber, and it supports hundreds of companies and tens of thousands of jobs.
Forest product industries now have an estimated economic impact of more than $18 billion in the state, according to the South Carolina Forestry Commission. That’s a huge number, but it could grow, according to State Forester Gene Kodama, especially if more landowners actively manage their timber lands for better ecological and economic growth. “The opportunities are tremendous,” he says.
Other signs of what an economic force forestry currently is in South Carolina include:
• The annual value of harvested trees is $759 million, the commission estimates.
• The industry employs more than 90,000 people in the state, counting related businesses such as pulp and paper mills. That makes it the state’s top manufacturer.
• Wood-derived products such as paper and pulp products, not automobiles, are the top exported commodity leaving the state with a value of $1.5 billion in 2014.
This huge economic impact might seem invisible to many folks who assume not much is going on out in the quiet of the woods. “Most people don’t understand what forestry is,” Gene says.
It’s an entire economic system in South Carolina, as agribusiness provides materials that are converted into high-value products by its own manufacturing sector. It’s also more than economics. It involves people making sure that their land supports different plant and animal species and is safe from hazards.
To support forestry activities across the state, the state commission has several major objectives. One part is the oversight of the five state forests, including the Harbison forest in Irmo, which is popular for its network of trails that welcome hiking, biking and running. The five forests are managed to promote recreation, but also as a habitat for wildlife and for selective timber production.
In a broader effort, the commission works to promote smart management of forests and to encourage growth in timber and its related industries. In part, that means bringing the many different partners in the sector together.
Two-thirds of the state’s land area is covered by forests, and 88 percent of that is in the hands of private landowners, according to the commission. In fact, most of that is with family landowners and not the big timber companies. In part because of tax rules, timber companies have become less important to the industry. About 200,000 landowners own forests in South Carolina, with the average holding being about 80 acres. For many of them, this is a livelihood or an important supplement to their income. “That’s the family business,” Gene says. “That land can be a fabulous asset to their family.”
“Timber has demonstrated results as a long-term business,” according to Jim Daniel, chief operating officer of American Forest Management, a company headquartered in Sumter that provides help with sales, management and leasing of forest land. “Timber has always proven itself to be a good and stable investment,” he says.
“The business cycle for timber usually dictates a long-term investment horizon, but one that can outperform many other investment vehicles over the same time period,” according to Joey Ferguson. He serves as regional manager for Resource Management Service, a timber investment and management firm that oversees about 275,000 acres in 20 South Carolina counties. Properly managed timber can provide steady revenue appreciation as the trees mature, outpacing many stock and bond investments over the long term. “It’s a natural inflation hedge,” Joey says. “It’s a great investment from a financial perspective.”
Timber land also provides either institutional or individual investors with a way to put their funds to work in environmentally friendly activities. Many funds want a certain portion of their dollars allocated toward such sectors. “It’s a green investment,” he says.
Jim explains that the revenue that can be generated goes up as the trees mature. The most basic use of smaller-diameter trees is to be converted into such products as chips, which can be used in pulp mills for paper. Larger trees can be cut into more valuable saw timber, which provides such products as boards for construction and nearby home improvement stores. Even taller, more mature pines can provide a more valuable resource: poles like the ones that utility companies use.
How long can all this growing take? “From a good set of seedlings,” Gene Kodama says, “timber land can get a partial first cutting within 12 to 15 years, then a second thinning five to seven years later.” A full harvest can come 25 to 30 years after initial planting, making way for a new crop. By any standard, that’s a long-term investment, though the intermediate cuttings can provide cash flow as the rest of the trees are allowed to mature.
“Often it makes sense to cut down all of the trees on a piece of land when it’s time for a full harvest,” Gene says. “New pine seedlings need to be in sunlight, not in the shade of older trees. A cleared area of hardwood forest will naturally re-establish itself in four to five years.”
Landowners can time their sale of wood to take advantage of price fluctuations in the market. That’s a big difference from cyclical crop owners, who must sell during the month the crop is ready. “It’s the markets that drive the bus,” Joey says.
Timber prices have been struggling in recent years, but the housing industry will provide a big boost as it continues to recover from the recession and the popping of the housing bubble. The value of large timber is directly connected to new home construction. Forecasters indicate that the number of housing starts will continue to recover from its decline in 2008, with some predicting in excess of 1.5 million starts by 2019. “Until then, we will likely operate below expectations in our large log markets,” Joey says.
“Increasing housing starts offer encouragement across timber’s entire economic sector,” Gene says. “If it continues to grow, this industry will be humming along like you wouldn’t believe.”
Those in the industry emphasize that well-managed land is a strong investment, but there are threats, too. Land that is not properly maintained can be susceptible to the dangers of wildfire or invasive pests. Another threat to timber land is invasive species taking over and upsetting the balance, including the class Southern invader, kudzu, an invasive plant also know as “The vine that ate the South.” Landowners also can get in trouble if they have not done enough to keep intruders off of their land, and can be exposed to legal liability. A property needs to be appropriately gated and fenced, with posted signs against trespassing.
Flooding does not pose the same kind of threat to timber as it does to most other crops. It can drown small seedlings and delay a harvest, but most trees can survive a flood relatively unscathed. The commission estimates that the flood of October 2015 had a negative economic impact to the states forest products industry of $100 million, but most of that isn’t timber damage. It occurred when forest roads or bridges were blocked, preventing work or slowing mill production.
Proper management can change a plot of land from a liability into an asset. Imagine the story of a South Carolina landowner who was behind on his taxes and about to sell his land to cover the costs. Instead he showed the property to a professional forester, who told him that clearing some trees would both benefit his lands and his budget. Instead of selling it out, the property owner was able to set up a management plan for the land and use it as an appreciating asset.
That’s the kind of advice that landowners should seek from a forester, whether it is one employed by the South Carolina Forestry Commission or a private company. “Get a professional,” Gene says. “That’s what they are paid to do.”
The first step a professional forester should take is to talk to the landowner and see what benefit they want from the land or goals they have for the land — or from finding land to acquire. Do they want to use it for recreation, to encourage certain wildlife, to generate revenue or a different mix of both? “Once you have an idea of what their objectives are, that influences how they should manage or what property they should buy,” Jim says.
Private management firms not only create sustainable forest management plans, they work with quality contractors while field foresters oversee various projects on the property. Joey’s company manages hunt club licensing on the properties for hundreds of hunt clubs who use the land for recreation year-round. The hunt clubs aid his foresters with information on issues related to the property. “They’re our second set of eyes,” he says.
More Growth Likely
Newer products are helping to keep the timber industry growing into the future. The Southeast continues to export logs overseas through the Port of Charleston to such high-growth markets as India and China. More exports also go across the Atlantic. Both the northeast United States and Europe use processed wood pellets from South Carolina for heating and fuel. European countries use the pellets to meet their mandates for generating energy from renewable resources — with a target of 20 percent of power from renewables by 2020. Another growth product is a new architectural application called cross laminated timber. Lamination is used to put together properly oriented timbers for a “super strong” beam. Cross lamination timber allows for the types of architectural designs in residential and commercial buildings that were almost impossible to envision before.
The best thing about South Carolina’s timber industry might be that it is based on a resource that is constantly renewing itself, rain or shine. Joey bristles when he reads a message telling him to avoid using paper so he can “save a tree,” especially because without the demand for paper, there would not be as strong an incentive for people to plant trees instead of other crops on their land. To him, trees are healthiest when they are on lands that are managed in a sustainable cycle. He sees paper as far greener and more renewable than any computer screen.
“A properly managed forest is an infinitely sustainable forest,” he says.