Do You Know Dirt? Why Land Buyers Need to Factor Soils Into Their Valuation Equation
One of the things that I see most recreational land buyers and small timberland investors overlook when assessing a potential purchase is the dirt. Soils impact almost every aspect of a property.
Soil Type and Fertility Impacts:
Species of plants that can be grown successfully
The rate of growth and volume of plant growth
The type and abundance of wildlife
Soil erodibility and stability
Potential land uses
The overall value of the land
Most people think of soil as just “dirt,” but healthy soil is a complex ecosystem. Soil is a product of its parent materials (the underlying geologic material), climate, terrain, and the organisms present. Past uses heavily influence its health and condition.
Fertility’s Effect on Timber Yields
Soil fertility (aka productivity) impacts the volume of forest products (or any biomass) a site can produce and how quickly it can do so. Additionally, soils determine the tree species that can successfully be grown. Thus, knowledge of species suitability and productivity is essential for gauging a timberland investment’s value and cash flow timeline.
Site Index, Foresters’ Measure of Productivity
Foresters evaluate a soil’s productivity by measuring its site index, which is a measure of the height that a given species' codominant and dominant trees will grow by a specified base age. The site index correlates closely to the potential forest product yield. Planted pine stands use a base age of 25 years. Natural stands (both pine and hardwood) use a base age of 50 years.
Using Site Index Curves
Three items are needed to determine site index:
the average height of codominant and dominant trees
the appropriate site index curve chart (dictated by species, stand origin, and region).
Example: A forester samples a 13-year-old planted loblolly pine stand and determines the average codominant/dominant tree height is 37 feet. Using the appropriate site index chart (Chart 1, below), he reads across the bottom row to age 13, then reads up from there to reach a tree height of 37 feet. This intersection (red +) falls just shy of the SI70 curve, so he estimates a site index of 68 (base age 25).
A Comparison of Fertility Levels
You may wonder,” Do a few site index points make that much difference?” Using a pine plantation grow and yield program, I have estimated the volume growth of identical planted loblolly pine stands with site indexes ranging from 55 to 80 (base age 25). I projected the stands to age 20 with no thinning harvest. All numbers are on a per-acre basis.
Compare the SI60 volume growth to that of the SI65. The SI65 site produces 19.4% more tons/acre by age 20. Additionally, had I chosen to thin the stands, it would’ve been feasible to do so a year earlier for the SI65 site. Jump to SI70, and the differences are even more dramatic—39.3% more volume at age 20 than SI60, and a potential thinning age of 14 rather than 16.
Below I have compared the SI60 with the SI70 in a one-thin management scenario. The stands were grown to a basal area of 120ft²/ac, thinned by reducing stand density to 80ft²/ac, then allowed to continue to grow to a basal area of 150ft²/ac. Basal area is a measure of stand density used by foresters. See the explanation of basal area here.
As you can see, the SI70 site produced higher revenues at considerably earlier ages, making the net present value (NPV) of the reforestation investment 55% greater than the NPV of the SI60 site.
Plant Indicators of Forest Soil Quality and Productivity
Because the health, quality, and properties of soils impact every aspect of a property, you should always consider them when purchasing timberland, even if you never plan to manage or sell timber. Knowing your dirt will help ensure that you have realistic expectations for your management goals and financial returns.