Introduction to forestry investment analysis: Part I. Basic investment characteristics and financial criteria

Many forest landowners consider their forest to be an investment. Some of these landowners, however, and many new timberland investors, may not fully understand the basic ingredients that make up a forestry investment. Like all investments, forestry involves costs and revenues, and rates of return can be calculated. These rates of return can be compared with interest rates earned for other investments, but forest landowners should be sure to understand the unique characteristics of a forestry investment. Most of the cash flow from a forestry investment will result from timber sales. Timber sale revenue, of course, is a function of current stumpage prices, but also it is a function of the amount of wood removed from an acre. This is called forest yield