An hour north of Mobile, in Washington County, Marc Pelham lays his hands on the bark of a loblolly pine and gazes up at its canopy. The trunk is tall and straight, he says, with minimal tapering as it ascends — a prime candidate for a future transmission pole.
Pelham is pleased with this tree and for good reason. A transmission pole could fetch more than $100 a ton at the sawmill, while a crooked, knotty tree might pay $7 by the ton at the pulp mill. It begs the question, “What’s the secret to growing a transmission pole?”
“If you figure it out,” he says, “let me know.”
The 64-year-old Pelham lives in Mobile but drives his truck up Highway 43 about twice a week to monitor 6,000 acres of family land, spread across St. Stephens, Wagarville and McIntosh. His grandfather was born in St. Stephens in 1886 and, over the course of a lifetime, accumulated the timberland that Pelham manages today. As a boy, Pelham learned to read the woods by tagging along behind his grandparents. He says there are many others like him — property owners overseeing the timbered legacies of their ancestors — and the result is often a deeply personal connection to the land. Pelham’s father, who managed the forest for several years before handing it off to his son, was buried in a casket built with lumber harvested from the acres he once tended.
But Pelham’s tenure as the property’s caretaker hasn’t been easy. An overabundance of timber across the South, combined with years of depressed demand, has crushed timber prices, dashing the hopes of thousands of landowners who planted pine trees 30 years ago with dreams of retirement savings or college funds. In fact, the current price of Southern pine is about half of what it was 20 years ago.
The reality is especially dire for smaller landowners, who find themselves at the mercy of whatever the nearest mill is paying. In some cases, a harvest might not even be worth the trouble after adding up the expenses of logging, hauling and replanting. Pelham, on the other hand, has enough acreage to allow him some flexibility in his approach.
“I was never in a position like some people where I had to decide to buy timberland and think of it as an investment that I was going to need at some point in the future. It was more like, ‘Now it’s your turn. Take care of it for the family … and maximize the long-term value for everyone involved.’”
Stumped
The 2018 Wall Street Journal article “Thousands of Southerners Planted Trees for Retirement. It Didn’t Work,” largely pinned today’s timber woes on a late 1980s federal program that incentivized the planting of trees and thus created a glut of timber decades later. But Barrett McCall, president / owner of the Mobile-headquartered Larson & McGowin Forest Managers and Consultants, says that’s far from the whole story.
Headquartered on the corner of Dauphin and Florida streets, Larson & McGowin has offices across five Southern states, offering comprehensive forestry services to a range of clients, from individual landowners to large foundations. McCall points out that the state has gained as much as 2.3 million forest acres over the past 65 years.
“That’s additional inventory, so that’s factor number one. And it’s kind of sped up a little bit by government investment.”
More notable is that silviculture, the science of growing trees, has made tremendous strides in the past half century. A better understanding of tree genetics, hybridization and improvements in the quality of seedlings has produced trees that are growing faster and better.
“The big number that we look at is growth over removal,” McCall explains. “And we’re probably growing one and a half times what we’re harvesting. That’s pretty significant.”
The other major factor is the technology of sawmills. Highly computerized mills, with the assistance of speed lasers, are able to better measure a log in order to reduce the amount of waste created after it’s cut. In other words, mills have become far more efficient.
“And so, for the number of trees they receive at the mill, they’re actually able to produce more wood than they were 20 years ago.”
Those three factors, McCall summarizes, have resulted in the current major oversupply of timber. “And that just makes the prices go down.”
And then there’s the demand aspect. Before the housing crash in 2008, Americans were building roughly 2 million homes a year. When that number dropped to 1 million, and the demand for lumber slackened, it created a supply imbalance that, in some places, still exists. Some professionals estimate that, even with a rebounding housing market, 25 years’ worth of softwood supply remains in the Southeast.
Exacerbating the issue is the fact that more and more young people are deciding to live in high-rise city apartments than buy or build homes. “And so our household creation number is lagging behind the population demographic, so we’ve got this pent-up demand, maybe. Folks who would normally be getting married and having kids at 28 are getting married and having kids at 35,” McCall says.
The question becomes, “What should a landowner with a crush of maturing trees do?” The answer for many is to leave the tree on the stump and let it grow.
“A lot of landowners, when the market went down, said, ‘We’re just going to wait for the market to recover,’” McCall says. “And it really didn’t. And so you end up with this big slug of inventory … the average tree size is going up, and the backlog is going up.”
Leaving a tree to grow while waiting for better prices also invites a slew of risks. The Southern pine beetle can leave swaths of dead trees in its wake. A wildfire can wipe away decades of toil in minutes, and as trees age, they become more susceptible to disease. And, of course, there are hurricanes.
“A tall, 70-year-old pine tree can be turned into $150 of pulpwood by a hurricane,” Pelham says.
The short answer is that every landowner is different. “We’ll kind of talk to them about a couple of different things,” McCall says. “You know, what’s their objective here? Are they looking to … maintain their forest in a healthy manner and not necessarily maximize return? That’s one set of recommendations versus someone who says, ‘No, this is really an investment that I need to maximize my return on.’”
Again, smaller landowners are especially feeling the sting. “We’ll typically tell a landowner to hedge a little bit — let’s sell some and keep some. The smaller the landowner you are, the more difficult it is to do that because of the economics of harvesting. You really need to be harvesting 40, 80 acres to make a timber sale economically viable. Because you’ve got to offer enough volume to the logger to make it attractive enough to move their equipment in and do the work. A smaller landowner tends to have to be a little bit more speculative on the market.”
With the benefit of acreage and an eye on the long term, Pelham’s focus these days is mostly maintenance — the routine thinning of timber stands and addressing problems of disease and insects. Some landowners have sought other avenues to squeeze revenue from their forests: selling pine straw or leasing woodland during hunting season.
“Almost everybody leases hunting land,” Pelham says. “There’s an old saying that all of your timberland is hunted, so you should try to have most of it leased. It’s not a significant income generator, but the value to me, and to a lot of landowners, is having somebody on the property throughout the entire hunting season that can catch problems. If there’s a fire, if there’s some beetle damage, if there’s some invasive species that’s taking hold in a certain area, they can contact me and let me know.”
Looking on the Bright Side
Despite this era of low prices, the story for southwest Alabama is that things could be much worse.
“We happen to sit in one of the top four timber markets in the country,” McCall says, noting that we simply have more mills at our disposal than many Southerners. Canfor Southern Pine, formerly Scotch Gulf Lumber, in particular has been a source of stability in the region for generations.
“Southwest Alabama is a pretty good place to be,” McCall concludes. “It’s not a coincidence that we’re headquartered here.”
Walter Tutt is the founder of Tutt Land Company, a full-service real estate and land management company based in Thomaston, Alabama. Tutt says he’s encouraged by the continuing construction of mills throughout the state, namely in Demopolis and Thomasville.
“Both of these mills will combine to add additional demand for our pine sawtimber products, and this is great news for all of the pine growers in this region.”
The most recent obstacle facing landowners is COVID-19, which led to a few temporary mill closures just as timber prices were beginning to see an uptick.
“This has created an oversupply of pulpwood, pine and hardwood, thus lowering the demand and consequently lowering the stumpage pricing,” Tutt explains.
In late August, Gov. Kay Ivey set aside $10 million from the state’s Coronavirus Relief Fund to help stabilize Alabama’s forest industry which, Ivey noted in a press release, has an economic impact of over $23 billion and provides over 40,000 jobs.
The announcement is welcome news to Alabama landowners, such as Pelham. Looking ahead at the years to come, he knows such assistance will help his overall goal of passing on a healthy stand of pine to a fourth generation.
“Wood is a commodity that will always have many, many uses,” he says. “Now there’s been a blip because of COVID and the recession associated with that. A lot of people are staying home, but they’re not sitting idle. They’re remodeling their houses and that’s generating a lot of demand for lumber. Ultimately, that demand will flow back through the value chain to the landowner who sells the timber.”
In the meantime, Pelham is content with his role as caretaker of the family woodlands, a duty that is as rewarding as it is challenging.
“It’s a wonderful activity. I love going to the woods. It can be a lucrative activity as well, but I wouldn’t ever suggest that someone think they’re going to make a big killing in it quickly. It’s not a hedge fund and it’s not a get-rich-quick scheme. It’s almost more of a — kind of a lifestyle.”
