By TOM KELLY
Editor and Publisher

It has not been too many years since forest products companies were buying all the land they could get their hands on from Depression-busted farmers, small landowners moving to town, and other companies with timberland to market. They established the new forests of the 20th century, developed "super trees" that grow bigger, better, faster than ever, hired professional foresters, scientists, technicians, and other staff to plant, manage, and maintain not only their own forests, but those of forward-looking private individuals who were encouraged to take advantage of the companies' technical assistance programs. Everyone prospered with an abundant supply of good timber.

Now, there is a developing trend that sees the companies - not all, but a significant and growing number - selling their lands, and contracting with the new forest owners for their supply of logs and pulp for their specialized manufactured products.

What's going on? Who's selling, and why? Who's buying, and why?

In a word: money. And, on both sides of the equation, specialization.

The forest products companies, according to industry observers, say the sale of land makes sense because timber is a heavy asset on their corporate balance sheet that "belongs to an outdated industry model." Investment analysts are encouraging them with the prospect of earning more money by manufacturing value-added products than by managing their timberlands.

Gordon Manuel, of Bowater, told a Reuters news reporter that selling the land "frees up capital for us, and we can put that capital directly back into our operations to make capital improvements or pay down debt. In January, Bowater sold 262,000 acres for almost $230 million.

Closer to home, Louisiana Pacific, with debts and operating losses mounting, is selling off 935,000 acres in Louisiana, Texas, and Idaho, from which it expects to gain a big portion of a $700 million cash purse to pay down debts and tailor its U.S.-Canadian operations to a smaller but profitable company.

Plum Creek Timber Company went the other way, selling its lumber mills in the South, keeping its timber lands, and acquiring all the forest lands of manufacturing giant Georgia Pacific. As a real estate investment trust, Plum Creek now manages one of the largest forest land holdings in the nation, from which it sells logs and pulp to mills - including the land-less West Fraser South in Louisiana and Arkansas, a subsidiary of the Canadian company.

Smurfit-Stone Container, with a major mill nearby, reversed a 50-year policy in this area under which prior owners had acquired and maintained major timberland acreage to supply their pulp manufacturing. Owning no forest land, they supply their needs by purchases from other timber companies and from individuals.

International Paper Company has become a seller, as well, but continues to own and manage major forest lands in the South and internationally.

The other investment vehicle for forest land, the Timber Investment Management Organizations (TIMO), is becoming a favorite of institutional investors and wealthy individuals looking to diversify their holdings. TIMOs don't own mills and manufacturing facilities that eat through capital whether the market is good or bad. They have the flexibility to sell when the market is high, and wait out price slumps, since the trees continue to grow.

Profitability of forestry for small private landowners in this changing ownership environment is drawing more interest in today's timber world. It is on the agenda for discussion at the 55th annual Louisiana Forestry Association in New Orleans August 27-29, and has long-term implications for individual landowners according to observations by Consulting Forester Steve Templin of Boyce, Louisiana. (Separate story, this edition.)

The LFA has announced that speakers during the convention will analyze the sell-off of timberland by large companies, and forecast the profitability of forestry for small landowners. Both groups have significant financial interests at stake.

The industry awaits a report from a University of Georgia forestry professor, Mike Clutter, on a study of changing trends in forest ownership. According to a recent report by Reuters news writer Lauren Weber, Clutter says, "Fifteen million acres has changed hands in the last four years. That's a big structural change for our industry."

Forest land ownership is moving from traditional forest products companies to investment groups that hope to make money on their holdings. This could have big consequences for the lumber industry and its investors, for local economies, and for the environment around the country, the professor says. He states that land holdings three times the state of Massachusetts have changed hands, and another 12 to 15 million acres is expected to be sold out of forest products company hands over the next ten years. These tracts are coming largely from the major forest products companies, who are restyling their business model to specialize in manufacturing, looking to others who specialize in land ownership to provide their raw materials.

In the Southern Forest Resource Assessment issued in November last year by the USDA Forest Service, it was pointed out that one of the major trends in land ownership is the increase in number of private landowners, who have smaller acreages. This is occurring as former family farms and landholdings pass into the hands of heirs.

The SFRA report stated that between 1978 and 1993, the number of forest landowners increased by 12 percent in the South, and stood at 4.9 million in 1993. Of these, 84 percent owned tracts smaller than 50 acres. Indications are that this trend increased during the 1990s, indicating a growing number of southern forests is held in smaller tracts.

SFRA also said that intensive management - practiced mostly by timber company landowners and the forest management companies that are acquiring major acreages - dramatically increased per-acre yields. High intensity management can increase yields by 65 over standard site preparation and planting, and by more than 100 percent over naturally regenerated forests.

These facts have implications for the growing number of landowners with smaller acreage, who hold a major portion of the South's timber lands but who practice less intensive management than the industrial or professional land managers - thus limiting the financial output from their lands unless they join with a landowner assistance program operated by one of the companies or make other arrangements for intensive management.

There isn't much you can do with just ten acres of timber land, unless it's "The Old Home Place," and you're keeping it to remember Papa. On forty, you could feel good and enjoy an occasional outing or wild game hunt, but you'd need a day job. A hundred? Maybe. But not much less, unless it's the preferred site for new major suburban development on the north side of Houston or Atlanta or Charlotte. Then you can retire.

And, SFRA says that up to six percent of Southern forests will be converted to urban uses between now and 2020. The effects of this change will extend far beyond city limits, resulting in fragmentation of wildlife habitat, changes in recreational opportunities, and a movement to the growing specialty of urban forestry practice to keep the forests healthy. Environmentalists enter the picture on these issues. As urbanization spreads, and larger numbers of landowners with smaller acreages increase, issues of private property rights vs. public domain come into conflict, as noted in nearby East Texas where private farmers, ranchers, and forest land owners are feeling the pressure of land use regulation in a heavily urbanized region.

Thus, we should see an interesting decade or so in forestry.