Five years ago, I decided that I wanted to buy some land. I had convinced myself I needed it, but I didn’t know how to approach my wife about it. I’m not sure how it is in your family. In mine, a hunting club membership might be my decision, but a land purchase is a FAMILY decision. One day, out of the blue, I just asked her. ”Honey (I always start out this way when I want something) would you ever want to buy a little place somewhere out in the woods, with a cabin and maybe even a lake?” She didn’t even have to think about it. “No” she snapped, “I can’t even keep this house clean, why would I want another one? And you……you can’t even keep the grass cut at home. How are you going to find time to keep up another place?” Ouch!

Months after that conversation, I came home talking about a little place I had found.

I caught her at a weak moment, and off we went to see it. It was beautiful, and it was peaceful. The cabin was closer to a shack than a lodge, but it did have indoor plumbing which was definitely a plus in my wife’s book. I am not sure how I got her to agree to purchase it. Perhaps it was the fact that we were living in one of the most congested suburbs of Atlanta at the time, and after fighting traffic all week, the chirping of birds sounded a whole lot better than the honking of horns. Even so, she went into this whole land buying process with the idea we were buying my play place; my place to hunt and fish. I don’t believe she ever went into it thinking it was going to be a family retreat or a place she would enjoy.

It’s not that she dislikes the outdoors. She loves it, as long as there is a lounge chair, a beach towel, a small cooler by her side, and a body of water she can wade in when she needs a break from basking in the sun. A condo on the beach would have been more her speed, but you can’t hunt from the balcony of a condo. It also helped my situation that we couldn’t afford the ocean front condo, but that’s another story.

When we were in the process of purchasing our place, I thought the cabin would be what would sell my wife. She saw it as more work. When we walked to the lake, I saw the road as just a way to get to the lake; she looked at it and said, “Oh this is beautiful.” The gazebo didn’t matter to me, but for my wife, it is a cherished place, where she drinks her coffee and reads the newspaper. My wife loves our place in the woods as much as I do, but for different reasons. She enjoys basking in the sun (and yes, she even tries to do that in the pasture). She doesn’t hunt or fish, but she gets as excited as any of us when my son comes back with a catfish, or a deer, or a rabbit, or a squirrel. She goes there to read, to pursue her hobby of photography, to simply do nothing.

For us, owning land was a family decision with family benefits. It is our place to just go knock it in neutral for a while. If you are considering a land purchase, get the whole family involved. You’ll be glad you did. In next week's article, we’ll discuss how you can get started down the road to land ownership.

Today's youth are the wildlife managers, landowners, and land stewards of the future.

Wildlife management, particularly white-tailed deer management, is becoming more and more commercialized. Hunting magazines and TV shows bombard landowners and hunters with commercials from seed companies, feed dealers and feeder manufacturers. They are catchy ads, too, with pictures of huge, sometimes out-of-proportion antlers and promising trade names such as "Rack-Up," "Antler King," "Rack Attrack," "BigAz' Feeder," "Rackmaster," "Pro-Vide," "Bio-Logic," "Big Buck Crunch," and the list goes on. Food plot implement dealers and deer stand manufacturers are also flooding magazines and TV shows with their ads. These ads seem to be right on target for fueling the current frenzy of growing and hunting trophy bucks. But, little attention is given to the basics of deer habitat management because it can't be put in a bag or can and sold for a profit.

As in most situations, there are two sides to the story. On one hand, one can argue that this commercialism is creating a heightened awareness of deer habitat management needs and that there is a subliminal message to the non-hunting public that hunting is big business. Proponents of the issue may say that education and hunting opportunities for youth are also big benefits. On the other hand, one can argue that commercialization of this manner threatens the very livelihood of hunting by over emphasizing the "trophy" and "convenience" aspects of hunting. After all, today's hunter only has to go to a heated, fully enclosed, recliner-equipped blind set up by the feeder or food plot and wait for a hungry deer to appear. Opponents of the issue may say that youth are only learning that it is the size of the antlers that matters and that the only requirement for killing a big buck is to sit in a comfortable blind next to a food plot or feeder and shoot him when he appears.

Unfortunately, this commercialism has led many deer managers and hunters into a trap. The trap is believing that food plots and feeders equal habitat management which equals big bucks. This has led many landowners and hunters to manage "intensively" for deer, i.e., food plot and feeder establishment, rather than "extensively," i.e., manipulation of native plants through burning, cutting, grazing, etc. Managers who want to influence body weights and antler growth in a free-ranging herd by developing a deer supplementation program beyond what the native habitat can provide under proper management need to realize that it is an expensive and inefficient process. Therefore, intensive supplementation programs for free-ranging herds are not recommended for most deer managers.

This is not to say that food plots, feeders and minerals are not useful. In many situations, they have their place, especially for attracting deer for photography or hunting purposes. However, if nutrient supplementation is the goal, managers should not expect too much from them. Nutritional issues are better addressed through proper management of native habitat and deer population parameters such as deer density. In addition, most biologists agree that in order to potentially impact deer nutrition, food plots should comprise 3 to 5 percent of the property being managed and consist of cool- and warm-season plants. When using supplemental feed to improve the nutritional plane or increase carrying capacity, feeders should be located about every 100 to 320 acres and contain feed every day of the year. Management of this intensity requires a lot of time, labor, money and weather conditions conducive to growing food plots.

Another potential trap that this commercialism may create is a perception by the non-hunting public that hunting is only about trophies. Surveys of the non-hunting public show they are more likely to support hunting as a recreational pastime, but less likely to support hunting for "trophies." Youth are the future of all of our endeavors, including hunting. Youth should be taught about how to properly manage native habitats for wildlife and how to balance these needs with population management goals. They should also be taught that food plots, feeders and minerals are artificial supplementation and should only be considered for increasing the nutritional plane or carrying capacity after it has been determined that native habitat is not meeting nutritional needs for management goals.

This month is the time when many managers and hunters begin to establish cool-season food plots and fill feeders for the coming fall and winter. Before you do, be sure that the food plots or feeders meet your hunting or habitat management goals and objectives. Also, when you take that youngster with you, be sure to teach them about managing native habitats and why or why not you chose to plant a food plot. We owe it to them. They are the future managers of our wildlife populations.

This article was contributed by Russell Stevens of the Samuel Roberts Noble Foundation.

Last week I asked a question of our Facebook Fans.  What does conservation mean to you?  My thoughts were that conservation had become a general term whose meaning depended a lot on the person who used it (and their political viewpoint).  It is with this mindset as a backdrop that I spent three days attending the Mother Earth News Fair in central PA last week.

Conservation vacation?

I'm not really sure what I expected, but the Mother Earth News folks had asked me to come speak about landowner responsibility, stewardship, and blending conservation into a land ownership strategy (all things I believe in), so I happily went.  For the record, central PA is BEAUTIFUL this time of year with rolling hills, farmland, and small comfortable towns.  Fall was in the air, and since I left 98 degree temps in GA, a welcome change.  I had a great time.  My session was well attended, as was the entire event.  People came from all over - speakers, vendors, and attendees.  Well over 10,000 people were there over two days.

Here's what I found out about the Mother Earth News crowd:

• They are ordinary folks just like you and me.
• They have a love of all things outdoors.
• They are passionate.
• They have some great ideas (and great products).
• They are mostly apolitical.
• They just want to make a difference.
• They are nearly all  landowners and aspiring landowners.
• They believe simple is better than complicated.

Here's what I found out about conservation:

• It is alive and well.
• It is being carried out every day by ordinary folks doing extraordinary things.
• It is much more about passion than it is about politics.
• It is a surefire way to create a rewarding and PROFITABLE land ownership experience.

Here's what I found out about me:

• I like central PA.
• I like the folks at Mother Earth News.
• I want to learn (and share) more about the people and products that make up the grassroots conservation movement.

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To get started on the path to land ownership......

Order A Practical Guide to Buying Land.

Here's the full report on farmland returns from Iowa State University.

The report includes estimates of the average returns from owning farmland since 1970. Annual returns are in two forms: cash returns and change in market value. Total return is the sum of these two. The source of data for cash rents and land values is the Economic Research Service (USDA) data series for whole farm rents and value, not data from ISU Extension, which refers to rental rates for corn/soybean land only.

Read "Returns to Farmland Owners"

The following article (which appears on the JP Morgan website) was written by Jeff Mortimer, Vice President and Senior Consultant within the J.P. Morgan Investment Analytics & Consulting group.

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BACKGROUND

Prior to 1980, most Timberland properties were owned by integrated forest product companies. These firms, such as International Paper, Weyerhaeuser and Georgia-Pacific, not only owned the physical land and timber, but also the processing facilities – sawmills, paper mills and pulp mills. As a result of tax law changes and prodding from Wall Street to become more efficient, forest product companies began to sell their Timberland properties and focus on their core operations. The passage of ERISA in 1973 gave pension funds the green light to diversify their investments out of traditional fixed income assets into equities and alternative investments. Institutional interest in timber started to gain traction during the 1980s once new organizations emerged to manage the mass of timber investments now on the market. These firms, known as timber investment management organizations or TIMOs, became a significant factor in enabling investor access to “pure” plays in timber.

There are approximately 20 TIMOs in existence today in the United States, and they control roughly $50 billion in Timberland properties. TIMOs are usually structured as public or private REITs, master limited partnerships, limited liability companies or limited partnerships.

Institutions invest with TIMOs via commingled vehicles or through a separate account, depending on the size of the investment. In the case of a commingled fund, a group of investors is formed and a fund is launched. Capital is called as investments are made. Unlike private equity, Timberland investments may generate immediate cash flows in the early years.

Investments in timber are most often characterized by product and location. From a product standpoint, there are hardwoods and softwoods. Hardwoods are deciduous trees that lose their leaves during the autumn season. These trees tend to grow in the naturally regenerating forests of the northeastern and northwestern United States. Hardwoods cater to higher niche markets, such as flooring and furniture. Softwoods are evergreens and typically grow in the southern portion of the U.S. in plantation settings. The majority of large Timberland owners, both in the U.S. and internationally, focus on plantation softwoods. The end use of softwoods is structural lumber.

Categorizing timber by location typically begins by differentiating investments based on geography - U.S. vs. international. Russia, South Africa, and Central and South America are classified as developing markets. Unlike relatively low risk investments in North America, political and currency risks emerge when dealing in these markets.

SOURCES OF Timberland RETURNS

In order to understand a Timberland investment, it is important to understand the fundamental components that comprise returns. Timberland returns are driven by the following three factors. The first factor is biological tree growth. Timber is a renewable resource and, if managed well, will increase in value as it matures. Trees not only grow in volume, but they also turn into higher value products as they grow. This nonfinancial source of return is unique to the Timberland asset class in that growth occurs regardless of macroeconomic conditions or financial market performance. There are not many assets or investments that can make this claim. According to research compiled by the International Woodland Company (IWC), biological tree growth accounts for approximately 65%-75% of the Timberland return.

The second factor is timber price change due to macroeconomic factors such as population growth, construction activity, interest rates and the overall level of economic activity. Unlike most other commodities, timber does not need to be harvested at the end of a growing season. If the price of timber is down, it can be “stored on the stump” and will continue to grow and increase in value. It does not cost extra to store since warehousing costs do not enter into the equation. By taking advantage of positive market conditions, management can maximize the return from the investment, which in turn contributes to lower volatility. IWC estimates that timber price change accounts for approximately 25%-30% of the Timberland return.

The third factor is changes in land value. Most often, the value of the land represents a very small portion (2%-5%) of the total Timberland investment value, so it typically contributes least to Timberland return. Land value is based on more of a supply-demand dynamic than is timber.

An additional but non-fundamental Timberland return source includes easements. Timber or conservation-related easements are financial agreements designed to keep a portion of a forest untouched. For example, a conservation easement results in a property owner transferring some ownership rights to a government agency or nonprofit land trust in return for cash or tax benefits.

LOW VOLATILITY

In relation to Timberland's rate of return, the volatility is low. As noted earlier, the low volatility is attributable to biological tree growth. When Timberland is combined into a diversified portfolio, returns tend to smooth over time, thereby reducing the overall portfolio's risk level.

DIVERSIFICATION BENEFITS

In addition to attractive risk-adjusted returns and low volatility, Timberland investments enjoy low correlations with other asset classes. Combining Timberland into a well diversified portfolio leads to a more efficient portfolio (higher return, lower risk). There is a slight negative correlation between Timberland returns and inflation. This should not be surprising, since inflation has been trending downward for much of the period under review. However, if longer time periods are reviewed, there is clearly a positive correlation to inflation. Therefore, this indicates to a certain extent that Timberland investments provide a hedge against inflation.

RISKS

Despite favorable return and diversification benefits of Timberland investments, there are still risks to consider.

First, there are economic risks since pulp and lumber prices are impacted by the laws of supply and demand, as well as cyclical and seasonal fluctuations. For example, if the economy is in a major downturn or recession, timber demand for new and existing home construction will slow, thus providing downward pressure on lumber prices. This risk is somewhat muted because of the ability to “store on the stump” and harvest when prices trend upward. TIMOs that are structured as private REITs can clearly take advantage of this by adopting a long-term investment approach. On the other hand, publicly structured REITs cannot fully take advantage because they are managing to dividend targets. By definition, publicly traded REITs are required to pay out approximately 90% of their income each year.

Second, there are physical risks, including fire, weather, insects and disease. These risks vary to a large extent across geographic regions and climates. Surprisingly, the total loss for managed forests in the Unites States is fairly low – less than one half of 1% per year.

Third, there is risk due to the lack of liquidity. Timberland is a relatively illiquid investment and is therefore not efficiently priced in the marketplace. A major concern for investors is the risk of overestimating inventory and future growth from a piece of land. The fact that typical investments can exceed ten-year investment horizons highlights the importance of the due diligence process and proper pricing of properties.

Fourth, there is risk due to environmental action. For example, in the early 1990s, the United States government placed certain harvesting restrictions on Timberland in an effort to protect threatened or endangered species. Environmental restrictions – as well as the loss of land to development pressures – will reduce the availability of global timber.

CONCLUSION

In our view, institutional investors should consider an allocation to Timberland. Despite the potential risks, Timberland provides traditional equity returns with fixed income volatility. The diversification benefits are equally impressive.

The focus of most plan sponsors today is on the funded status of their pension plans. Timberland funds typically require a ten-to fifteen-year investment horizon, which makes them an attractive asset to match the long-term nature of pension liabilities and endowment and foundation spending requirements.

Future demand for timber is projected to be favorable due to population growth and improved living standards worldwide. Timberland supply, on the other hand, is finite, thereby preventing overcapacity in the market. This demand-supply imbalance would appear to provide pricing support for the foreseeable future.