Most of the time, the only outward symptom of wood rot is mushrooms forming at the base of the trunk or near wounds or scars on the bark. Otherwise, the magnolia tree appears healthy. Once the magnolia tree is infected with the wood rot fungus, management is difficult. However, you can lessen the damage by removing diseased and dead limbs from the infected magnolia tree. Preventing the fungus from attacking the tree is the best defense against this fungal disease. Wood rot generally infects the magnolia tree through tree injuries. Keep the tree healthy and avoid injuries to keep wood rot at bay.

This may be a bacterial disease called wetwood.

Wetwood is caused by a number of species of bacteria that enter the tree through wounds. Since bacteria associated with wetwood are common in soil, root wounds are probably a major point of entry. Infection is usually confined to the inner sapwood and heartwood. Gases and liquid are produced in infected trees from the fermentation action of the bacteria. The gases within the trunk cause a buildup of pressure that forces the liquid out of the tree. The build-up of gases fluctuates during the year; the highest pressure is usually found in summer when the bacteria are most active. This oozing material is toxic to plants and could transfer the disease to a new stem or branch. If this liquid is transported internally through the vascular system up to the branches, wilting and/or defoliation may occur. Occasionally, branch dieback also occurs. However, in most healthy trees, this disease is not considered to be life threatening.

There is no satisfactory control for wetwood. To help prevent infection, avoid wounding trees. 

Thanks for the answer! So you say the disease is in the inner sapwood and heartwood, so there is no treatment, and no reason to scrape away the blackened bark?

We have a lot of tree saplings we are growing nearby, so want to be careful not to spread this disease to them.

The spot is getting bigger, but you say it will not kill the tree. Do you mean it will stop getting bigger and heal on its own?

thanks for the help,

Kathy

Practicing good sanitation and cultural care goes a long way to preventing diseases in trees. Healthy and vigorous trees are less likely to develop problems and, if a problem does arise, are more inclined to survive it. Always provide proper irrigation, never allowing the soil the tree is growing in to become too dry or too wet. Soggy soil leads to fungal diseases, while drought conditions cause the tree to become water stressed. Regularly raking up debris from around the tree eliminates a food source and hiding place for pests, and removing any damaged or diseased twigs or leaves prevents the spread of diseases.