Years of care and growth are accumulated in a
mature timber stand. The return from all those years is frequently
marketed in a single transaction. Too much is at stake to sell timber
without having accurate information on the process, products, volume,
and value of the timber, and efficient methods for protecting the
environment.
Selling timber can be complicated. California
landowners must file a Timber Harvest Plan - or exemption. The actual
harvest is usually conducted by a Licensed Timber Operator so their
ultimate value to the landowner, called stumpage value, is reduced by
harvesting as well as transportation costs. Logging costs vary from
place to place, and vary depending on the type of logging system
used.
The sizes, quality, and species of timber and
methods of marketing vary greatly. Training and experience are need
to accurately estimate volume and value within merchantable standards
accepted by local markets. Actual production volume is usually
assessed at the mill but the volume of standing timber can be
estimated using one of several methods.
One reality of marketing timber, especially for
smaller landowners that might have a timber sale only once or twice
in their lifetimes is that it is difficult to get accurate, timely
information on prices. This can be a very expensive lesson.
Wood is a commodity meaning that once size and species are considered, all wood is very similar. An 8 foot long Douglas-fir 2X4 is pretty much the same whether it comes from your forest or Canada. Commodity prices fluctuate widely given world wide supply and demand, and seasonal fluctuation. There are no daily market price reports for stumpage, nor are there any government support prices for small landowners. Both demand and price for many timber products fluctuate widely.
- Do I need professional assistance?
- Which trees should I sell?
- How do I market them?
- Are property and cutting boundaries well marked?
- What is the timber volume?
- How is the volume measured
- What is the value of my timber?
- Are timber market prices going up or down?
- Are the trees financially mature?
- Who and where are the appropriate timber buyers?
- What sale method should I use?
- What laws do I need to consider
- How should I reforest harvested areas?
You should have at least a basic understanding of
how timber volumes are normally measured. A timber cruise is an
inspection of the timber stand made to estimate the volume of
marketable timber present. This ranges from a walk through
”eyeball” estimate to a sophisticated statistical sample
that takes detailed estimates on very few trees, and extrapolates
information to large areas. Most often, the cruise is based on a
systematic sample of trees on plots or strips representative of the
entire stand.
Two measurements are usually needed on each tree:
the Diameter at Breast Height (DBH) 4.5 feet above the ground, and
the trees height. Tree height is generally recorded in terms of the
number of 16 foot logs to a merchantable top of a specific diameter,
or the actual top of the tree. Once the trees' diameters and heights
are known, their volumes can be determined from various tree volume
tables.
Making square boards form a round tree results in some waste. To account for this various log rules are used to convert from these gross measurements to a predicted volume. The Scribner, short log scale is used in California mostly because yield tax is calculated from this volume. Because other log rules are used, Doyle, International 1/4 kerf, and others check carefully which one your timber is estimated with. There can be a great deal of difference between different log rules.
The amount that a landowner realizes after selling
timber is called the stumpage price. It represent the value of the
trees “sitting on the stump” after all costs of harvesting
and hauling are considered. Many variables affect the price paid for
standing timber:
Species – In
California, Port Orford Cedar for export commands the highest prices
by far. Redwood is the next highest valued species, followed closely
by ponderosa and sugar pine, and then Douglas-fir. True firs, while
still valuable, net less to the landowner. Most hardwoods have little
timber value except for specialty markets. Species price varies
widely with location and with changing market demand.
Quality and size
– Large, sound trees with clear logs that could be exported or
used for lumber generally bring the highest prices. Old growth trees
have the highest values.
Location –
Distance to the mill and the quality of the roads are crucial factors
affecting the price paid for stumpage. A log truck leave the property
loaded and returns empty. The driver is paid for both directions.
Fuel and maintenance is only slightly higher for a loaded truck than
the empty truck, and the truck owner still has to pay off the loan
whether the truck is loaded or empty. The farther away your property
is from a mill, and the time it takes to negotiate the roads there an
back play a big part in how much you can realize from selling
timber.
Size and Volume
– Logging operations require high capital investments in
equipment. Low volumes of timber on small acreages may not be
profitable to log. Timber Harvest Plan preparation can be expensive.
On small properties with low volume, the cost of the plan can exceed
the value of the timber. Stumpage values generally increase with both
volume and acreage.
Market Competition
– Competitive bidding by mills in the area improves the chance
that a fair market value for timber is offered. Some situations
involving specialized products, unusual harvesting conditions, or
poor markets may be better handled by negotiating with an appropriate
buyer.
Contract Provisions.
Restrictions placed upon the harvest of timber may protect the site
or the landowner, but they usually reduce the price paid for the
stumpage. It is your property and after the harvest you should be
satisfied with the results. The best way to assure your property will
look the way you want it to following harvest is with a well written
contract that has specific objective measures of performance.
However, be aware that loggers bidding on you job will need to charge
for these contract provisions. One of the most common sources of
tension between landowners and loggers is the amount and distribution
of logging debris - slash - left after harvest. Legal requirements
for fire hazard reduction rarely meet the expectations of landowners
that cherish their land. You should include contract provisions that
address slash and other considerations important to you.
Marketing your timber will bring the highest
return with the most protection for your land. In most situation you
will need to hire a Registered Professional Forester to prepare a
Timber Harvest Plan. Even for sales that do not require a forester,
consider hiring one to handle the many details. Use that
professionals advice and experience wisely. Be well informed and be
aggressive in marketing. Buyers have more confidence in sellers who
use a businesslike approach.
Hire your own forester. Many logging companies
have a RPF on staff and are willing to “take care of all of the
paper work”. While this seems attractive, the forester is
legally, ethically, and financially responsible to the person who is
paying for the service. That is if the forester is paid by the
logging company, then he or she must look out for the logging
company’s interests - not yours. That is one check that you want
to write.
Prepare a forest stewardship, or management plan,
and keep it updated. This is the single best way to understand the
capabilities of your land, and communicate your goals to all
concerned. Preparing a plan will help you learn more about your
property and forest stewardship in general.
Make certain that your timber is ready to harvest. Are the individual
trees large enough to support a harvest? Will waiting a few years
increase the value of the trees enough to justify waiting. A
short-term loan using timber as collateral could be less costly than
a premature or inappropriate timber sale.
Being a commodity, the price of timber fluctuates
widely. While the general trend is upwards, timing the market can
mean significantly higher returns. Check the current timber market
demand and recent trends. For example, in 192 the US forest Service
essentially shut down timber harvest in California. Mills were
competing for a much smaller amount of available supply. Prices for
some species nearly tripled over a few months. As the market adjusted
prices dropped, but at a higher level than the were before 1992.
Landowners that were ready to take advantage of this market - those
that had a plan in place - made very handsome returns.
In most timber sales, individual trees, or at
least sale boundaries should be clearly marked. Forest Practice
Regulations require trees to be marked in some circumstances. Well
marked sales make it easier for the logger to bid accurately.
Having a good estimate of the volume and value of
your standing timber helps get you the best return. Have the timber
cruised to estimate its volume, quality, and value. It is surprising
how many landowners offer tens of thousands of dollars in timber for
sale without any estimate of just what they are selling. Your
forester may charge a daily or acreage fee, or they may handle all
sales-related activities on a percentage commission basis. A
percentage commission provides a consultant with a strong motivation
to get the best price for your timber sale, although it could also
encourage selling more timber or selling it sooner. Daily or acreage
charges might be less expensive, but they generally remain due even
if no timber is sold.
Inform adjoining landowners of any proposed timber
sales to make certain that boundary and access road locations are
acceptable. Neighbor notification is required for many situation
under the Forest Practice Act. Combining sales among neighboring
tracts can sometimes increase volumes without substantially
increasing logging costs, which could result in higher prices to the
sellers.
Advertise the timber to all reliable buyers in the
area. High-value products or tracts could attract buyers from far
away. Buyers can best be notified by sending them invitations to bid
on timber. Provide as much information about the timber, the tract,
and contract restrictions as can be given in the bid invitation.
Describe payment provisions, including any security deposits or
performance bonds that will be required. Also include with the
invitations copies of vicinity maps, plat maps, or aerial photographs
indicating the location of the timber offered for sale.
Conduct the timber sale as advertised. Many
marketing experts believe that sealed bids usually result in a higher
offer than auctions or negotiated sales. Allow at least a month for
buyers to make their own examinations, or timber cruises, before the
sale is held. Reserve the right to refuse any or all bids.
A written contract in which the rights and obligations of buyer and seller are detailed should be signed by all parties involved. Important restrictions should be included. You may wish to require a performance bond that is refunded to the buyer when all contract provisions have been satisfactorily met or used if necessary to correct contract violations.
The contract is used to pass title of the timber
from the seller to the buyer. How this transfer is structured can
influence both federal and state taxes. Since everyone tax situation
is different, it often pays to consult with an accountant prior to a
timber sale. Be sure the accountant if familiar with timber related
transaction.
Common method of selling timber include:
- Lump Sum
- Per Unit Delivered to a Mill
- Directly to the Mill
Lump Sum sales occur
when you sell the standing trees to a logging company for a fixed
price. This is rarely a good deal for landowners and in most cases
should be avoided. Often the logger offers the landowner a fixed
percentage of the price for the logs paid by the mill. Lump sum sales
gives the logger no incentive to do a good job, rather the focus is
on cutting the best trees as quickly and cheaply as possible. Lump
sum sales often leave a disappointed landowner and a messy job.
Lump sum sales are like telling a general
contractor to build me the best house you can for this much money.
When the house is built you hand over a check and take possession.
Along the way you have little to no control over the design or
materials that go into constructing the house.
Per Unit Sales occur when the landowner
receives payment bases on the volume scaled at the mill and verified
by scale tickets. The agreement is usually for the landowner to
receive a fixed price per thousand board feet delivered to the mill
adjusted by species. The logger sells the trees to the mill and the
difference between what the mill pays and the landowner receives
cover the logging and hauling cost and the logger’s profit.
Other costs associated with the harvest are documented in the
contract. This method is how most landowners operate.
To extend our contstructing a house example, per unit sales would be
like hiring a general contractor, giving them a careful plan, and
paying along the way as certain aspects of the building are complete
and the subcontractors paid.
Selling directly to the mill and contracting independently for either logging or
hauling or both is a popular method for sophisticated landowners with
a lot of time and experience to manage a complex sale. A a landowner
you make your best deal with a lumber mill, separately contract a
logger and pay the logger only for harvesting and hauling costs -
usually at a fixed price per thousand board feet.
If this were building a house, the landowner would act as the general
contractor, hiring sub contractors and paying them as their task are
completed. The landowner is responsible for all scheduling and takes
all the risk of the job coming in under or over budget.
Landowners sell timber infrequently but they can sell it successfully. Marketing can be a confusing and complex process. Your timber sale may be your only chance to cash in on the many years of annual income accumulated in a mature timber stand. No single publication could cover all possible marketing situations, nor could it make you an expert timber seller. But there are questions you should ask, and answers you should know. Hire a forester for help before you sell your timber. Know what your are selling, when you are selling it, and how the sale is structured. Be an informed seller. Market your timber in a businesslike manner to get the most that it will bring.
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Publication of this series was in part funded by the
California Department of Forestry and Fire Protection
under Contract numbers 8CA96027 and 8CA96028