Maximizing Your Timber Investment

STUMPAGE SALES

Stumpage sales have been effectively used by timber sellers over the last 30-plus years. In a stumpage sale, sellers identify a stand either by legal description (or shapefile), or stand ID, depending on how inventory is managed. A seller of stumpage will then reach out to a known list of qualified buyers and present the opportunity in a notice of sale. On occasion, if a stumpage seller is feeling bullish and market conditions favor the seller, they might advertise the sale publicly in hopes of gaining new bidders and/or increased competition for the logs. In stumpage, sale bidders are asked to make what is typically a lump sum bid on the standing trees, and the bidder assumes all costs and risks in harvesting and marketing the logs. Bidders are normally expected to conduct their own timber cruise and appraisals and, in reality, they bid at their own risk. If a buyer overestimates the volume of the standing timber, or bids and acquires it just before the market takes a dive, a bidder can lose money. In this instance, most sellers are not terribly sympathetic, given that the inverse can provide better returns to the bidder. Generally speaking, sellers in this type of sales process are all generally credible, quality sellers, but on occasion, buyers can be caught up in scam sales, or a seller may present false or misleading inventory data. Almost without exception, sellers in stumpage sales where bidding is required will disclaim any defects in the data, the process, or the markets, and the bidder assumes one hundred percent of the risk and liability. These risks can often include permitting, access, and post-harvest regulatory obligations such as erosion control, RMAP, resurfacing of roads, and more. When making the decision to sell timber, sellers often will do a log and haul cost analysis and compare it to what they feel might happen in a bidding environment. If the seller’s conclusion is that bidding will result in more net income than if they were to contract to log themselves, the bid process is where they will focus.

DIRECT LOG SALES

In some cases, timber sellers will contact local mills or log buyers and get pricing directly from them for various log species and grades delivered to their yard or specified location. In this case, it is the responsibility of the timber owner to deliver the logs to the yard, or another specified location. A timber seller can do this by hiring a contract logger who either has log trucks or can outsource the hauling. Timber owners who choose this option would be expected to have some experience with this process and assume all risk for costs, permitting, and delivery. Timber sellers can see modestly higher values or returns by selling specific species, grades, or sorts to a log buyer who places premiums on this type of log. The inverse can occur if the logger does not deliver logs to spec, the log buyer often drastically discounts the non-spec logs or, in extreme cases, asks the timber seller to transport them to a different location and log buyer. The timber seller owns the logs until they are delivered and accepted by the log buyer.

CONTRACT LOGGING

Contract logging can take a wide variety of paths, but we will focus on two widely accepted approaches. A timber seller will hire the logger with a contract based on a percentage of gross log sales, or the logger is contracted to log the timber on a per 1000 board feet (bf) basis. This can include hauling costs or, on occasion, timber sellers will hire a log truck(s) to deliver the logs and the logger separately. In percentage sales, the logger is expected to receive a percentage of gross sales for logging and delivery of the logs. Here, timber sellers typically rely on the logger to optimize value, because the respective interest is aligned. While the alignment is theoretically true, the result for the timber owner is not always better. Things that could negatively impact the timber seller are an inexperienced logger, an overly generous percentage of the gross proceeds, or the logger delivering logs not properly sorted or manufactured, resulting in large discounts to the timber owner.

Most loggers are reputable and will often work with timber sellers to achieve the best outcome. It’s probably safe to say loggers prefer percentage sales, because the opportunity to make better than wages is available to them, and they are equally incentivized to do good work and strategically market the logs. More sophisticated timber sellers generally favor contract logging on a per 1000 board feet basis because they may already have the markets, or they have loggers under contracts at specified rates. Rates vary from $150/1000bf to harvest and deck logs, to $300/1000bf for challenged, steep ground, or logging permits with numerous restrictions or compliance criteria. Hauling costs vary widely, depending on the number of trips a log truck can make in a day. Depending on location and destination, one to three trips per day are common. The timber seller owns the logs until they are delivered and accepted by the buyer.

THINGS TO CONSIDER AND DISCUSS WITH YOUR FORESTER

A single big leaf maple tree can have a retail value of $60,000. As a timber seller, the success of your timber sale depends largely on the knowledge and integrity of the people contracted to harvest. Specialty trees and forest products are other areas where timber sellers can realize value. In the Pacific Northwest, for example, the ubiquitous broad leaf western maple was regarded as a nuisance by most timberland owners and professional foresters. A canopy of 100-year-old western maple (Acer Marcophyllum) can cover nearly 10,000 feet of forest floor if it is in good health. The aesthetic value of these trees in music applications began first on the East Coast and in Europe. Luthiers of the day prized these maple trees for the three-dimensional figure pattern that could be enhanced with stain and lacquer. Luthiers coveted the stripped magical appearance and the look achieved when the artist would book-match two pieces for a violin or cello. Maple was preferred by Italian violin makers such as Stradivari, Amati, and Guarneri as far back as the 15th-century. They used maple for its superior sound and resonance qualities, as well as the look, predominantly seen on the back of the instrument. Figured maple was a staple in the construction of stringed instruments for the next four hundred years, primarily on the backs of these pieces of art. In the 19th-century, guitar builders, starting with Les Paul and, 40 years later, Paul Reed Smith, began making instruments featuring these stunning figured maple pieces on the front of the instrument. These brands became iconic with the finest figured maple tops. One in one hundred mature maple trees will have what is referred to as curly or flame pattern maple, and one in ten thousand mature maple trees will have what is regarded as quilted maple figure pattern.

THINGS TO ASK YOUR FORESTER

Ask your Forester to do an assessment of the standing trees and ask whether there are high-value specialty trees present and, if so, whether they should be marketed outside of the traditional log yard. Another thing to consider is post-logging impacts. Ask your Forester what, if any, impact will occur if the harvest is clear-cut versus selectively logged. Is the logging likely to impact surface water quality? Will remaining standing timber be wind-firm? Ask your Forester if there are quality trees that would be better left standing for soil stability or habitat, and what

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