WATCHING TREES GROW
By Quert Evans
SELLING STANDING TIMBER
Selling standing timber has long been a subject wherever trees of value grow. How trees are bought and sold can be as complex any business transaction (you are selling a product or commodity). The quality of this commodity and in some cases the quantity of the commodity being sold will dictate the value of your trees. Competition, used to your advantage, will also have an influence on the value paid for your trees. While the value of a woodlot will vary depending on such factors such as size, quality, species composition, etc., a woodlot in good condition can have considerable value and can be managed to yield periodic income.
If you are contemplating selling some timber or if you are approached with an offer to buy some of your timber, don’t jump into an agreement too quickly. Taking the time to find out what you have to sell, then choosing the appropriate method of marketing will usually result in more income to the seller. In addition, selling timber and implementing forest management practices do not always mean the same thing. Cutting trees just because someone knocked on your door or sent you a letter is generally not a wise decision. It is better to take the time to evaluate what you have, what your goals and long term objectives are and ask yourself how will a timber harvest meet these goals and objective.
Buyers, brokers, industry and even consulting foresters will often utilize tactics that infer forest management in an attempt to lend credibility to their services. Here are several types of terms and definitions that are used by landowners, industry and foresters alike.
Managed cuts
Timber cutting is one of the forester’s major tools and is useful not only for generating income from a forest, but for accomplishing many other objectives such as improving the health and vigor of the forest, developing wildlife habitat, altering species composition, establishing planting areas, creating vistas and trail and developing certain types of recreational activities.
In fact, managed cuts are rarely achieved. A managed cut is one where the removal of trees is based on an understood objective. The trees harvested are selected based on statistical analysis of the woodlot. Here are a few treatment objectives often used in forest management. In a true managed cut, the trees selected for harvest are always individually marked with paint before bids are solicited or trees are cut down. In addition, specialized equipment my also be required.
1.) Stand Improvement Cuts - This is subject to some interpretations. Implies that your stand will be in better shape after the harvest. Generally speaking, true stand improvement cuts remove only the poorest quality trees in the woodlot and are often non-commercial in nature. Freeing up growing space for higher quality trees is the objective.
2.) Even aged management – Even aged management generally means that trees within the stand are generally all the same age or size. A red pine plantation is an example of an even-aged stand of timber. A harvest that removes one row and leaves two is a typical harvest recommendation in even-aged red pine plantations. Hardwood stand can also be managed as an even-aged forest. Diameter limit cuts, shelter-wood cuts and clear-cuts are examples of even-aged management of hardwood stands.
3.) Selection Systems and Uneven aged management – The term selection system applies to cutting activities used to create or maintain uneven-aged stands; the selection method is employed to regenerate stands as well as improve growing environments over a wider range of diameters. An uneven-aged stand contains at least three well defined age classes, “well defined” means differing in total height and age, not just in stem diameter. The selection system has been subject to many different interpretations. Rotations are generally shorter 10-15 years and multiple entries are needed to maintain the stand.
Managed cuts are the harvest cuts that many buyers will try and convince you that they are doing and many landowners say that they want. Open any paper and you will see advertisements regarding the buying of standing timber. Most will say something like: specializing in select cuts, managing our renewable forests, practicing sustainable forestry methods, or something that alludes to the ability of said company to manage your forest land. At the same time, landowners will often convey their interest in management cuts in general terms, that is, “I would like to manage my forest”, or “I would like to selectively harvest my woodlot”. Without professional assistance you are unlikely to achieve a managed forest system.
As a landowner, you need to develop an understanding of how a proposed harvest will influence the management of your of your stand.
Liquidation sales
Lets be real, there are times when we simply need some money. Often times a woodlot can fill this need. Liquidation of your timber asset is similar to selling a stock from your portfolio. There are several methods or “buzz” words that further describe a liquidation sale.
1.) High-graded sales – This is where you are only cutting your best trees. Selling your 100 best or biggest trees as an example. Cutting the highest grades of lumber products from the woodlot generally degrades the quality of future harvests.
2.) Clear-cutting – This is where you are removing all the trees on a given acreage. Some species like aspen may actually require a clear-cut at some point in their rotation.
3.) Diameter Cuts – This is where a specified diameter and those trees above that diameter are removed from the stand. Every tree 16 inches in diameter and larger, or all trees 18 inches and larger are examples. In this case a whole age class or size class is being liquidated from the stand as well as the most valuable trees. Diameter cuts are likely the most common type of cut occurring within our northern hardwood forest. The are also the most damaging to the sustainability of a forest stand. If someone says they are only going to cut trees 16 inches and larger, ask them where will they be measuring the trees? Also, this type of cutting proposal gives a great deal of latitude to the buyer. Generally they will consider 16 inches on the stump- allowing them to select from most all of the sawlog sized trees in your forest.
4.) Stump Cuts – This is where a specified measure on the stump is used as a sale parameter. All trees 16 inches and up, usually indicated that trees 16 inches and larger measured on the stump (ground level) are being cut. Like the diameter limit cut, this implies that an entire age class or age classes will be removed from the stand.
Sustainable Forestry- This term originated from state and federal agencies charged with the management of public lands. It is critical that these lands are management of produce a sustainable flow of forest products as well as other forest values. The forest products industry is a 9 billion dollar industry here in Michigan. Sustainability is a critical component of this economic force. Sustainable forestry on private lands has a direct influence on the forest economy however, differences in time lines, land ownership values, and ownership goals all influence the sustainability of a forest. Most landowners are interested in sustaining their woodlots ability to produce periodic incomes, produce recreational activities and produce wildlife habitats.
TYPES OF TIMBER SALES
LUMP SUM TIMBER SALE
A timber sale in which a single payment (the lump sum) is made to the seller for the trees designated for sale (TREES SHOULD BE MARKED FOR SALE).
Advantages
- Places the burden of quality and quantity assessment on the producer.
- Seller does not have to be knowledgeable in timber markets, logging, trucking, sawing, scaling and alike aspects of producing forest products.
- Seller does not have to worry about buyer’s ability or inability to market log products.
- Levels playing field among producers.
- Bids can be easily compared. A dollar value per tree can be easily computed.
- Assures payment. You are paid up front for your trees.
- Seller does not have to rely on the ability or inability of the producer to merchandize each tree.
Disadvantages
- Does not compensate for fluctuations in timber markets (upward).
- You have no control on who the producer is. Simply pick the highest bidder.
- Buyer’s tend to underestimate true value of trees. Cover the risk described above.
- More difficult to have a relationship with the producer.
SCALE SALE OR SCALE BY UNIT
A timber sale in which the seller is paid a certain amount for each unit of product cut (e.g. so many dollars per 1000 board feet, per cord, per post, per pole, etc.). This type of sale requires someone to measure the products harvested. This someone is typically the receiving sawmill.
Advantages
- Can negotiate a percentage of profit from each log produced.
- May be able to take advantage of specific market trends.
- Have a relationship with the logger/producer.
- Ability to see how logs are merchandized.
- Lower risk to the logger as described above.
Disadvantages
- Must have complete confidence in the credibility of the producer.
- The question of who provides an accurate production tally and how, when, and where the scaling will be done makes this sale more difficult to administer.
- Logger hold all of the cards with regards to marketing, transportation etc.
- Seller is relying on the merchandizing skills of the logger.
- Seller is relying on the marketing skills of the logger.
Types of Timber Buyers
A Timber Buyer - is someone who is willing to make you an offer on your standing timber.
A Broker – Is a timber buyer who will offer you a price for your timber then sell it to a sawmill or lumber company.
An Industry Buyer – Is a timber buyer who works for a single sawmill. They are paid by the sawmill to bring wood into the mill.
Timber snoops – Are individuals who makes an initial contact and refers you to a sawmill representative. He or she is paid a percentage of the timber value coming from a referral. Similar to a broker.
Loggers/ Jobbers - These are independent small businesses or companies. Often they will buy timber on shares or on a cut and scale basis. They sell their products to a variety of sawmills.
FORESTERS
Consulting Foresters – A consulting forester is a degreed forester who is operating a company or small business. They can be hired to market your standing timber.
Industry Foresters – Industry forester are degreed foresters hired by sawmills to purchase timber as well as assist with the management of company lands and private lands. They generally do not charge a fee. It should be understood that they are working for a given lumber company.
Public Service Foresters – Foresters that are employed by local governments, State governments or the Federal government are public service foresters. They can often be relied on to provide unbiased advise to private landowners.