One of the first questions asked by buyers and sellers of forestlands is “What’s the timber worth?” The answer is usually not a simple one. It is the intent of this page to give the user some good rules of thumb but it is certainly no substitute for a comprehensive evaluation by a licensed forester.
The first step in valuing timber is to look at what things influence timber values. The following list is not exhaustive but should give the reader some ideas of the complexity involved:
1. Timber volume. Certainly the most important factor is how much timber you have to sell. Most often it is measured in tons, but can be measured in cords, or thousands of board feet.
2. Timber species. In our area we harvest both hardwoods and pines. Pine is still the most valuable however hardwoods have been gaining in value. Value is also predicated on which type of pine or which type of hardwood.
3. Timber quality. All timber does not grow equally. The absence of disease and the conditions of growth create a large difference. Generally knotty trees and trees with many limbs are less preferred. Tall straight trees with few knots and straight growth are preferred for lumber.
4. Global demand for lumber and paper products. The market for lumber and paper has become a truly global market. When the world economy is thriving advertising, packaging, furniture, and paper products drive demand and put pressure on manufacturers to produce more.
5. Local demand for stumpage. While global conditions exert a force on demand, this is not translated into local prices until area users of lumber and paper products adjust their production to those demands. Local capacity to consume these products can reach saturation and increased demand will not change local prices.
6. Distance from manufacturing plant to property. A large part of the cost of delivering timber to market is the cost of moving the product from the harvested tract to the mill or plant where it will be processed. Knowing potential local markets is the key to determining the impact of distances on value. If you alternatives limited the prices you may be offered might be limited as well.
7. Logging conditions. Wet weather can provide both problems and opportunities for timber sellers. If you have a tract with wet ground logging operations may be difficult or impossible until dry conditions return. On the other hand if you have a dry tract, you might benefit from higher prices during wet seasons since tracts available for logging are in short supply. Generally dry tracts can benefit from winter sales. Mills generally need a steady supply of timber for production but are limited to logging dry tracts in the winter.
8. Property conditions. Tracts, which have good access, are better suited to logging operations. Both a good access from public roads and an internal network of roads are of benefit to the logger. Long stretches of dirt roads for access can be a detriment, particularly in winter months. Severe slopes, ravines, and large creeks can be an impediment to logging.
9. Time allotted for timber harvesting. Timber is bought and sold from a landowner in a “stumpage” sale; That is to say the timber is purchased while it is still standing and the buyer has the right to harvest. The terms under which the buyer may harvest are spelled out in a timber contract. The length of time the buyer has to harvest is subject to negotiations between the buyer and seller. Generally the longer the time period, the more favorable the contract is to buyer. Long-term contracts allow the buyer to make his own judgment as to when it is most favorable to him to cut. Long-term contracts in essence are the same as a futures contract. Typical contracts are in the range of one year.
10. Special conditions for timber harvesting. Quite often timber contract spell out special conditions for the seller or buyer, which may impact prices. Examples might be an agreement to repair internal roads, removal of cutting debris, and provisions for consequential damages to remaining trees from the logging process.
Coming Soon! Timber Cruising for Laymen Part II Estimating Timber Volume in a Standing Tree.