Stumpage vales, was :Ignorance Tax

Ron Wenrich woodtick at lebmofo.com
Thu Dec 4 18:00:13 EST 1997



Joseph Zorzin wrote:

> BOBNDWOODS wrote:
> >
> > In article <347CAE61.A75D62CD at lebmofo.com>, Ron Wenrich <woodtick at lebmofo.com>
> > writes:
> >
> > >I've been struggling with why there is a difference between timber value and
> > >the price that landowners receive for their timber, especially after seeing
> > >Don and Bob go around about consulting vs industrial forestry.  Timber value
> > >should equal log value less logging costs less profit.  But, not all
> > >landowners receive that.  Is it because profit is exceedingly high?  Is it
> > >due to a high risk factor? Or is there something missing from the economic
> > >equation?
>
> If the landowner retains a qualified forester, he WILL receive the full
> value of the stumpage (timber value on the stump).

Not necessarily.  Mills that don't get the highest price can't pay a high price.
Consultants never grade trees, largely because most can't.  Do you know what the
expected yield will be in lumber or veneer?  Basically, a consultant marks the
trees, measures them, and says I have so many board feet of timber for sale.
Quality estimates are real fuzzy - such as average for the area.  Then the loggers
are told your eyes are your market.  No quality or volume guarantees.  15% is rather
high considering the types of service which are typically offered.  No line work is
guaranteed (since we're not licensed surveyors).  If there is a tree marked over the
line, usually the liability is shouldered by the landowner, who can then sue the
forester.  The consultant does oversee the logging operations, the bidding process,
and watches out for the landowners interest.  The quality of the estimate seems to
be lacking to me.

>
>
> And of course the timing is CRITICAL. Put the timber out to bid when
> prices are high; although we never really have a good grip on prices
> unless we carefully observer what happens during other timber sales-
> locally.
>

Not having a grip on prices comes from not following the lumber market.  Talk to the
loggers and you can figure out what's going on.  Talk to veneer buyers and you'll
know where markets are headed.  Veneer buyers are starting to shy away from oak, and
you can hardly sell ash (at least in this section of PA).  Europeans are looking
into bland woods - poplar, maple, beech.  This will put downward pressure on all oak
markets.  Observing other timber sales tells you where the market was, not where its
going.  Something like reading the stock market pages.

> I recently talked to a landowner who was considering a timber sale. But
> he didn't like the idea of paying me 15% of the sale. He sold directly
> to the logger. He got a good price; but I could have gotten him at least
> 50% more while doing good silviculture. So my 15% fee would have been
> "free" because I would have earned it for him and then some, getting him
> a higher price while ACTUALLY doing real forestry, not "high grading".
>
> But noooooooo, he didn't believe me. He was MUCH to smart to want
> another middle man involved, even after I told him I have the ONLY
> forestry web page in Massachusetts. <G>

Did you offer to mark the wood and give him a value estimate?  Or is the only way
you do business is to sell the timber.  I have cruised timber for the landowner like
this.  He makes out far better than paying 15%, and of course, you don't have as
much responsibility in sale administration.  For me, that's a plus.

RDW






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