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What is typical in a timber sales contract?

Started by KYGirl, January 02, 2018, 08:45:09 PM

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paul case

In my opinion that is a good idea as well. A trial basis will help you see if it is worthwhile for you and for the logger. Just give them 10 or 15 acres to cut and if it works out let them cut more.

PC
life is too short to be too serious. (some idiot)
2013 LT40SHE25 and Riehl edger,  WM 94 LT40 hd E15. Cut my sawing ''teeth'' on an EZ Boardwalk
sawing oak.hickory,ERC,walnut and almost anything else that shows up.
Don't get phylosophical with me. you will loose me for sure.
pc

Claybraker

Quote from: KYGirl on January 03, 2018, 10:09:09 AM
Thank you all for the warm welcome and your responses. It's 80 acres, give or take. I'm not sure how much she wants timbered at this time. She has some white oak and walnut--the other I'm not sure. She has contacted a few foresters in the past with mixed results. Most did not respond to calls, one said she should find someone more familiar with the local market (he was 90 minutes away??), and one told her that he would be happy to tag the timber, but that he didn't have much luck with sealed bids in our area.

She's very near Magoffin Co.

Okay, you've got some homework to do.  Start with a management plan,  it would be a good exercise with your grandmother,  to define her objectives for the land, and possible intergenerational transfer at some point.  I think Ky offers  some of that for free, at least for starters. They'll send out a service forester to do a walk through and give you some ideas. http://forestry.ky.gov/LandownerServices/Pages/default.aspx

Here's the regional offices, find the one that's appropriate, give them a call, and go from there.  http://forestry.ky.gov/regionaloffices/Pages/default.aspx Start with the stuff that's free, and in person the service forester may have some advice on private consultants, or any other helpful information to help you and your grandmother determine the value of the timber.  BTW, sorry to hear about your grandmother's recent injury to her wrist that makes it impossible for her to sign a contract. Once she has a clear idea of what the timber's worth, it should heal rather quickly.   Fact is us landowners  have no idea what our timber is worth, it's not a level playing field.  The deck is stacked against us. Just like real estate appraisal isn't an exact science,  appraising the value of timber is similar, ultimately both are worth what someone is willing to pay for it and competitive bidding is the best method for selling both.

Sorry if this gets a little lengthy, but I wanted to share some of my family's history, in the hope no one else makes the same mistakes we did. My Grandfather had a gorgeous stand of timber that he had spent most of his life growing and improving. He was an early proponent of "banking on the stump"  When he got sick,  and went to the nursing home,  in order to raise some cash to pay for that, my uncle insisted the thing to do was to cut some timber, and he would handle all the arrangements since he was in the timber business. My grandfather had 3 daughters,  my uncle was married to one of them.  If he paid 25% of fair market value, I'd be suprised. When my grandfather passed, my uncle still kept his crew logging.  By this time, armed with what little I knew about timber value, I was being a real PITA until Dad finally put a stop to the cutting until things could be sorted out, and the rest of the timber was put out for competitive bid.  Wish I'd been a PITA earlier. My uncle insisted that even having a cruise done would have cost 10% of the value of the timber, a complete lie. What, didn't anyone trust him? He acted so hurt.  Besides, he was a man and knew more than Mom and her other sister. Any way, they finally put it out for bid, and for some strange reason the sale yielded much higher than my uncle had said was left.  So the estate cut what was left, then had the property surveyed, divided in 3rd's. and replanted. pulled numbers out of a hat at the lawyers office to determine who got which 3rd. After it was divided relations continued to be strained among the sisters.  How strained? we only found out my uncle had passed away 6 months after the fact, when my brother was doing some genealogical research and found his obituary online.

Fast forward a few years, and I had a feeling those planted pines were ready for the first thinning, so I reached out to the service forester who conducted an exhaustive windshield cruise, slowed down all the way to 25mph and confirmed that yep, probably ought to think about thinning in the next few years, sent us a nice letter with the results of the data he had collected. Even estimated the BAF.  That really was all the accuracy I needed, an opinion from someone that didn't have a financial stake in the decision.

I set about finding a forester to handle the thinning, and took me a while, but finally found one, after several phone conversations,  Mom was still suspicious, and not terribly interested in cutting *any* timber, given her previous experience.  I got the forester to put together a proposal for the thinning, and carried it to Mom, and had the forester call Mom using  the magic words "forest vigor."  Worked well, and we got the first thinning done without a hitch. every one was happy, Mom especially  because she got FMV instead of getting stolen from. She looked like a genius, and even bragged to her one sister she was still talking to how much she had made on the thinning.

That was 2010,  in  June 2013 Mom was diagnosed with a glioblastoma.  That's a fancy term for inoperable brain tumor.   as part of the process for preparing the transfer of her property, I insisted we have the land and timber appraised, to establish our cost basis. The lawyer who was handling things thought it was an unnecessary expense, but I was a real PITA and finally she agreed to be reasonable and do things my way. Mom passed the day after Christmas.  my siblings and I established an LLC for the land, which is what Mom wanted, even though the lawyer tried her best to drive a wedge anywhere she thought she could stick one.

One of our first meetings I mentioned we might want to think about a small sale to put some working capital into the LLC for expenses.  I was really thinking about the second thinning, even though it was too early,  but there is a dog hair stand  of natural regeneration that needs to be cut and replanted. Should have been done on the first thinning, but Mom really didn't want to cut any more than absolutely required.

Conditions weren't good, so I sorta put things on hold until the ground dried out.  My sister got a little antsy at the slow process, so decided she would take over.  She got in touch with our forester we had used in the past, and somewhere in that process the size of the timber sale grew a bit more than I really wanted to cut, but the proceeds go into the the LLC so it's really no big deal. We fought enough as kids riding in the back seat of the car on long trips.  Since the proceeds will be a bit more than the expenses needed for the next 15 years or so, we've got a trip to plan.  Maybe a couple. I'd like to go back to Alaska, and I can talk my brother into that, but I'm thinking my sister wants Hawaii this time. I suppose I'll have to compromise and let her have her way.

Cost of a good forester, trivial. Remaining on speaking terms with my siblings- priceless.

Southside

Quote from: paul case on January 04, 2018, 03:43:46 PM
In my opinion that is a good idea as well. A trial basis will help you see if it is worthwhile for you and for the logger. Just give them 10 or 15 acres to cut and if it works out let them cut more.

PC

Hi Paul,

What you suggest here is not bad logic, but it can cause problems for the logger.  It is expensive to move equipment.  A one man operation with a small skidder, chainsaw, and truck mounted loader might not be turned away from such an arrangement.  But unless they were cutting close by many mechanical crews would not even look at 10 acres of select cut unless it was top notch walnut or white oak.  It's the sad reality of the economics of logging today.  When you have $2 million in equipment that drinks fuel like water, is worn out in 4 years, wages, insurance, workmans, comp, you are in the commodity world and have to think that way.  The other issue is fiber commitments to mills, more and more the mills expect just in time, just the right volume of wood, etc so logistics and planning are becoming increasingly difficult.  Not saying you can't find the guy who will work that way, but the selection of those guys is becoming less and less.
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

CJennings

A big problem with this is if there's no one monitoring the sale it's very easy for the logger to rip you off. They'll give you the receipts, sure. From one mill or from some of the loads. They either won't give you receipts for some loads or they'll take some to one mill, some to another mill, and give you receipts only from one mill.

When the logger says "selective cut" I'm hearing high grading in the back of my mind. Maybe it won't be, there are a lot of good loggers out there, but I think you want more than just this logger involved in whatever is done.

Southside

Quote from: CJennings on January 04, 2018, 09:47:05 PM
A big problem with this is if there's no one monitoring the sale it's very easy for the logger to rip you off.
When the logger says "selective cut" I'm hearing high grading in the back of my mind.

Wow - really?  There are also foresters who have pet loggers out there too you know.  Some that cruise a track and never show up again, but expect their commission just the same, etc.  People are people no matter what line of work they are in, there is always good and bad.   Trust but verify was and still is a good policy. 
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

paul case

Southside,

You are correct. That do present a problem.

PC
life is too short to be too serious. (some idiot)
2013 LT40SHE25 and Riehl edger,  WM 94 LT40 hd E15. Cut my sawing ''teeth'' on an EZ Boardwalk
sawing oak.hickory,ERC,walnut and almost anything else that shows up.
Don't get phylosophical with me. you will loose me for sure.
pc

Claybraker

 First logger that can figure out how to handle small 10 acre tracts profitably will make a killing down here in the deep south.  that was back in the days of chainsaws, bobtail pulpwood trucks and dipping turpentine.

Southside

It's what I do - but to do it I need to have all my equipment and run the sawmill so I have market options for the lower grade, which means I am slow.  A lot of the 10 acre folks expect their lots to be opened and done in no time flat, and want the same money as a 400 acre lot owner.  I won't touch those, and I can't think of one that has actually been cut that I said no to.  I can say that a killing I am not making.... :o so maybe I still don't have it figured out. 
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

WDH

No matter what business endeavor you are involved with, there are good practices to follow and poor ones too. 

It is a good business practice to know the value of what you are selling, no matter what it is. 

It is good practice to keep up with anyone operating on your property. 

It is good practice to avoid conflict-of-interest situations or to manage them carefully.  An example of a conflict of interest is where someone is giving you advice but will also profit off of you for that advice. 

If you are selling a pile of hog meat, and you set an average price, it is good practice to pay attention and not to let the first customer that you deal with take only the tenderloins and backstraps and leave you with just the snout, tail, feet, and low quality meat. 

It is good practice to have a firm understanding of any deal or arrangement, and putting things in writing is a good way to avoid misunderstanding or misinterpretation. 

There is good business and bad business not matter what endeavor you are in. 
Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

CJennings

Quote from: Southside logger on January 04, 2018, 10:14:23 PM
Wow - really?  There are also foresters who have pet loggers out there too you know.  Some that cruise a track and never show up again, but expect their commission just the same, etc.  People are people no matter what line of work they are in, there is always good and bad.   Trust but verify was and still is a good policy.

I don't know why that post rubbed you wrong but it's not intended as an attack on loggers. It's just stating some facts. And yes there are bad foresters too. I've seen what I described in that post firsthand. I also caught a timber theft situation this past summer where a logger crossed a line (for a lousy beech of all trees to steal  :D). Anyone in VT has probably heard of the Bacons. Infamous for this situation. It's why I suggested to have third party involved. Check references, do a background check. It stinks for the good loggers but people need to protect themselves and their land. Trees grow back but mature hardwoods don't spring up overnight either and the landowner can be on the hook for fines if laws are broken. https://northernwoodlands.org/articles/article/timber-theft

bill m

Southside logger, You are correct that some foresters have their favorite loggers they go to most of the time. I am sure it is because they are loggers they can trust to do the best job for the land owner for honest money. I know a few around my neck of the woods. I don't know of any that use or even recommend bad, less then honest loggers.
Having a private consulting forester manage your job helps insure a proper job that meets your goals for the most amount of money.
NH tc55da Metavic 4x4 trailer Stihl and Husky saws

Claybraker

Exactly WDH. that whole "conflict of interest"  thing is why I always suggest the service foresters as the first step for rookie landowners.  It's free. Normally anything free should be valued at acquisition cost, but in the case of service foresters there's a lot of value just in avoiding a conflict of interest.

Southside

Quote from: bill m on January 05, 2018, 08:50:48 AM
Southside logger, You are correct that some foresters have their favorite loggers they go to most of the time. I am sure it is because they are loggers they can trust to do the best job for the land owner for honest money.

This same conversation has been hashed out here on the FF many times in the past, so I am not going to dig into that rabbit hole again, but to say people have their own motivation and as I stated to the OP - do your own homework.  There are good and bad in every walk of life, and there are places where money makes a circle, foresters with pet loggers are no exception to that rule.  When I start to hear things like "he's the best" the hair on the back of my neck stand up on end.  I recently observed such a circle with a rather well known name involving lots and lots of money on multiple levels, each "recommending" the next player because "no one is better", or "it's worth it to wait for him". 

Selling timber is a financial transaction, not unlike investing your 401K money, you best be well educated in the entire picture if you are going to come out on the up end of it. 
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

bill m

Quote from: Southside logger on January 05, 2018, 10:19:08 AM
Quote from: bill m on January 05, 2018, 08:50:48 AM
Southside logger, You are correct that some foresters have their favorite loggers they go to most of the time. I am sure it is because they are loggers they can trust to do the best job for the land owner for honest money.
Selling timber is a financial transaction, not unlike investing your 401K money, you best be well educated in the entire picture if you are going to come out on the up end of it. 
So what you are saying is that a land owner must be well educated in growing, harvesting and selling timber if he expects to make a profit. I don't think so. There have been many land owners, who know nothing about trees, who have made a lot of money selling timber with the assistance of an honest well educated forester.
NH tc55da Metavic 4x4 trailer Stihl and Husky saws

Ron Scott

Much good advice given. Seek out the services of a certified forester serving your area for advice in valuing and selling your timber.

https://forestryforum.com/board/index.php/topic,33345.msg480853.html#msg480853
~Ron

WV Sawmiller

Southside,

   I understand the expense of transporting big, heavy equipment multiple time so maybe as part of the sample/trail cut you also include an option for more work upon satisfactory completion of the sample. That way both parties get to see/show what the contractor can do and if as promised and expected he gets the next phase and does not need to double transport equipment.
Howard Green
WM LT35HDG25(2015) , 2011 4WD F150 Ford Lariat PU, Kawasaki 650 ATV, Stihl 440 Chainsaw, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once

Southside

Quote from: bill m on January 05, 2018, 12:11:36 PM
Quote from: Southside logger on January 05, 2018, 10:19:08 AM
Quote from: bill m on January 05, 2018, 08:50:48 AM
Southside logger, You are correct that some foresters have their favorite loggers they go to most of the time. I am sure it is because they are loggers they can trust to do the best job for the land owner for honest money.
Selling timber is a financial transaction, not unlike investing your 401K money, you best be well educated in the entire picture if you are going to come out on the up end of it. 
So what you are saying is that a land owner must be well educated in growing, harvesting and selling timber if he expects to make a profit. I don't think so. There have been many land owners, who know nothing about trees, who have made a lot of money selling timber with the assistance of an honest well educated forester.

Bill,

That's not what I said. Would you take your entire retirement and invest it into a single company based on one infomercial? Probably not, nor would you go to school for a PHD in investment banking. A wise individual would reasonably educate themselves in what they wanted to accomplish and make sure it was the same goal as the entity they have hired to achieve said goal. You can be good , lucky, a little of both or a whole lot of none.
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

Southside

Quote from: WV Sawmiller on January 05, 2018, 01:23:23 PM
Southside,

   I understand the expense of transporting big, heavy equipment multiple time so maybe as part of the sample/trail cut you also include an option for more work upon satisfactory completion of the sample. That way both parties get to see/show what the contractor can do and if as promised and expected he gets the next phase and does not need to double transport equipment.

WV

What you are saying is logical, but most guys margins are so tight that they aren't willing to gamble on a lot they "might" cut when they can be on a lot they are cutting. Now if a guy has no work then maybe it's a different story, however that begs the question as to why he has no work.
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.
White Oak Meadows

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