How Much Left

[terry f]

    To any of the foresters, how much money is left from a load of logs to the owner after the logger, trucker and forester are paid. Say a four thousand foot load at 350 a thousand with under 50 miles to the mill, how much of that load goes back to the landowner.

[Ken]

A few other questions would need to be answered first.  Does the logger have to build a road?  Is it a clear cut or partial cut and what is the average volume/acre or piece size/tree?  Lots of variables to every job which will determine the return to the landowner but around here 25-40% after trucking is the average.   Trucks average the better part of $100/hr.

[Ron Wenrich]

If you're selling your timber by the thousand on the stump, then what goes back to the landowner is the amount you were quoted.  If they said it was $200/Mbf, then that's what you get.  If a forester was involved, their commission comes from the stumpage if he was working for you.  Landowners aren't taking any risks past the growing if timber to marketable size.  They sold timber for whatever reasons, and if markets go up or down is of no concern.

If you're doing it by a split, you get whatever split you agreed to.  These sales are usually between logger and landowner.  Now the risk gets to be greater, as you have no control over record keeping, or the logging skills of the logger, as well as their marketing skills.  If the logger is a poor bucker, too bad for the landowner.  If the logger picks a poor markets to send the logs to, too bad for the landowner.  If the logger is dishonest and skins a few loads, too bad for the landowner.  Its not a good way to sell timber, but lots of folks do it.

Trucking, road building and logging costs are the burden of the logger, not the landowner.  The value of a stand of timber goes to the logger.  His profits are the value of the logs less operating costs less stumpage.  The landowners profits are stumpage less operating costs. 

Landowners have several options for increasing profits.  You can increase growth or lessen operating costs.  You can also grow for a different market.  In hardwoods, your ultimate market should be veneer if the site supports it.  There are lesser markets in the thinnings.  Ignoring the lesser markets usually lowers growth rates and profits.  Other options are to go to secondary products such as hunting rights or botanicals  that can be produced in conjunction with other forest products.  Too often landowners only think of profits during a sale, and not all the other things that go into growing timber. 

[ashes]

Very well said.^^

[terry f]

    Ron, using the 200 stumpage figure as a floor, lets say the forester finds a better market or the market goes up 100 during the process of getting the wood out, who gets the added value? The logger shouldn't get any since their service would be the same if the price was 250 or 750 a thousand. Does the mill or forester own the logs from day one and reap the added value or is it the landowner.

[BaldBob]

Terry,
It all depends on how you sold the timber and the type of contract you have with either the logger or the mill. For instance if you sold the timber as stumpage and the logger takes ownership as soon as it is cut, then you get the original agreed upon price per MBF regardless of what the logger gets from the mill. You get no reward if the price the mill pays goes up, but you also take no risk of the price going down. On the other hand if you retain ownership of the logs until delivered to the mill, then the logger essentially becomes your contractor rather than the purchaser of the timber. In that case the logger has no risk or reward with regard to mill price fluctuations ( unless he is logging on shares, but that type of contract is extremely rare in Northeast Oregon), the landowner does. There is a myriad of ways to structure timber contracts and many variations of the two examples I gave. What is best for you is certainly a subject for discussion between you and your forester.

[Ron Wenrich]

The price of diesel goes up and causes logging and trucking costs to go up.  Should the landowner shoulder that expense?  If you sold your timber during a down market cycle, it isn't the fault of the logger.  He didn't put a gun to the landowner's head to sell the timber. 

I used to think that it was possible to sell landowner logs and have a logger come in and contract log it.  Logs would be taken to a central yard to be sorted and sold.  Pretty much what a co-op should be doing.  I figured the extra money in the higher value of logs would pay for the added expense in marketing.  But, a couple of guys have tried it, and failed.  I don't know if it was their marketing skills or not.  The only ones to succeed at this are loggers.  I think a lot of that has to do with the fixed price of the stumpage.  They also leave a lot of junk in the woods that a forester might not, which lowers the ultimate current dollar yield.

I also used to think that landowners would be interested in co-ops where the co-op owned their equipment and possibly their own mill.  Its done in Sweden where co-op mills produce about 25% of the wood.  But, my experience has been that landowners are only interested in selling timber, not growing timber.  As a base, they remain fragmented and they will continue to be marginal as a marketing force.

[Clark]

But, my experience has been that landowners are only interested in selling timber, not growing timber.  As a base, they remain fragmented and they will continue to be marginal as a marketing force.

Ron  - I appreciate what you write on the FF, your insight is always spot on.  The above statements about private, non-industrial landowners should be repeated to every class in forestry schools and reiterated at every continuing education class offered because it so succinctly sums up what landowners (in the US at least) want and what their actual market position is.

Clark

[OneWithWood]

It is sad but true.  As a landowner who is very much into the growing of the trees as well as harvests, I often feel the lack of awareness and interest of other owners keeps the landowner at the lower end of the value received for the trees.

[kytimberman]

Terry, around here a common method of selling is on a "shares" basis, with the landowner getting 50% of the mill's delivered price.  All the costs of logging, hauling, roads, etc., are paid by the buyer, out of their half of the gross.  It's a good way of selling only if you're dealing with a reputable buyer.

[SwampDonkey]

What Ron says about coops exists right here. The biggest factor to make it all work is a market and price, when the veneer market dries up so does the idea behind the central wood yard to move, buck and market the hardwood. Same for log prices, if the extra effort to buck and sort logs has no reward in price, then it just goes to the pulp mill and not fooled with. Plus we don't have an open market like in the US, we compete with cheaper crown wood that have diminishing returns as harvest efficiency goes up. Resulting in devalued timber, which is not sold by bid so unionized mills can take all the profits. Are you going to cut good logs for pulp prices, not me.

[terry f]

    If I could take this in a different direction, what type of return would someone expect when investing in small acreage timberland (20 to 80) acres, to make it a worthwhile investment. Aside from the love of the land and the "fun" you have playing in your woods, it would be tough to beat the stock market over any 20-30 year period. It seems land appreciation and tree growth would have a tuff time keeping up, but it must or no one would do it.

[SwampDonkey]

Bare land is going to be worth a lot more than forest land. Up here it is. Huge areas of forest land are sold or traded quite often for about $250-400/acre when you do the math. You don't see 500,000 acres + of farmland sold in one swoop. Woodland value up here goes with the price of wood and stumpage. When cut we only get about $300-400/acre for brush land at best and some cases when bundled in with the farm, $50/acre if your lucky. The biggest gains, is the property you bought from the old widow lady that figured $80,000 was a lot of money for 300 acres. Then logged it during a market upswing. That went on a lot here over the years. Everybody knows somebody.

[enigmaT120]

    If I could take this in a different direction, what type of return would someone expect when investing in small acreage timberland (20 to 80) acres, to make it a worthwhile investment. Aside from the love of the land and the "fun" you have playing in your woods, it would be tough to beat the stock market over any 20-30 year period. It seems land appreciation and tree growth would have a tuff time keeping up, but it must or no one would do it.

That certainly is a different direction!  I have 32 acres that I live on and manage.  The return is probably too variable to estimate.  I bought my house and 4 acres for $75,000 in '91, then the surrounding 28 acres of re-planted clear cut for $17,000.  I've sold $7,000 of trees to Weyerhauser in 2004 -- some the 1989 logger missed.   I guess within 10 years I should have some commercial thinning ready to go, but I won't sell it unless prices are pretty good.  Except for a few poorly stocked patches, I don't expect to clear cut anything.  I do expect to make money, but I guess my biggest reason for all this is, as you say, "the love of the land and the "fun" you have playing in your woods."

[BradMarks]

Interesting topic, particularly rate of return.  Industrial timberland owners often times appear to be run by "bean counters", maximizing return for investors(stockholders) at a rate of maybe 3% annually, certainly not as good as the stock market 'may' be.  But I'm sure there are a lot of folks out there whose 401K turned into a 201K in recent years, particularly bad timing when nearing retirement. So the timber investment is slow and steady, and harvest is sustainable - except when timberland is sold or converted into a REIT. Then it's ball's to the walls as the return must justify the investment or must keep up with the stock market.  The result is overcutting the remaining product to produce revenue, with the end result many communities feasting in the short term before famine sets in. Oversimplified, certainly.  The small timberland owner, restricted by size, doesn't have to produce revenue on an annual basis to justify his/her investment and therefor the rate of return has to be different.  Lump sums at irregular intervals.  But satisfaction always.  Just my opinion.  :

[Ron Wenrich]

The investment in the timberland increases in value to land values as well as timber appreciation.  Some places, that's a lot more than in others.  In my part of the country, its rare to see timberland sold with a timber inventory.  Realtors are only interested in one thing - commissions.  That's what one told me when I informed him he did his client a disservice since he sold the land for less than timber value. 

Returns depend on how intensely you do the management.  Most people do nothing, so the increase in their return is not as great as someone who takes the time to do thinnings and the like.  There are also non-timber products that can also be harvested.  I remember a guy from Oregon that was harvesting white truffles, and could get much more in truffle value than in timber value. 

If you do nothing and your return is $100, you have a high rate of return.  If you invest $100, then your return has to be higher than $200 to breakeven.  Sloth is always cheaper. It just means it takes longer to recoup the return. 

[SwampDonkey]

Yeah, if you go to a realtor looking for cruising work, you'll be starving.  ;D

But most of the cruising I've seen in sales, is just for the stumpage, not the land. There are quite few that I do recall for land sales, but that is instances that the land owner wanted the cruise, not a realtor.

[enigmaT120]

I had my place surveyed for truffles -- nope.  I have some chanterelles, but not enough to worry about selling.  I am interested in non-timber forest products, especially for after I retire. 

[terry f]

    If I was to do it again, I would do it with less emotion and more of a bean counter attitude. High grade and clear cut aren't in my vocabulary, and I'm not comparing the two, just not for me. The forty I have now will take more than my lifetime to get it where I would like to see it, but would love to have more ground to play with, just don't know how to justify it.

[SwampDonkey]

I'm mid 40's and my hardwood and spruce won't be mature until after I'm dead. But fir and aspen will be ready for a commercial thinning in another 20.  8)

[Tmac47]

But, my experience has been that landowners are only interested in selling timber, not growing timber.  As a base, they remain fragmented and they will continue to be marginal as a marketing force.

I think there are a few reasons for this.

For one, the industry itself is very fragmented and segregated.  Due to high competition and slim margins, people are VERY protective over their timber business.

There's also a lack of marketing know-how within the industry as a whole, even from the big guys, so landowners don't understand the value of the industry as a whole, especially foresters.  Therefore, when they look at their land, they think they're smart enough to do it themselves, because no one's telling them otherwise.

When it comes time to the sale, they follow the same line of thought.  "Why do I need the help of a forester, who's going to charge me to tell me what I already know?"  I don't think it's because they're stupid or mean spirited, I think the industry just does a poor job of marketing the value of foresters.

A couple of months ago, my dad got a call from a lady wanting to sale some timber.  It took him a couple of days, but he got some premium prices for her.  He called her back to tell her he got a her $58,000 for her acreage and she says, "Hey Mr. ___, turn out I didn't need your help after all.  I just sold it for $40,000."

When an industry is closed off, it's difficult to do business.  It's also hard for landowners to see timberland as an investment, because again the industry isn't marketing the idea to them.  It's even harder for them to see the value in professionals who can increase the value of that investment.

Imagine the stock market without a ticker.  How much harder would it be to do business if you didn't know the price of anything.  The timber industry is like that.

[mesquite buckeye]

You plant trees for your grandchildren. You cut your grandfather's trees. This is not a business for the impatient. ;D

[Tmac47]

You plant trees for your grandchildren. You cut your grandfather's trees. This is not a business for the impatient. ;D

Quality planted pine reaches harvest age at 28 years.  There's companies that sale CMP that grosses around $2k per acre at 28 years, with a nice thinning at 13 years.

I would say that your quote is sort of misleading.  If you're thinning, like you should be, at 13-15 years then it's totally reasonable to sale timber at least 4x if not more in a single lifetime.

If you're cutting your grandparents trees, you've either got bad advice or bad seedlings.

[Tmac47]

 

 

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[beenthere]

Tmac

If you're cutting your grandparents trees, you've either got bad advice or bad seedlings.

If'n we were all growing Loblolly pine in the south, then we wouldn't be cutting grandpa's trees either. ;)