When to grade and not to grade, that is the question

[Jordan Beyer]

Hello everyone. I'm a forestry student near the end of my third year. I currently have an associates from my previous college so I'm still pretty new at all of this. At my former college, we graded standing timber using the Forest Service tree grading chart, then organized it into a grade utilization spreadsheet to get the totals.  I had a few questions regarding this and asked around. I was basically told people don't do that and that they just use ungraded stumpage for that area. Basically saying that statistically law of averages come into play and it all works out to be that said stumpage.  I'm really not buying all that, and although it may be true in some stances, certainly not for all. 

So my question is much broader than before, but how often do consulting foresters grade timber? What are some factors that a forester will look for when deciding to grade or not?  And one last thing, is there any advantage to grading even if the average price per board foot equals ungraded stumpage when say organizing a bid or in any other circumstances? 

Thanks for your time
Jordan

[stavebuyer]

It depends on the region as well as the quality of the stand. Some consultants in my region only grade veneer while others grade every log. Working as a buyer I can tell you that you can grade to the nth degree and the reality is that buyers will develop a trust for the accuracy of your volume numbers but pretty well reserve the grading and valuation determinations. The timber feller, guy bucking up at the landing, and log grader at the mill induce so many variables that many times overall historical averages come closer to the "real" result than over-complicated analytics.

[mudfarmer]

My impression locally is that consulting foresters do not bother to grade, bidders have an opportunity to cruise and are left to their own experience and opinions as to how it will grade out.

This is how public sales here work as well. All you will get from the state/county foresters is species and volumes split into "sawtimber" and "pulp". 

[stavebuyer]

I will add breakdowns showing species volume by diameter class can be very helpful. A 180bd/ft tree average can "hide" some real nice prime 30" trees but have the average tree volume pulled down by some 14" log and half stuff that needs to come out. 

[rusticretreater]

A practiced eye is always grading trees and logs without really thinking about it.  Most acreage is simply woods with all the pluses and minuses of trees left on their own.  When you see a really good stand of trees you will know it and then you can separate those out for consideration.

[Ron Wenrich]

I've bought timber, sold timber, bought sawlogs, and sawed logs.  Each one of those require the practitioner to see inside the log for the defects that lay underneath the bark. 

As a sawyer, I had to figure out the way to saw a log that would minimize the effect of a defect.  Put it on an edge, trim it off, etc.  Grading a tree in the woods would make no difference if the sawyer wasn't up to the task of limiting defect.  A working knowledge of hardwood grading comes in extremely handy.  Taking this knowledge to the log yard is beneficial to the business. 

Grading sawlogs is what happens whenever a log buyer is buying logs.  But, as nice as the Forest Service grading rules look like, most mills develop their own grades.  They vary from species to species, and are often dependent on how well a grader can identify a defect, and know how well it can be minimized.  How hard a log buyer grades their logs are often dependent on market conditions.  Same goes for lumber. 

Taking grading knowledge to the woodlot, as a procurement forester, I could tell how well timber would produce grade lumber.  I also knew about how site and aspect related to quality.  Species composition could also dictate interactions that would increase defect.  For example, in our area, the northeast coves on the ridges produce some pretty good quality red oak veneer.  Black cherry often had gum streaks due to peach borer, so wasn't worth the hype.  White oak and pine often produced worm.  In discussions here on the Forum, I know that my black oak cuts out a whole lot better than black oak in other areas.  All the FS grading won't give you that regional knowledge. 

As a consultant, I never graded timber.  I tried a couple of times, but I always had a disclaimer that no volume or grade is guaranteed.  We always knew what prices timber buyers were looking at since we were procurement foresters before we were consultants.  There were a few consultants that would say how much veneer value there was in the standing timber.  They were also veneer buyers, and I felt that was a conflict of interests.  My dad was an auctioneer and his slogan was always "your eyes are your market".  It follows well in many a profession. 

The major failing of the FS grade system is that, to my knowledge, it was graded and sawn out of logs to produce a yield.  As a sawyer, I know that there are so many variables that it is really hard to nail down a number that would be beneficial in real world instances.  A lot depends on markets, product mix and sawyer philosophy.  I know that I rarely cut logs into boards.  There was always some sort of blocking to produce, and the dollar yield is what you're aiming for, not volume or a particular grade yield.  The art of sawing is knowing when to stop cutting and make the biggest piece of blocking that you can.  I put pencil to paper many years ago to figure all that out.  Time is an expense, and it is a non-renewable resource.

[Ron Wenrich]

A practiced eye is always grading trees and logs without really thinking about it.  Most acreage is simply woods with all the pluses and minuses of trees left on their own.  When you see a really good stand of trees you will know it and then you can separate those out for consideration.

If you read the book by Malcolm Gladwell called Blink, you'll understand how right you are. 

[moodnacreek]

The best tree /log grader will of course know basic grading rules but will have learned what to expect in his area from long experience.

[Dave Shepard]

Jim,  from Working Horses With Jim YouTube channel, just did a video grading a load of logs. Many times the grader bumped the grade a couple notches up because he knew he had a market for it at that grade. Very interesting to watch. 

[Ron Wenrich]

That goes both ways.  I had a logger that we knew was shady.  He brought in a log that was covered with mud on the end.  He told me it was a muddy site and said there was nothing wrong with it.  I didn't like it, but trusted him.  So, I gave him full scale and a #1, since it was a butt log.

I happened to see it go through the mill, and my suspicions were confirmed.  It was hollow on the end.  I always marked scale and grade on the end of the log.  The logger would follow me around when I graded his load, and we would have a discussion about certain logs.  I would put one thing on the log and another on the scale sheet.  I don't think he ever caught on. 

There were only a few loggers that couldn't be trusted.  When I started doing consulting work, we made sure they never got a bid sheet.

[Ron Scott]

I would often take the grade of sample trees when marking and cruising a stand to get an idea of the stand's quality for appraisal purposes. I used the USFS grading rules which I was most familiar with.

[Jordan Beyer]

Thanks everyone. Alot of good information here. I guess it's not as big deal as I thought. I would be curious doing some cruises and seeing how the numbers turn out. I was just worried on giving a landowner an appraisal value and having it be too low or uncomprehensive.   I supposed if a seal bid was set up, you'd likely get what the timber is worth and maybe some more.

Thank you

[Jordan Beyer]

I would often take the grade of sample trees when marking and cruising a stand to get an idea of the stand's quality for appraisal purposes. I used the USFS grading rules which I was most familiar with.

Ron, how would that play in how you value the standing timber? Or would you simply just so that the buyer has an idea? 

[Ron Wenrich]

I went into consulting after being a log grader and a procurement forester.  I would use the grading more in a sample cruise.  I feel that doing a 10% variable plot cruise gives me a great deal of data and shows stand structure.  By doing some grading, you can get a feel for the quality of the stand and where it lies in the stand.  You can also come up with a volume.  Grading was mainly for my usage, and I would never give that out to a bidder.  You can't stand behind the grade because each potential buyer has different markets.

Valuation of timber has a lot of other things that are involved.  You have to know what the going rate is in your area.  There will be variability for quality or size.  But, how far you have for trucking will also alter your price.  Access problems, road construction, and other limitations also play into the price of timber. 

My bid sheets had the stumpage separated by species and size.  I also put the volume in Doyle and International, which are the predominant volumes used in my area.  There is no guarantee for volume or grade. 

[stavebuyer]

High quality(above average in size and quality) tract volume(lots of footage), and "winter logging" have an outsize impact on the bid price. If one took the selling price of a 500,000' plus tract with a 400'+ tree average it would sell for more than it would pencil out when compared to delivered log prices or lumber prices in the HMR.

Conversely a 50,000' tract with 150' average tree size average with dry weather only access may not even get a token bid.

Both reflect fair market value. Supply and demand. The first example is getting pretty rare in the hardwood belt. Fragmented, recently cut-over ground not so much.

[Ron Wenrich]

Several decades ago when cherry was really hot, the state had a sale of cherry.  The quality was so high they got $3500/Mbf as the winning bid.  Veneer cherry was selling at $8/bf, if I recall.  I know truckers that were hauling a load of cherry veneer worth about $35k at the time.  Every log that went to the sawmill was produced at a loss.

The risk/reward has to be considered.  The risk was whether it was veneer or not.  Local expertise was the input needed to figure whether that particular area was prone to really good cherry. 

The problem with small sales is the cost of moving equipment.  Terrain is another factor.  Dragging line gets old pretty quick. We had sales that had massive boulders on it.  When we marked, we had to find ways into the timber. 

A lot of our ridges have rock outcrops and the timber grows poorly due to the thin soil.  We had some enterprising group that found what they thought was virgin timber growing in a rocky area.  They used helicopters to take them out.  The quality looked good, but most were rotten.  An expensive part to the learning curve.

[Ron Scott]

When I took a sample tree grade of a stand by species, that also included a veneer sample by species. This helped determine the minimum appraisal value of the stand that I would recommend that the landowner accept from those buyers interested in procuring the timber.