Timber Sale / Consulting Forester

[Frickman]

This will be a few paragraphs, but please bear with me.

A week or so an independent, consulting forester sent me a prospectus for a little sale he has. 100+ trees, 20,000 or so feet. This sale supposedly received no bids earlier in the summer. I'm quite familiar with this forester, having bid on his sales in the past, and he thought I might be interested.

Anyway, I stop in today to look at it. Much of it was windblown, down, or damaged  timber from a storm we had last December. Most of it was mediocre to low quality to start with. It was all short skids, but the ground was steep, it has a creek running through it, the landing will be located on a hillside, some trees are hanging over the neighbor's hayfield, you get the picture. A challenging sale to work. In addition, it is located in a township that has a very restrictive timber harvesting ordinance along an eight ton road. It has enough problems to scare most timbermen away. Not me though, I like a challenge.

So the landowner walks me around the sale, and at the end asks if I'm interested. Yes, kind of, but I'm not that desperate for timber right now. Well how much do you think it's worth? I gave him a narrow range just off the cuff, and he said it wasn't high enough. He had a bid within that range he turned down. Well, if two different men give the same bid, and those are the only bids, that's what it's worth I told him. No he said, the forester worked up a price that was double what I offered. The landowner said that the forester said it's worth x dollars, so someone will have to pay that to get it.

My question is this. Should an independent, consulting forester, working for the landowner, give an appraisal, valuation, whatever you want to call it, to the landowner for his timber? I'm not talking about just a range he can expect, but actual, exact dollars and cents. What tipped me off was when we first walked into the woods the landowner pointed out a nice tulip poplar. He said that tree is not to be cut, he wasn't "killing it" for $36.00. I asked him how did he know it was worth $36.00, and he said that is what the forester told him. Between you folks and me, I would have paid at least double for that tree. There were alot of other trees though that were marked that the landowner told me were valuable, but were culls for pulp or firewood, scragg logs at best.

Now my idea is that a consulting forester gets as many people as possible to bid on a sale, and let the market forces work. Whatever the sale brings is it's value if the forester has done his job right. Also, a forester should advise a landowner to not sell if all the bids are unusually low. I'm OK with all that. But is it OK for the forester to give a detailed analysis, tree by tree, of the timber's value before it's put on the market? With unrealistic expectations too. I thought that the buyers and market set the prices, not the forester. My problem with this sale is the forester never even took into account the difficulty working the sale, and all the broken wood. He knows how to paint trees and fill out a few forms, but he personally has never worked a sale and marketed the wood. If there was only one bid on the sale, it is obviously not a valuable piece of timber.

This kind of reminds me of some real estate agents who overvalue a property. They may tell you, hope that, a property is worth $200,000, but if the highest bid is $150,000, then that is what it's worth. It also kind of reminds of the "valuable black walnut trees" in the backyard that many of us get called about.

[Tillaway]

An appraisal is usually part of the timber sale prospectus.  Its usually better to be very conservative on volume, quality, and high on the logging costs, particularly with a salvage sale.

A salvage sale is only worth what you can get for it on the open market.  Since it did not receive any bids then that tells me the minimum bid was too high.  Our department does place too high minimums on occasions.  The forester falls into a trap of trying to get every last dollar out of a sale and then shoots themselves in the foot.  If you put out a good timber sale meaning the access and logging has been carefully considered then it really does not matter how low the minimum bid is.  Purchasers are very competitive and will not allow someone to steal one at a ridiculously low price.  Sealed bids require the the bidder to give his best price most of the time.  The only time this doesn't work is if the sale requires special knowledge or equipment or the minimum bid is set right at the very top the market.  When a bidder shows up with two or three different envelopes to select from and chooses which one to use by who's bid  will you know.  The ones priced just a little too much to "get on the board" will sometimes be bought at the minimum a month or two later if the market changes.

Tell the landowner that what it worth to me right now and the wood quality is not going to get any better.   Next year he might have to pay someone to clean the place up.

[Texas Ranger]

I don't believe I have even seen a timber sale (mine or anyone else) where individual tree values were given.  The only exception may be high value veneer trees.  I give my landowners a range that covers the reported highs and lows as published by the state forest service.

[Ron Wenrich]

There's a lot of guys in the woods that really can splash paint, and that's about it.  We get a lot of sales that aren't bid, but just brought to us by the consultant.  We'll work a consultant for a couple of years, then they move on to someone else. 

Foresters should have a good feel for the value of the timber, considering that they have marked every tree.  I came into consulting from the mill side and had bid on timber and scaled and bought logs.  So, I had a pretty good feel on timber value.  When we put out sales, we put a realistic minimum on it, but never published what it was.  It was a price that gave the landowner a reasonable price for the timber but didn't bleed the logger.  Usually our estimate was pretty close to the middle bid prices where a lot of bids fall.

I sold a lot of salvage timber when the gypsy moth came through our area on the first time.  Landowners knew one thing - it had to be sold or the value would go down.  For those sales, there were no minimums.  Your sale is facing the same prospects, and should be sold without a minimum or the timber is lost.

The problem that arises with consultants in our state is that there is no licensing, and there are no stipulations of who can call themselves a forester.  So, we get guys who come out of college, can't find a job, and hang out a shingle.  They'll hang on for a couple of years before they change professions.

I don't recall of telling a landowner an exact price on a tree.  I'd give a ballpark or a range.  The merits of leaving a poplar should rest on tree and stand condition, not solely on an economic one.  The bid is the market value of the wood.  Its what a willing buyer will pay for the wood.  Anything else that the forester throws out there is pure conjecture, since he has nothing to back it up.

As for bids, I usually found that there were 3 types of bid on any sale.  You will have the bottom feeders that are not looking to buy the timber, but to look at bid results.  There will be a bunch in the middle that represent the fair value of the timber.  Its probably what most mills are paying for timber they buy on their own.  The top tier represent guys who really want the timber and will pay the forester premium. 

[Phorester]

"Now my idea is that a consulting forester gets as many people as possible to bid on a sale, and let the market forces work. Whatever the sale brings is it's value if the forester has done his job right. Also, a forester should advise a landowner to not sell if all the bids are unusually low. I'm OK with all that. But is it OK for the forester to give a detailed analysis, tree by tree, of the timber's value before it's put on the market? With unrealistic expectations too. I thought that the buyers and market set the prices, not the forester. My problem with this sale is the forester never even took into account the difficulty working the sale, and all the broken wood. He knows how to paint trees and fill out a few forms, but he personally has never worked a sale and marketed the wood. If there was only one bid on the sale, it is obviously not a valuable piece of timber."

Correct, in my estimation.  Most consultants I know that have been in the business for a long time are the ones that learned what you said above and adjusted the way they do business to reflect that.  They give the landowner an estimate of what the total sale might bring, not a per tree figure.  They will also low-ball that dollar estimate, since they'd rather have the sale bring more than they told the landowner he'd get instead of less.  That, of course, would put a big dent in the forester's credibility.

I think this Forester will learn a bitter lesson with this sale.

[Frickman]

Thanks for all the replies. I told the landowner I would only cut this job on a percentage / share basis, not as a lump sum upfront. This didn't sit too well with him, as the forester made all kinds of promises and this gentleman believed every one of them. He is a college educated forester after all.  ;)

Another thing I forgot to mention. The landowner started cutting up the down, but marked timber for firewood. So there isn't even the same volume now as it supposedly had in early spring. That's another reason I won't pay up front.

I don't think I have ever bought a sale from this forester, but I have bid on his sales. I don't like the way he marks and manages timber. He mostly high-grades, but will mark a few cull trees to fool the property owner into thinking he's thinking about the future. He goes about it the same way alot of loggers do, all diameter limit cuts.

[Ron Wenrich]

The degree doesn't make the forester, nor does experience. 

[Frickman]

Ron,

You're correct, neither the degree nor experience makes a forester. Many of us in the industry know this. But try to explain that to a landowner who has been buffaloed by a "forester". This fellow has a degree, along with a few years experience, but he's not much of a forester. He's a good paint sprayer though.

I told the landowner that, like you stated, in Pennsylvania we have no liscensing or certification requirements to be a forester. I said that I act as my own forester, and it's perfectly legal for me to call myself one. I don't hold myself out as a trained forester, but there's nothing to stop me.

[Gary_C]

I just completed a large sale that had blowdown and storm damaged trees. The storm went thru after I bought the sale and the state did reduce the price and add probably 30,000 bd ft but that may not have been enough. It's kind of like paying for the privilege of being the clean up crew.

I know what I would do if I looked at a job like that. I'd tell the landowner "no thanks" and wish him and his forester well in making any money at those prices.

Walk away and put a note by that forester's name in your book.

[Ron Scott]

Ditto! to what the others above have said. The timber is only worth what you and others are "willing to pay." Average selling prices usually establish what the timber is worth rather than placing a price on each individual tree as the forester has done.

Salvage sales are also discounted for quality and quantity value loss as well as the added logging costs and hazards involved.

The landowner will not sell the "downed timber" and the forester will learn that the job was "over priced". All will loose in completing the needed timber management of the situation.

[Brian Beauchamp]

I know that there are some times I speak to a landowner and think that they are crystal clear on things...give them a couple of weeks though and they'll have the details of which we discussed for hours all wrong. I'm not saying that this is the case here, but it may partially be to blame.

Also, when I mark timber, I mark it so that the buyers/loggers can compare measurements if they'd like...record defect, product class, diameters, merch. ht, etc...anything I use to calculate my volumes, they can see. They can go out and measure whatever trees in the sale that they want, ask for the data on those tree numbers and compare volume measurements.  I do not want them to trust me on it, I want them to understand how we differ in interpretation of measurements and adjust their bids accordingly. Did he give you any avenues to check his measurements/volumes? If so, did you check them?

As for the tree that the forester quoted a price on, that may have been a bit irresponsible, but if the reserve bid price was still too high for you, then you really would not have paid 'double' for that single tree you mentioned...you would not even pay what the forester quoted to the landowner if you think about it. People...and I'm guilty of it too...tend to focus on individual tree value too much when they're out actually looking at the timber. They should be thinking of the revenues and costs more entirely...what is your process that you go through when considering a bid? By the way, I'm not trying to be critical of you on it, I'm just trying to connect myself to your point of view a little more. I'm still relatively new to things, so I still have a little bit of a disconnect yet.

[Frickman]

Brian,

Timber bid = Gross sales of product - logging costs - trucking costs - expected profit. What's left is what I bid. No emotion involved, just dollars and cents.

[Brian Beauchamp]

Brian,

Timber bid = Gross sales of product - logging costs - trucking costs - expected profit. What's left is what I bid. No emotion involved, just dollars and cents.

I wasn't suggesting that you were being irrational in the way you come up with your bid offers...just wanted a little more detailed look at your end of things...like how you verify the forester's measurements...analysis of haul restrictions/how haul costs may vary with load size, etc. Things they I may not see on my end that may be obvious to you.

[Ron Wenrich]

I've been on both ends of timber sales.  I have sold timber as a consulting forester and have bought timber as a procurement forester.  Selling is a whole lot easier than buying.  You can lose your job if you don't buy timber at a price that's profitable.

Do you really think guys go out and look at your measurements?  I've found so many errors on forester perspectuses, that I know which ones I can trust and which ones I can't.  If guys aren't cutting your scale, than your $/Mbf will reflect that.  Scale a tree for a lot more than can be cut, you'll get better volume, but the final sale price will be uneffected.

The only things that most guys look at is the number of trees, the diameter, and the species.  From there, I can tell how well you scaled the trees.  If the diameters are not measured right (I ran into one forester who didn't know how to measure them consistently), your volumes will be off dramatically.  You won't be selling too much wood, either.

I do like to see how many board feet there are by diameter class.  That will give me a good idea how you scale.  I ran into one forester that was pulling logs from limbs and adding them to the tree scale.  He never cut a tree in his life, but was willing to tell others how things should be bucked.

I really don't need to know how much you have estimated the timber to be worth.  I'm not bidding against you.  I'm bidding against the mill up the road or the logger over in the next county.  Its kind of like a game.  I know what they're interested in, and how much they pay.  They know the same about us. 

If the quality is pretty good, then we can throw a little more on it.  If its close to the mill, or we need it, then we can pay the premium.  If its pretty much run of the mill stuff, then we'll just be putting a bid in.  If we get if, fine, if not, then that's OK too. 

But, if you come out and tell me how much a single tree is worth, you better have something to back that up.

[Geoff Kegerreis]

Appraisals for small sales, especially for sales that are less than adequately merchantable, I don't bother bidding out.  Basically, I'll go to a few guys that I know do good work, show it to them and take the highest (within reason) price.

I always appraise the sale before I bid sales out, but I almost never share those figures with the landowners.  There is such a huge discrepancy in the bids sometimes that the appraisal may not eve come in close - and the final figure could be higher or lower than what the appraisal suggests.

We have over 1,000 buyers, brokers, truckers, etc. in the state of Michigan...How could ANYONE know all the markets that are out there?  The bottom line is you can't, therefore highest bid when the power of the full market has been harnessed = value of the sale under the decided conditions.

[Texas Ranger]

Welcome, Geoff, think your relatively new here, and I/we extend a a welcome to all new folks.  Did Joe troll you in here?

[Frickman]

Brian,

To answer your question, here are some of the things I look at that others, including some foresters, might not.

1. How the forester scales. You get to know how different foresters scale, and how accurate they are to what you can cut out. Ron discussed this above. Certain foresters you just multiply their numbers by a certain percentage and it will be right on to what's actually there. Most local consulting foresters use the scribner scale. That's OK, but most of the local industry uses doyle, so you have to take that into account. Usually I can do like Ron and look at the number of trees, diameter, and volume and can tell how close you are. I too have run into foresters scaling limbs. The one big thing I watch is some foresters will seperate high quality logs and give you a seperate sub-tally on them. They'll throw alot of mediocre logs in that sometimes.

2. Hauling. I look at the distance to market, both my mill and other mills I sell to. The longer the haul, the more it costs, and the less I'll pay. That's why I don't buy timber 150 miles from home. I could stay in a motel while I cut it, but it costs me too much to get the logs home. Also, I look at what kind of restrictions are on a road, usually weight. A sale on a state highway with no weight restrictions will bring more than one three miles back a 10 ton township road. Interestingly, those sales on weight restricted roads are a specialty of mine as I have the equipment to haul the logs over these roads without having to bond the roads. This adds to the costs, thus I pay less for the sale.

3. Ease of logging. If a sale is easy to work, nice gentle grades, no cliffs, no streams to bridge, little or no dozer work, short drags, etc., it costs less to log. Therefore, I can pay more. If I have to skid or forward logs up to a mile over four stream crossings, build three hundred yards of haul road out to the blacktop, doze a landing into a hillside, and pull a third of the logs out of a steep gully, I'm not paying as much. I have a set cost per thousand feet I start with under ideal conditions. As things become more challenging I add to that figure. If my logging costs go up, my timber bid goes down.

4. Other factors. Are the landowners easy to deal with? Or are they going to follow you around and nit-pick you about everything you do? And if you run into bad weather, will they give you an extension? The summer of 2004 was the wettest summer on record in our parts, and alot of timber harvests weren't completed on time. I was lucky in that my landowners had alot of common sense and gave me extensions until the weather improved. Other loggers in the area weren't so fortunate. An easy going, down to earth landowner is the greatest thing in the world to a logger. An uptight, demanding, know-it-all from the city is about the worst. I've had them both, and I prefer the former. And I try to avoid the latter.

How about security at the harvest? Will my equipment be parked behind the landowner's barn out back, or along a lonely road in the middle of nowhere? And how secure are my logs? If the log deck is hidden a half mile back on a farm through a locked gate I can be more flexible in my trucking arrangements than if it is along the blacktop along that lonely road.

How much do I need the timber? Like Ron says, if you need it, you'll pay more. If you have a year's worth of timber bought, you just put in a decent bid.

I could go on, but you can see there is alot more to bidding on and buying timber than species and board feet. The philosophy I work by is that I don't need to buy every tree out there. I only need to buy enough to supply my business. I pass on alot more timber than I buy.

[Ron Scott]

Frickman,

Well said, good points from the buyers perspective in how they determine their bid/ purchase value. All are variables that should be considered in any site specific timber appraisal.