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“I HAVE TIMBER TO SELL”

Timber Sales and Marketing

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“Don’t just sell your timber, MARKET IT!”

We’re going to talk about how to do just that.

We want to help you maximize forest stewardship benefits and revenues when

harvesting timber.

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http://extension.psu.edu/natural-resources/forests/private/tools-resources/publications

Our goal is not to make you experts, but to raise your awareness. You will still need professional assistance.

Be sure to look at some of the Forest Management and Forest Stewardship publications posted to the PSU Extension web site:

Educating Yourself

Some timber harvesting data for Pennsylvania:• about half of forestland owners have harvested in the past• about one-fourth never intend to harvest• about one-third are not sure Photo Courtesy of Carl Martin, PAFS

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The Timber HarvestSelling timber is often a once in a lifetime opportunity. Do not take it lightly. Often times the revenue generated can exceed a year’s salary!

A timber harvest is a critical time in the history of a woodlot, as it:• can affect all values – not just future

timber• can help you achieve your objectives • is similar to a medical operation, as it

alters the system

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In the Plan:Short- and long-term objectives• Written descriptions• Management recommendations

Includes:• Property map• Schedule of management activities• Professional input

Decisions to Harvest Should be PlannedIf you don’t have a management plan for your woodlot then you should develop one with the help of a professional forester.

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Different Plan OptionsThere are different types of management plans. Some examples:• Forest Stewardship Program• American Tree Farm System• Timber Management Plans –

“Stand” Exams

Your plan should be flexible, but it should provide the long term guidance needed to maximize benefits from your woodlot.

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Why sell timber?The decision can help you achieve your objectivesBesides creating revenue, a timber harvest can also address other goals.

Before proceeding with the sale, determine your objectives, whether they are large or small: • What do you want your forest to

provide?• What do you want it to look like?

Examine your objectives to ensure that the outcome of the harvest/timber sale achieves them.

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Understand Your Own MotivationObjectives may or may not be financial.

Maximizing the production of wood products – interest in financial returnWildlife, recreation, water, and aesthetics – income may not be a top priority

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Make Your Own List of Objectives

• Preparing for regeneration• Maintaining growth rates• Improving stand value• Altering species composition• Improving wildlife habitat• Generating revenue• Developing recreation access and

activities, such as trails and vistas Imag

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Best Management Practices (BMPs)One of the greatest benefits of well-managed forests is clean water.

Timber harvesting can affect water quality and quantity.

Be sure to incorporate Best Management Practices (BMPs) into your timber sales.

Photos Courtesy of Carl Martin, PAFS

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The Minimum Standards of Good ForestryBest Management Practices will protect water quality and other forest benefits.

‘Best Management Practices for Pennsylvania Forests’ were developed by a team of natural resource professionals, forest landowners, scientists, and representatives from forest industries and environmental organizations.

BMPs ensure that both the short- and long-term aspects of forest management activities have a beneficial effect on the entire forest ecosystem.

This publication is available from the Pennsylvania Forest Stewardship Program by calling 1-800-235-9473.

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Photo Courtesy of Carl Martin, PAFS

Erosion & Sediment Control plans are required for each logging job that disturbs more than 5000 square feet.

Protecting your Site and Water Quality

This photo was taken from along a stream affected by the I-99 construction project

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Consider Wildlife

Timber harvesting can affect wildlife, both large and small.

Effects can be positive and negative, depending on the species. (Some species benefit by more open land and young forests, while others depend on a contiguous tree canopy and mature forests.)

Photo Courtesy of Carl Martin, PAFS

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Roads and TrailsTimber harvests can provide a

quality road and trail system. If they are well planned and

maintained, they can become a permanent asset used over and

over again.

Photo Courtesy of Carl Martin, PAFS

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Sustainable Forestry

“. . . to meet the needs of the present without compromising the ability of future generations to meet their own needs . . .”

Timber sales should be conductedin a sustainable manner

In conducting a timber sale, the buyer and the seller have a responsibility to the forest resource and its future. This is your responsibility as the current owner of the woodlot.

What do we mean by “sustainable forestry”?

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Silviculture: The theory (science) and practice (art) of controlling forest establishment, composition,

structure and growth

Proper Forest Management

Trees selected to remain are based upon several factors including:• Species• Quality• Health• Diameter• Spacing

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SilvicultureThere are different harvesting practices, and different techniques produce different results.

The key is to find the technique(s) or the practice(s) that are right for the particular stand of trees and that help you accomplish your objectives.

This is where knowledge of silviculture and wildlife species preferences for habitat are necessary.

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What Are You Leaving?IMPORTANT – consider what is left behind (residual trees and potential regeneration) – not just what is taken.

What you leave also affects many of your objectives:• wildlife habitat value • future management options• future income potential

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‘Silverculture’Getting those bucks today, not concerned with tomorrow

This is what we don’t want to be practicing.

This is Unsustainable Forestry.

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Objectives + Management

You may be inclined to think of profit only in terms of dollars, but a timber harvest can be profitable in other ways.

For example: it can give you increased access to your woods, provide increased hunting opportunities through improved wildlife habitat, higher resale value, and more.

= Increased Profits and Sustainable Forestry

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High GradingTwo types of high-grading:• Diameter-limit cutting: Only harvesting those trees above a

specified diameter (e.g., above 14” diameter) • Select Cutting: “Take the Best and Leave the Rest” – removing high-

value trees and leaving lesser value and poor quality trees

Unsustainable Forestry

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High-Grading Results :

• Removes high quality trees • Leaves smaller, weaker, and/or low value trees behind• Leaves standing trees vulnerable to damage• Maximizes immediate income yield but decreases long-term

income yield and limits long-term options

High GradingStill a common practice in Pennsylvania today, even though it degrades forest quality, reduces management options, and decreases future income potential.

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IMPORTANT: Get Professional Assistance

FIND A FORESTER WHO UNDERSTANDS YOUR OBJECTIVES AND IS ABLE TO HELP YOU PLAN AND EXECUTE THEM

Many landowners are skeptical about hiring a professional forester. They do not believe that using a forester will add value or that the value added will be lost by paying the forester.

• A study by the University of Georgia found that landowners who used professional forestry assistance received 23% more income per acre for their timber than those who sold the timber themselves

• Foresters can assist you with timber appraisals and can clarify tax implications.

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Sources of AssistanceThere are different types of foresters:

• Service Foresters• Consulting Foresters• Industry Foresters• Information Foresters

PA Bureau of Forestry employs Service Foresters and maintains a list of consulting and industrial foresters

Private Consulting Foresters prepare Stewardship Plans and offer other Technical Assistance

Industry Foresters work for Sawmills and Paper Mills

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Penn State Cooperative Extension has Information Foresters who offer education and information, present programs, write publications, and assemble the Timber Market Report

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When Hiring a Forester

Ask About:

• References•Other woodlots managed in the area

• Credentials / Experience• The contract / written agreement• Fee structure• Services provided• Time frame for accomplishing the work

Forestry expertise, market knowledge, experience with loggers, and sale oversight are all invaluable attributes of hiring a professional forester.Ask for references from their three most recent timber sales.

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1. Determine Access2. Set Sale/Property Boundaries3. Identify Species and Volume4. Select the Type of Sale5. Prepare a Prospectus6. Receive Competitive Bids7. Show the Land8. Prepare a Written Contract

The Timber Sale ProcessFollow these steps and you will be successful in meeting your timber sale objectives.

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1. Determine Access

Determine where the road access will be. Locate all the roads, trails, and landing/loading areas.

Access for trucks and skidders must be planned. Timber harvests can provide quality roads, which can become a permanent asset if they are well planned and maintained.

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1. Determine Access, continued

Investigate these issues:

• Are bonds required to use any township roads? • Do bridges that need to be crossed have

adequate weight limits? • Do any streams need to be crossed? Does it

require a permit?• Do you need to construct roads?• Do you need access across another property? (If so, secure these

agreements and be prepared to pay.)

Access that makes skidding and hauling easier will generally increase your profits.

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2. Properly Mark BoundariesVerify ownership and mark the sale boundaries.

No buyer will actually purchase the timber without verifying ownership.

Paint and flag boundaries (flags alone can be moved). Poorly marked boundaries only lead to problems. Well-defined and verified boundaries prevent cutting trees over the line.

Verify location of all boundary lines with neighbors. If uncertain, a survey may be necessary – it is part of the cost of the sale and can be deducted from your taxes.

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3. Identify Species and Volume (Know What You Are Selling)

APPRAISAL: This information comes from a timber ‘cruise’ or inventory, which identifies the trees to be cut. All trees to be harvested are measured, tallied, and marked with paint.

Marking includes both stump marks and stem marks at eye level on both sides of tree.

Marking gives potential buyers an accurate picture of what timber is being sold. It controls the harvest and provides consistency for potential buyers, in knowing exactly what they are buying and bidding on.

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Price Reports

Penn State’s Timber Market Reporthttp://extension.psu.edu/timber-market-report

You can sign up to have the Timber Market Report emailed directly to you or simply view it online.

You can also mail a request to:Forest Resources ExtensionThe Pennsylvania State University,320 Forest Resources BuildingUniversity Park, PA 16802

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Sample Timber Market Report

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Price Trend Price Average

Graph showing trend of Northern Red Oak over the past 10 years.

Prices are not adjusted for inflation, they are Nominal prices.

Sample Timber Market Report

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You can decide when to sellTiming is important

Follow price trends in the TMR or contact your consulting forester to know when prices are up and when is a good time to sell.

Wood is not a Perishable Product!

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4. Select the Type of Sale

Lump Sum Sale• Buyer submits a bid for all designated stumpage

(the value of the trees as they stand in the forest).• Simplest way to sell timber. • Paid in full before the timber is removed. • Requires accurate volume estimations up front to

establish a fair price.• Can be negotiated or sealed bid

What you are selling will help you determine this – lump sum or by the unit, competitive bidding or negotiated.

Is there a demand for the products you have for sale?

Photo Courtesy of Carl Martin, PAFS

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Type of Sale, continued

Scaled Product Sale• Based on prices per unit volume –

dollars/MBF, per Ton, per Cord, etc.• Landowner paid as the timber is cut and

scaled. • More complicated, requires more diligence.

• Can also be negotiated or sealed bid

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Describes What You Are Selling

5. Prepare a Prospectus

Outlines the requirements (terms) of the sale – used for advertising purposes.

The prospectus describes what you are selling, how the harvest will take place, and what the terms of the sale will be.

A landowner wanting to maximize the economic return on a timber sale should send the prospectus to as many potential buyers as possible.

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What’s in a prospectus?The “Invitation to Bid” (advertisement)

1. Describes what is for sale and where and when it will be available2. Includes terms, volume tables (by species and diameter), and a map of location3. Describes sale conditions and the timber that is to be sold• Identification of seller and seller’s agent• Location and size of sale area – Total acreage• Type of sale – Lump sum or per unit (ton, cord, MBF, etc.)• Species and Volume information – Stand Tables by species and diameter class• Duration of Sale agreement• Harvesting restrictions/conditions

Prospectus Information

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Prospectus Information

Terms of Sale:Bid deadline - opening date, time, and place.

A written sealed bid procedure is recommended. Seller sets a time and place at which sealed bids are due and opened. A successful buyer is selected.

Conditions of bid acceptance – Reserve the right to “accept or reject any and all bids”Provisions of payment – Generally 10% required from buyer upon bid acceptance

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6. Competitive BiddingCompetitive bidding, with all potential buyers notified, is the only method which will ensure that woodland owners get maximum economic return for their wood products.

Lets the market set the price. The more competition, the higher the sale price!

Bids can differ significantly. Different bidders have different markets and needs for wood. Bids are often very different for the same sale.

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Competitive Bid Variation

SALE A (9 Bids)

SALE B (6 Bids)

SALE C (10 Bids)

$5,100 $8,300 $28,5005,950 10,400 36,050

10,043 16,237 38,90011,396 16,848 40,00011,569 18,368 42,07511,767 18,755 45,01013,032 57,56013,259 65,83613,448 89,310

105,550North Central Pennsylvania sales

Important to consider if the highest bid will

meet your objectives.

Consider operator reputation, skill, and

professionalism. $8300 difference

Almost $80,000 difference!

Over $10,00 difference

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Understanding Markets

“The Price is Right”

To understand markets, let’s discuss prices:

What price would you pay for this can of beans?, . . .

What about this truck?

You might shop for the same vehicle at various dealerships, check Blue Book value, and compare options

How about this house?

You’d want an appraisal by a realtor, and to look at comparable houses in area

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So…How much would you pay for this timber?

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What’s it Worth??

$10,000 or $100,000?

To determine that, you may need a crystal ball….

or else educate yourself about market conditions and your woodlot to determine….

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The market determines price.

This brings us back to the first point – don’t just sell your timber, Market It!

Stumpage Value: the value of the trees as they stand in the forest.

The buyer develops this/her own estimate of the volume of timber and its value, usually by visiting the site, subtracting harvesting/processing costs, and formulating a bid.

This is the “stumpage” value.

What the market will bring!

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What affects market price (stumpage value)?• Weather/season

• Tract characteristics: location, accessibility

• Timber species, size, density, quality, and end product

• Volume harvested

• Logging methods used or necessary

• Distance to mills

• Sale conditions

• Insurance and other carrying costs

• Landowner characteristics

• Buyer’s needs / markets

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1. Determine Access2. Set Sale/Property Boundaries3. Identify Species and Volume4. Select the Type of Sale5. Prepare a Prospectus6. Receive Competitive Bids7. Show the Land8. Prepare a Written Contract

The Timber Sale Process

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7. Show the LandIf you are having a competitive bid, set a date to show the timber to all interested bidders. Discuss access, property boundaries, and terms of the sale.

Showing tours make a difference. • They show possible bidders that others are

interested. • Lets them know who their competition will

be. • Also lets the forester and the landowner

clarify any conditions of the sale.

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8. Prepare a Written ContractOnce the Bid has been accepted – now is the time to talk about contracts. Before a single tree is cut, the landowner and buyer should sign a written agreement which clarifies the responsibilities of both parties. A written contract protects both the buyer and the seller.

It is advisable to get professional assistance from a forester or a lawyer who knows about forestry operations.

In some cases the buyer will provide their own. Before signing, have it reviewed by your own lawyer.

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Seller’s Responsibilities• Designate timber to be sold

• Guarantee ownership • Define boundaries

• Permit access • Type of sale

• Method of harvest

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Buyer’s Responsibilities• Terms of payment

• Effective and expiration dates

• Comply with laws and bonding requirements

• Protect the resource – BMPs Relevant Rules and Regulations:• Chapter 102 Erosion and Sediment Control Regulations – plan required for all earth disturbance

activities over 5000 SF (area 70’ x 70’). Disturbing more than 25 acres requires a permit from DEP.

• Chapter 105 Dam Safety and Waterway Management regulations – governs the crossing of streams; construction of culverts, fords and bridges; and other impacts to water courses and wetlands. Requires general permit.

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Buyer’s Responsibilities• Proof of Workers’ Compensation and Liability Insurance

• Adhere to end of sale requirements

• Buyer is also responsible for:• how the site is left

• carrying out the work in a timely manner

• meeting utilization standards

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Joint Responsibilities• Transfer of title• Subcontractors

‒ Subcontracting requires prior written approval of the seller

• Performance bonds• Settlement of disputes

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Don’t Say It —Write It!

Protects both the seller and the buyer

A handshake is nice, but it isn’t a legal agreement.

If the buyer will not agree to certain terms of the contract it is better to deal with it before the cutting has begun.

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Handling the Sale Yourself

• Create a list of potential buyers

• Designate timber for sale & estimate value

• Contact as many buyers as possible

• Have contract legally reviewed

• Sign written contract before any work begins

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Focus on what is to be left (the residual stand and/or the regeneration), not just what you are taking

Photo Courtesy of Carl Martin, PAFS

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To Reiterate a Few Essential Points

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Get Professional Assistance

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Put it in Writing

A handshake is a good start, but always have a written contract.

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Good Forest Management Does Not Cost…It Pays!

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Other Sources for moreinformationThis publication, from the University of Wisconsin Extension, is a good source for further information about forest marketing. http://clean-water.uwex.edu/pubs/pdf/forest.timbersale.pdf

Numerous other publications are available from the Pennsylvania Forest Stewardship Program, free of charge, by calling 1-800-235-9473or going to the Renewable Natural Resources Extension web site: http://extension.psu.edu/natural-resources/forests/private/tools-resources/publications

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Presentation Developed by: David R. JacksonPenn State Cooperative Extension

Questions??