Business Basics for a Timber Sale

      Sawmill pros and foresters advise a landowner on how to approach structuring a deal to cut and mill standing timber. July 30, 2007

Question
My grandmother is selling about $100,000 worth of black cherry and some red oak. The logger who gave her this price is cutting it on the half. So when he is done, she should get a check for $50,000. This did not sound correct to me, but I know nothing about this. Can anyone tell me if this is a fair deal? If not, what should he get for cutting and hauling this timber? This is in PA on rolling hills and the log roads already are there, just need cleaned up a bit - easy job in my mind.

Forum Responses
(Sawing and Drying Forum)
From contributor W:
No, that is not a good deal. I suggest that you discuss the situation with a forester. I am a forester, but I work in the South and do not have experience with cherry. It seems to me that the cherry is worth much more than the cost to log it. I would definitely check it out. You could also check with your State Forestry Commission for assistance.



From contributor Z:
They often sell walnut here on the shares. 50/50 is not normally a good deal for the landowner. I suggest to landowners to bargain for a bigger piece of the pie, say 75/25.

My last landowner's deal was for over 200M ft of walnut. She had the logger agree for 67/33, with the logger cleaning up the tops. I suggested: the tops are not going to hurt a thing, land will remain in a forest situation. So therefore, try to renegotiate for 75/25. Have not heard back from her, will see. My job as a forester in this situation is advisement; I'm not allowed to act as the landowner's agent.

PA should have many timber buyers; is your grandma getting bids? I'd start out by contacting her state forestry folks.



From contributor S:
Don't let her sign anything until she and you understand a lot more about the deal! Get bids, many bids, and go out of your area for a few bids too. Local guys all tend to compete in the same market and can keep the prices low by knowing the other guys' price ranges. Consider a broker (although it is another chunk of change out of your pocket). Get references, get everything in writing, get a lawyer (another chunk of change). Consider the method - clear cut or selective harvest - and consider the damage that they are going to do. Go look at the site that they are on right now and watch them (you will be horrified).

Take some time and learn all you can. Barring a disaster, the timber is only going to go up in value. Learn about timber stand improvement projects and other methods of harvest such as continuous or sustained harvest. Consider harvesting smaller tracts to get a taste for the process. Find a timber cruiser to get an independent value of the crop. Talk to others in the area that have had harvesting done in the past and take notes. Consider the tax liability and any permits and other regulations. Nothing is ever as easy as it seems.



From contributor T:
100 grand worth of black cherry in log form is a lot of logs! I don't know what amount is fair to seal the deal. Factors that I believe you should take into thought:

- What size do these trees average?

- Would you be better off looking for specialty markets (looking for specialty sawmills to buy the logs directly and have them do the logging)? This may work if the logs are unusually large.

- Consult your local forester for sure.

- Check log form board foot values at the places the logs will be going to. I know of a large place in PA called RGM Hardwoods, and it is likely the logs may go there.

- Logging may go quickly if the logger is good. This doesn't mean it is an easy job. It means the guy knows what he is doing. Logging is something like the world's second most life threatening job next to deep sea fishing. These guys also have a lot invested in their machinery.

- Quote the job with different loggers. Prices will most likely vary a lot.

- Be aware of the logger. Good or bad they are all just a bunch of adrenaline junkies. For every good one there is a bad one. This opinion is from my experience with many of them, but I do hope everybody finds me to be wrong.

- As far as the cutting goes (all in all, it probably depends on your local laws - which is also why you need a forester), it makes the most sense to do selective harvesting, and to have the logger cut the branches up so all the leftover wood is in contact with the ground, which promotes decay, sending valuable nutrients (and eyesores!) back into the ground.

- Also, there is no reason for some of these guys to leave two foot tall stumps behind. This is a waste that I don't understand at all. The new Bailey's catalogs shows a perfect picture of a logger committing this sin, by cutting the log 3' up in the air!?



From contributor W:
Could you provide a little more information? Is the 100 M$ of cherry the value on the stump or the value delivered to the mill? That is a big difference. I think that you should get some help from a professional forester and put the timber up for bid. It is worth too much to do less.


From the original questioner:
Thanks for all of your responses. I am learning a lot. The bad part of this is she has already had a large part of the trees cut. She is a very independent person and did not tell anyone till the job was done. The logger left and is to come back to cut more, so I want to find out more before she loses any more money. I have contacted a local forester and am waiting to hear back from him.


From contributor Z:
As a forester, I occasionally get called after the contract has been signed. They want me to tell them if they got a good deal or not! I have a difficult time dealing with this situation. In one case, the logger purchased mostly grade saw logs for pallet grade tree prices. I think I finally said something to the effect of, "I believe you could have gotten a price. We need to discuss some Timber Stand Improvement, TSI, after the logging is completed."


From contributor U:
These responses are very good. All seem to be concerned that she get a fair price and that her land is taken care of. I can only add my concern that she doesn't get left with a raped forest and nothing to show for it.

Contributor T, I'm with you about the valuable butts. They claim that the sap accumulation in the butt creates sawing and drying problems, the butt swells create a log with so much taper that the extra log yield is not worth the handling problems, and the butts have more defects (hollows, etc., in our eastern hardwoods). They have good reason in their claims but are leaving behind what is the usually the clearest and most valuable part of the tree.



From contributor O:
You never have the logger do the marking of your timber. Did anyone from the family go with the logger while marking trees? Do you know the board footage of the cherry? Sounds to me you have a lot of trust in this logger? I had a timber harvest 2 years ago and a forester helped me immensely on marking the trees to get the most from each tree. I knew the board footage ahead of time and then did sealed bids. Got rid of a lot of inferior logs along with some veneer quality logs and averaged a little better than $1.00/bdft on the stump. And the most important thing is I still have a woods left after the cut.


From contributor T:
Those are interesting reasons that I didn't think too much of. I understand the taper issue, but that's just part of a day's work to me. I find it hard to believe, but an old farmer once told me that he only cuts trees down after some sort of moon phase, because it somehow drives the sap down to the roots. I don't know what to think of this. Crazy, or little known fact?

From contributor S:
Felling, sawing, splitting by the moon? Don't knock it. The old timers were a lot more in tune with nature than a lot of us modern folks. Generations of experience and paying attention and working more closely to the material may have some credibility. (I just wish that I knew all of the theory.) I recall that one or more of the Foxfire books talked about woodworking according to the moon phases, such as splitting shingles. When an 80 year old offers advice to make things easier, I tend to listen. (Well, I am trying to learn to listen.)

As for the three foot stumps? Well, it is easier and possibly safer to take a tree down higher off of the ground for a couple of reasons. Keeping your cut at a comfortable working height makes the day less painful on the back, staying on your feet as opposed to kneeling makes a getaway a lot quicker. Also, the flair is prone to split less predictably, may contain really stressed wood that will not hinge as hoped for, and is just that much more wood to saw through. Consider that the pie is two cuts and the hinge is the third. If the tree is 4" thicker at the flair, that is up to a foot or more of cut added up and then multiplied by the day. Also, big mills pay best for the perfect looking logs.

Personally? It is a waste of wood. I know of a couple of good climbers that will limb and section out the tree so that the flair is in a short 10' or so log when feasible. Traditionally the flair was considered waste by the mainstream industry, but it is becoming more and more usable as the term for scrap has become "highly figured".

After the logging, it is time for some TSI. Prune back the damaged limbs and others that need it. Go ahead and harvest a few more of the damaged trees that will not survive or produce any more. Fill in or level out the ruts left by the machinery to stop sprained ankles and stop mosquito breeding when they fill with water. Get the slash as close to the ground as possible, or piled remotely before spring to give new growth a chance and speed decay and help control erosion. Replant heavy and then thin heavy. Time to start reading up on forest management.



From contributor O:
I'd also talk to an attorney, as it sounds like this logger has already established an agreement with your grandmother. You may also want to contact your grandmother's neighbors to make sure this logger has not trespassed on them. Try to get an injunction to proceed on this logger until you can get a better idea of the true value of the trees to be cut.


From contributor K:
Sounds like your logger has been convicted before these guys know all the facts. There are a lot of variables. I would go talk to the man before I considered him a crook. Get some references. Does the work he's done look professional?

Some foresters are log brokers - they get paid a percentage of the gross. They may or may not do what's best for the timber owner or timber stand. Loggers and foresters can be good or bad, just like anyone else. A smart logger knows the log market better than anybody and that's what you need when you're selling your timber. A good logger can be your best asset. And yes, we're out there!



From contributor S:
Ain't no doubt it, loggers get a bad rap. But I ain't met one that didn't deserve it. Just kidding. It is a tough job, physically, economically and technically. If you find one out of ten in any trade that is good, you would be lucky. The truth about loggers as I have seen it is, the guys doing the work are not arborists, they are grease monkeys and equipment operators. If they are to take one tree in particular, they will have to cut a path to it or knock over others to get to that one. If they are after oak, then pine is trash and in the way. If they are after big pines, then the little ones are just unlucky enough to be run over.

Now you try to jump on any of their machinery and do a neat job. Try to turn without tearing up the earth under you wheels or tracks. Hell, let's say that you go into the woods with trained elephants that can step over and around anything on the ground without too much soil damage; let's see you drop a tree without hanging it in another or stripping the limbs off of another. Now do it and try to be able to meet payroll and pay for fuel and keep the repo man off of your back. What is it like to have to do a million dollars worth of work to pay yourself $10,000? So the guys have been doing it enough to keep afloat or even turn a profit. Now they will tell you that they will do as little damage as possible, but what is a little damage? Do you really expect them to tell you that they are gonna make your woodlot look like the Arden Forest, after the war?

The thing is that you have to do some research and learn the value of the timber and then what it is actually going to pay. How it will be logged, what if any reclamation will happen, and just what exactly the loggers will be doing on your property.



From contributor Y:
Not knowing all the facts, I think you guys are a little down on loggers. I have a friend that just did a selective cut on 2000 acres on his ranch. They took out saw logs and chip logs and piled all slash. He hired the loggers and truckers and brokered the logs and his costs ran 55% of the gross sale. So maybe she didn't do too bad.


From contributor O:
I'm not downing loggers, but I am skeptical of how this transaction took place. I don't have the facts of this sale, but it sure sounds to me that a single elderly lady could be taken advantage of fairly easy if she doesn't know the board footage to be cut and the stumpage value ahead of time. There is a lot involved in a timber sale - marking trees, a legal survey of your boundaries, and the best way to sell is by sealed bids detailing how the cut will be done (time frame), leveling of logging trails, reseeding, etc. What about all the tops? Will they be chipped and sold for firewood? Damage to other timber trees not marked usually are paid two times market value. All these things keep the loggers honest. But of all the advice, get everything in contract form or you will be sorry.


From contributor T:
I'm not trying to put down loggers either! My experiences with them just vary a lot. Some of the guys in my area just want a day's pay so they can support their heavy drug habits, and these are the guys that make the stereotypes sadly. I also have met plenty of loggers that are passionate about their work, and they do a very professional job. I too am a bit skeptical of how this job is taking place - a logger possibly taking advantage of an older woman - but it is also possible this isn't true at all. A 50,000 check does sound nice for not even having to work, though!


From contributor Y:
Going by what I have read so far.
1. She is a very independent grandmother.
2. The logger has already logged part and is coming back to finish the job.

If she is anything like mine was, she knows what she is doing and if you tried to tell her different, she would flat out tell you where to go. Like I said, we don't have the facts.



From contributor K:
Here's the way I set up a logging job. If the land owner decides they want me to log their land, I will help them obtain a timber harvest permit. When you apply for the permit, you have to submit a logging plan that abides by all the regulations. Wetlands and streams have to have buffer strips, wildlife trees must be left, with a reforestation plan, etc. Before a permit is issued, a state forester will come and walk the job with you to make sure you have identified all the water types correctly, that your planned roads are legal, your road abandonment plans are adequate, etc.

Once a permit is granted, it's time to sign a contract. The two parties hammer out all the details. Sometimes different species are logged at different percentages. Pulpwood may be negotiated at a different percentage than saw logs and so on.

Once you have a signed contract, you obtain purchase orders from the mills or brokers you intend to sell the logs to. The logger and the timber owner are on the p.o. and a split payment is set up according to the percentages agreed on. That way the logger doesn't handle the timber owner's money. Every time a load of logs leaves the job, a numbered load ticket is given to the timber owner, the mill and the logger. The original stays in the book. Use only 1 book at a time for the job. When the logs are delivered to the mill, the load is scaled and graded. A scale sheet is then sent to both the logger and the timber owner. The ticket number on the scale sheet will match the load ticket. This way there is a paper trail for each load taken off the property. The land owner should be responsible for collecting the load tickets, making sure they are in numerical order so no loads can leave without one.



From contributor O:
You must be an independent logger? The practices you mention sound like you are following BMP guidelines for loggers - great! I disagree with your log tally with the sawmill - too easy to cheat especially if you are well acquainted with the sawmill owner. What's a paper trail if it doesn't get recorded? The best method for a woodland owner is to sell by the bid method. If anyone is interested, they look the woods over and send in a sealed bid. The winner of the bid is notified and landowner is paid in full before any cutting is done. No keeping track of tally sheets or contacting sawmill to verify truck loads of timber - it's a done deal. Landowner is happy and logger knows ahead of time the approximate board footage of marked trees he will be getting paid for at the mill. There are many good loggers out there; it only takes one bad one to give all loggers a bad name.


From contributor Y:
I don't know where you are, but where I am it doesn't work quite that way. If you want sealed bids, the mills will send their cruiser out and lowball the stumpage. If you want top dollar, you log and broker the logs. That way you know the bf and the grades going out.

About the 2x damage on unmarked trees, I don't think that would work unless you clear cut. Around here it's pretty hard to fell a tree without damage to 10 others. We deal with multiage stands and whole tree skid to the landing.



From contributor K:
On the west coast we have an independent log scaling bureau. They are supposed to be independent of the logger and the mill but they work in the mill's yard and the mills pay the bureau. The timber owner and the logger are at their mercy once the logs are delivered. I agree with that lump sum bids tend to be low and sometimes the winners bring their own paint cans. The system in place seems to work well. But the timber owner needs to make sure loads don't leave without a ticket. If loads get stolen off a job, they can be sold anywhere in anybody's name.


From contributor O:
I'm in Eastern Ohio and the way most educated woodland owners here sell their timber is by the sealed bid method. The landowner hires a timber consultant or State Forester to cruise the timber to be cut. Each tree to be cut is marked with a certain colored paint which is outlined in the bid guidelines. Each logger or sawmill owner sends one of their workers to view the woods and enters a sealed bid to the timber consultant to be opened on a specific date. The guidelines on the bid sheet specify the paint marked tree by specie, size, and bdft using the Doyle Method. I agree that logs smaller than 20" are under estimated in bdft compared to the International Method, but that would be incentive to landowners to wait until their trees reach that size to timber. As mentioned, this is a contract, and the landowner will be paid in full before any cutting takes place.

Any logger caught with the same color paint trees were marked with violates the contract and will be removed from premise. I have heard of cheating, but they risk thousands of dollars just bringing the paint with them. Your way, the landowner has to be glued to his property at all times to keep everyone honest.

As far as damaged trees, if the property was never logged before and has no logging lanes, there will be damage to other than marked trees. I'm talking about what was mentioned about the loggers plowing through trees just to get to one tree. Where it is abuse, they should pay 2 times the value. The landowner is in control of how the lanes are put in and should be addressed during the bidding process.



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