2020 Indiana Consulting Foresters Stumpage Timber Price Report

This stumpage report is provided annually and should be used in association with the Indiana Forest Products Price Report and Trend Analysis. Stumpage prices were obtained via a survey to all known professional consulting foresters operating in Indiana. Reported prices are for sealed bid timber sales only (not negotiated sales) between a motivated timber seller and a licensed Indiana timber buyer. The data represents approximately 10 to 15 percent of the total volume of stumpage purchased during the periods from April 16, 2019 through April 15, 2020. This report has been published since 2001.

The results of the stumpage price survey are not meant as a guarantee that amounts offered for your timber will reflect the range in prices reported in this survey. The results simply provide an additional source of information to gauge market conditions

Categories of Timber Reported

The prices reported are broken into three sale types; high quality, average quality, and low quality. A high quality sale has more than 50 percent of the volume in # 2 or better red oak, white oak, sugar maple, black cherry, or black walnut. The low quality sale has more than 70 percent of the volume in # 3 (pallet) grade or is cottonwood, beech, elm, sycamore, hackberry, pin oak, aspen, black gum, black locust, honey locust, catalpa, or sweet gum. The average sale is a sale that is not a low quality or a high quality sale as defined above.

In the 2008 report some minor adjustments were made in the categories from the previous surveys. White ash was previously included as a component of the high quality sales and hickory was previously in the low quality group. No changes have been made in the categories so the 2019-20 data should compare well with the data collected since 2008.

Decreases in Sales Activity and Volume Sold

The decline in the number of sales may be due to several factors including but not limited to: the negative impact of the tariffs on certain species particularly red oak, recommendations by some foresters to delay their sales until invasive species are controlled as the disturbances to the soil during the harvest exacerbates the their spread and increases the cost of their control, the decline in the ability to still salvage the ash mortality caused by the emerald ash borers, and more recently Covid-19’s effect on the economy (although the reporting period ended on April 15, 2020).

There were 16 consulting firms that reported in 2020 which is an increase from the 15 that reported in 2019 (2018: 16 firms, 2015-2017: 18 firms). The main 14 firms have reported every year since 2011 although the configuration of several of the firms has changed due to retirements. The data from 14 firms has historically represented over 95 percent of the total sales reported making the data very consistent.

In 2019-20 there were 183 reported sales (plus 3 negotiated sale), down significantly from the last few years and the lowest total reported. In 2018-19 there were 230 sales (plus 6 negotiated sale), 2017-18 there were 212 sales (plus 8 negotiated sales), and in 2016-17 there were 310 sales (plus 16 negotiated sales). The number of sales has been declining for several years; 339 sales (plus 20 negotiated sales) in 2015-16, 368 sales (plus 12 negotiated) in 2014-15, and 330 sales (plus 14 negotiated) reported in 2013-2014.

Decreases in Volume of Timber Sold

The total stumpage volume sold also decreased to 17,494,018 board feet (also 187,861 board feet – negotiated sales). These numbers are similar to levels seen during the recession years of 2009 (17,687,648 board feet) and 2010 (19,256,436 board feet). The numbers are down from 21,123,950 board feet (plus 710,410 bd. ft. in negotiated sales) reported in 2018-19 and 19,630,108 board feet (plus 642,774 bd. ft. - negotiated sales) in 2017-18. The decline has been observed for several years with higher volumes sold in 2016-17 (24,700,232 board feet plus 983,276 board feet, negotiated), 2015-16 (29,044,240 board feet plus an additional 1,257,863 board feet, negotiated), and the record reported in 2014-15 (reported of 36,773,866 board feet plus 683,235 board feet, negotiated). The historical average of volume sold has been approximately 25 million board feet.

The volume for the high quality sales also declined to levels seen during the recession in 2009 and 2010 with only 5,806,549 board feet sold, down from 2018-19 when 7,650,681 board feet were sold, and 2017-18 (6,819,117 board feet), 2016-2017 (8,089,611 board feet), 2015-16 (7,728,890). The highest total was reported in 2015 at 11,861,259 board feet. The volume reported between 2011 and 2014 was between 8.5 to 8.7 million board feet.

The medium quality sales also were at levels seen during the recession with a volume of 9,886,553 board feet sold in 2019-20 when around 10 million board feet were sold. Last year a total of 12,168,667 board feet were reported with 12,075,284 board feet reported in 2017-18 which are down from the 14,928,599 board feet reported in 2017, the 19,782,273 board feet reported in 2016 and less than half of the 22,606,525 board feet reported in 2015. An increase in ash on the market due to mortality or pending mortality caused by emerald ash borers likely influenced the high volumes sold in 2016 and 2015.

Lower quality sales also increased to 1,800,916 board feet up from 1,304,602 and 735,707 board feet from the last two years but more in line with the 1,682,002 and 1,533,077 board feet reported in 2017 and 2016 although down significantly from 2,486,082 board feet and 2,657,366 board feet in 2015 and 2014 respectively. Historically the volume of lower quality sales has generally been around 3 million board feet.

Volume is Down but the Overall Price is Stable

Total timber value sold in the 2019-20 reporting period dropped proportionately to the volume sold to $11,315,225 which is down from 2018-19 ($14,057,036) but similar to $11,878,170 and $12,272,227 reported in 2018 and 2017. The high quality sales brought $5,431,134, the medium quality $5,331,160, and the low quality $552,931.

Interest in Sales Returns to more Historic Levels

The number of bids per sale decreased from the higher level of interest observed the last couple years to more historical levels. A total of 940 bids were received for the 183 timber sale for an average of 5.14 bids per sale down fairly significantly from 6.06 bids and 6.07 bids per sale the last two years but similar to the historical average of 5.09 bids per sale reported since 2000. The high quality sales received 6.41 bids per sale down from 6.93 bids and 7.85 bids per sale the last two years but similar to the historical average of 6.25 bids per sale. Medium quality sales received an average of 4.65 bids per sale down from 5.67 bids and 5.23 bids per sale reported in 2019 and 2018 but at the historical average of 4.64 bids per sale. The number of bidders on the low quality sales also decreased to 3.09 bids per sale down from 4.1 bids and 3.6 bids per sale the last two years also is similar to the historical average of 3.17 bids per sale.

Stumpage Prices (See figure 1)

The sales reported are generally lump sum timber sales where the buyers bid on all the trees (standing trees) that are marked (stumpage) which includes a combination of many species and grades (quality). The trees or stumpage are sold as a single unit. The higher stumpage price the last several years have been driven in large part by the higher stumpage price paid for black walnut and white oak. The spikes in the graph showing the stumpage prices are primarily due to the walnut component and to some extent the white oak component in the sales. Without these influences the graphs should follow a more traditional bell curve or skewed
bell curve with most stumpage prices paid falling within
the curve.

The average stumpage price for all sales was down slightly to $647/MBF from last year’s record of $666/MBF which was the highest since the report began in 2001 for all the sales and all the categories of sales.

The mean stumpage price for high quality sales increased slightly to $935/MBF (2019-20) from $911/MBF (2018-19) with the median value also increasing slightly to $865/MBF (2019-20) from $856/MBF (2018-19). These reported averages are record highs.

The mean stumpage price for the medium quality sales was down slightly to $539/MBF (2019-20) from the record $545/MBF reported in 2018-19. The median value was up slightly to $509/MBF compared to $483/MBF reported in 2018-19.

The mean stumpage value for the low quality category was down to $307/MBF from a record $349/MBF in 2018-19 with the median value also down to $320/MBF from $359/MBF.

This year there were 25 sales (13.7% of all sales) that brought over $1.00 per board foot which is slightly less than in 2018-19 (15.2 % of all sales) and the same as in 2017-18 (13.7%). The previous three years 2014-17 had between 9 and 10 percent of the sales bringing over $1.00 per board foot. This increase is primarily due to the high prices associated with black walnut and to a lesser degree the white oak prices with foresters and landowners trying to take advantage of those high prices. These very high value sales are generally outliers that distort the average stumpage value all the sales, which is why the median value is often the best indicator of value for most woods and sales. The highest stumpage price reported for a sale this period was over $2,186/MBF or nearly $2.20 per board foot. The lowest price was $190/MBF or about 1/10 of the highest price. This indicates the significant difference in the value of each tree which make it very important to know what you have and are selling.

Landowners should keep in mind that markets are only one factor to consider when selling timber. The condition of the tree is the most important factor that determines when it is the right time to sell a specific tree (what is the trees potential, is the tree increasing in value (what rate is it increasing) or declining? – is the trees condition (health and vigor) going to decline, stay the same, or improve?). Trees should be sold based on their problems or lack of potential rather than their current value. Another factor to consider when selecting harvest trees is what impact that tree will have on the health, vigor, and resiliency of the future stand? (Is it competing with a better tree or will it benefit or negatively impact natural regeneration, etc?). The lower quality sales are generally improvement harvests (commercial weeding) and the opportunity cost in lost productivity of the forest by not conducting these sales can be significant. Do you leave your weeds in your agricultural fields or gardens, why leave them in the woods unless they provide other benefits – they may occupy a considerable amount of space. Ideally, you should sell your good trees when they have reached their peak or highest potential. You need to evaluate the risk of growing the tree forward and the potential reward (the return can often be over 10 % annually) and then decide is the reward worth the risk? It often is. If done properly the value per board foot should increase in subsequent sales along with the tree growth, quality, and financial productivity or value of the trees in the woods. Many of the sales reported in this report have come from woods that have been well managed for many years, through several harvests. This is likely part of the reason there are fewer low quality sales reported and part of the reason high prices are reported. Good forest management definitely provides higher returns.

Figure 1 shows the stumpage prices for all sales, high quality sales, medium quality sales, and low quality sales held between April 16, 2019 and April 15, 2020. The curve indicates the range in values that the sales fall into. The jagged line at the higher end of the high quality and all sales lines is evidence of the variations in value some trees, especially high value walnut can have on the price.

All sale types—low, medium, and high quality—can be affected by sales with potential veneer or by the presence of a few high value trees, particularly black walnut and white oak. It is important for landowners reading this report to realize their timber typically will fall within the range of stumpage prices but probably will not fall into the outlying values. This makes it important to work with a professional who works for you when selling timber so that you know exactly what you have, an educated seller and an educated professional buyer generally results in a very successful sale.

The weighted average stumpage price by sale type (obtained from this survey in 2000, 2002, 2004, 2006, and 2008-20) is reported in Figure 2. The weighted average of the stumpage price is the total dollar value for each sales category. The median stumpage price per year for each sales category is reported in Figure 3. The median price is the amount where half of the sales are higher and half are lower. The price reported is per 1000 board feet ($/MBF) for standing timber.

Comments

Tariffs are still part of most discussions at this time. Indiana exports a considerable amount of high value timber and China was the largest importer. Exported timber is generally higher quality and higher value, and therefore, some species (especially red oak and black cherry) have been impacted more than the lower quality timber (pallet) and timber that stays in the domestic market (staves, quarter sawn, sugar maple, etc.). Because of the uncertainty and the volatility of the market related to the tariffs it is even more important to work with a professional forester that is looking out for your long-term financial interests. Now that the election is over we anticipate there will be some reduction in the impact of the tariffs.

Coronavirus – Covid 19

The coronavirus has caused a significant disruption in the economy and has impacted the markets for hardwood timber. The data in this report only covers the very beginning of the pandemic up to April 15, 2020. Next year’s data will show much more of the impact. We suspect the impacts on the market will reduce with the introduction of more effective treatments and a vaccine.

Standing timber prices (stumpage) often vary during the year and can change rapidly based on supply and demand. The prices are influenced by many factors including the tree species, the tree quality and size, your location in the state, the distance to various types of sawmills, the access to infrastructure, and the accessibility of the trees (steep slopes, water crossings, drainage, etc.), the size of the harvest, the terms of the sale, etc.

This report and the comments below are merely a snapshot in time and the markets can change quickly, it is therefore very important to work with a forester to get an up to the minute view of the existing markets.

•   Black walnut continues to be very good although it may have dropped slightly for the lower grades.

•   Black walnut prices are very good but that does not mean you should harvest at this time. Walnut markets are generally good and are generally less volatile than most species, so if the tree is good quality, healthy, and growing vigorously, patience generally pays off. If the tree is marginal it may be a good time to sell, as it’s kind of like grading on the curve, you are getting on bonus that may not be there in the future.

•   Red oak species demand and prices are down. Much of the lumber has been redirected to ties, mats, pallets, and other industrial products that don’t require higher grades.

•   Red oak demand and prices have dropped considerably likely due to the tariffs with China, although there seems to have been some improvement (fall of 2020) but it is still not very good.

•   Cherry markets appeared to be climbing out of a decade long slump last year (since the 2008 recession), but they have dropped back due the drop in exports.

•   White oak, especially higher quality and larger trees, is in demand and bringing a good price for staves, quarter-sawn logs and veneer. White oak markets don’t seem to be affected much by tariffs.

•   Hickory prices have generally been good although the markets are fluctuating. A longer contract (2 years) tends to bring a better price as it lowers the risk for the timber company when markets are volatile.

•   Poplar demand remains good and steady, especially for larger trees, although moderate in price paid. This species grows quickly and at higher densities and volumes per acre, therefore proper management can yield high returns.

•   Sugar maple demand is good, especially for white wood although prices are volatile. Sugar (hard) maple has strong domestic markets.

•   Low grade (pallet) demand was good but has been slowed considerably due to the coronavirus. 

The following are general comments.

•   The wet weather the last couple years has caused major issues with timber harvesting. It is important to work with the timber companies to ensure the process works for everyone.

•   Landowners need to have invasive species controlled prior to any harvesting. They are a slow moving wildfire that inflates (expands) rapidly after a disturbance such as a harvest.

•   Quality timber continues to sell well and draws more interest and a much higher price from buyers. This further demonstrates that management pays large dividends.

•   A few good trees can attract buyers to sales that are generally low quality or have small volumes making them possible to sell. Essentially you make money commercially weeding the woods.

•   Whole tree harvesting machines or fellers are being used more often in the state. These machines are ideal when making openings and when salvaging storm damage. They can also be effectively used in single tree selection harvesting. However, in this situation it becomes critical to have a highly skilled operator. It is important to work closely with your professional forester.

General Comments on Forest Management

Several of these comments have been made in years past but they are still very true today.

•   Have a plan to manage your woods so you and your heirs know what you have and what to do, now and in the future. Timber is a valuable asset that can appreciate rapidly and the income is deferred until the harvest and then it is taxed favorably as a capital gain (in most cases) so do your research and work with a professional consulting forester. Grow quality it pays. Patience can be an extremely valuable attribute. Procrastination can be costly if there are problems that need to be addressed like invasive species – early detection allows for problems to be addressed quickly and cost effectively.

•    Check with the local USDA – Natural Resource Conservation Service office in your county, technical and/or financial assistance may be available to help develop a detailed Forest Management Plan.

•    Plan early and thoroughly if considering a harvest to allow for control of invasive species, timing the markets, and better access. Contact the forester early to allow him to schedule the work and provide guidance.

•   Access and terms are very important when selling timber. Timber sales that had year round harvest access were in high demand and the buyers usually paid more for the convenience. Limitations to access such as “no harvesting during hunting season” and “no access when crops are in the field” will reduce bidders and result in lower bids. Give access strong consideration. In most cases the higher income from the timber will be more than the income lost from the acre or so of crops

•    To receive a premium price for your timber provide timber purchaser plenty of time (possibly 2-2½ years) to remove timber (especially with wet sites and possibly with the unknown affects of tariffs). A good map drawing showing the woods; location(s) of marked timber, access, fences, fields, roads, creeks, and possible staging or yarding areas make the process go smoothly with fewer or no complications. This is always important as good communication and documentation always pays.

•    Tenant farmers must be engaged and they must be cooperative for the harvest to run smoothly. Make sure they don’t work the field after the crops are harvested. This makes the access difficult or impossible.

•    Extreme weather conditions, primarily excessive wetness during the fall and winter have made it difficult for loggers the last couple years making it even more important to have everyone (landowner, forester, loggers, farmers, etc.) involved and willing to be flexible with the process. A return visit by the logging crew may be necessary when conditions improve to smooth trails and landings. It may be advantageous to improve or prepare old skid trails during the summer prior to logging when conditions are good.

•   Invasive plants (especially bush honeysuckle, burning bush, wintercreeper, Oriental bittersweet, ailanthus and others) continue to spread. Too many stands are being cut without pre-harvest control (poor planning) and the stand is overrun within a year or two of the harvest, negatively impacting the long term health, productivity, and regeneration in the woods. Invasive species need to be controlled prior to any harvesting. Cost share assistance is likely available to control the invasive plants thru the local Natural Resource Conservation Service office.

•    Invasive species control is also much more difficult and expensive after a timber harvest as the disturbance of the logging quickly magnifies the problem. Control the exotic invasive species first even if it means delaying the harvest for a couple years.

Consulting Foresters that have contributed to this report in alphabetically order include: Arbor Terra Consulting (Mike Warner and Jennifer Boyle Warner), Crowe Forest Management LLC (Tom Crowe and Jacob Hougham), Cruser Forestry (Brian Cruser), Christopher Egolf, Gandy Timber Management (Brian Gandy), Gregg Forestry Services (Mike Gregg), Habitat Solutions LLC (Dan McGuckin), Haubry Forestry Consulting (Rob Haubry), Multi-Resource Management, Inc. (Doug Brown and Anthony Mercer), Meisberger Woodland Management (Dan and Matt Meisberger), Quality Forest Management, Inc (Justin Herbaugh), Abe Bear, Stambaugh Forestry (John Stambaugh), Steinkraus Forest Management (Jeff Steinkraus), Turner Forestry, Inc. (Stewart Turner), and Rooted in Forestry (Mike Denman and Andrew Suseland).