Spring 2000 Volume 9, Number 1
MARKETING TIMBER
Many agricultural producers are considering harvesting portions of their standing timber as a means to offset lower-than-expected farm income due to drought or poor prices. But don't leap at the first chance to sell timber. We recommend that you pause and think about "marketing" rather than just selling trees. Depending on the size of your forest land holdings, timber sales may be an only once in a lifetime opportunity.
Landowners who do not prepare for a timber sale are likely to be dissatisfied with the harvest. Without proper management, landowners are likely to receive only a fraction of the timber's true value due to a lack of information regarding the timber stand's volume, products or marketing. But many problems that can been countered during a timber harvest can be avoided by following a few simple steps.
STEPS IN MARKETING TIMBER
Seek the advice of a professional forester. Your local county Extension service, state National Resource Conservation Service or Farm Service Agency should have a list of reputable public and private foresters who can advise you on forestry and logging decisions. Get references and seek a second opinion before harvesting.
Select and mark the trees to sell. Sell only those trees that have reached their economic maturity. If the timber harvest is done correctly, you can actually improve the overall health and vigor of the forest. Marking helps avoid boundary disputes with neighbors.
Know what is to be sold. Selling timber involves selecting in advance the number of trees to be harvested and determining what volumes and products are present in those trees. For valuable tree species, such as black walnut, it may be desirable to measure every tree to be harvested. A forest inventory done by a sampling technique is more feasible for less valuable stands like pulpwood.
Estimate the value of the timber crop. Other crops and livestock are generally not sold on guesswork, and standing timber shouldn't be either. The price of stumpage is influenced by many factors. These include trees species, tree size, tree quality, volume per acre of sale, distance to mill, site accessibility, logging difficulty, market conditions and your restrictions on harvesting and skid-ding techniques.
Decide how you are going to sell your timber. The most popular methods are negotiated sales and sealed bids. Negotiated sales are a commonly used method of selling timber, but they often produce a price well below what the timber is worth because the buyer has no competition and the seller is usually uninformed about the timber's true market value. Sealed bids general-ly produce the most desirable price for woodland owners.
Determine a method of payment that is best for your situation. You may want to contact the IRS or your accountant for current tax regulations before deciding which type of sale method to use. The two methods of payment are a lump sum sale and scaled sale. Which method you choose may affect your ability to claim capital gains treatment of timber sale income or whether you must pay self-employment tax. We recommend getting paid up from before trees are felled.
Advertise your sale to attract as many buyers as possible. A professional forester should provide you with a list of reputable timber buyers. Place an advertisement in several area newspapers and trade publications directing interested buyers to contact you for a complete description of the sale. Wide exposure to a variety of potential buyers will assure the maximum price. Also, make sure you include a statement of the right to refuse all bids in the timber sale notice.
Develop a written contract with the buyer. A contract does not need to be a complex document but should reflect what you and the logger/buyer have agreed. Make sure the logger is responsible for liability and workers compensation insurance and carries more than enough of both. Require the logger to follow Best Management Practices (BMPs). BMPs are cost effective, practical guidelines that allow timber to be harvested with minimal impact on your land. Require the use of a performance bond to ensure the buyer abides by the terms set forth in the contract. Plan for the next harvest. It is a good idea to have a reforestation plan developed before harvest begins. This plan should include a means of regenerating your forest. Whether you choose natural or artificial regeneration methods, a plan prior to harvest can make the job of reforestation much easier and less costly.
Supervise the timber harvest. Before the harvest begins, review the timber sales contract with the logger and walk the site to be harvested. Improper logging practices can have adverse effects on water quality, wildlife and forest regeneration. Once the harvest begins, either visit the area frequently or request the professional forester' to do it for you to ensure compliance with the contract.