Standing Timber Can Be Good Source of Added Revenue

| 9/3/2015 9:47:00 AM

Country MoonStanding timber can be an enticing way for landowners to increase their yearly revenue as long as the scales are balanced between the property owner and the timber buyer. Devastated by the uncontrolled logging, fire and agricultural development of a century ago, forests have recovered dramatically. Mature stands are now abundant in many regions and can provide additional financial assets. For many farmers this can be a Godsend that will help offset years when crop yields are compromised.

The upper Midwest states of Minnesota, Wisconsin and Michigan are among the most heavily forested in the nation with 41 percent of their total area in forestry land. There are a dozen major conifer and 50 major hardwood species. Do a little homework and know what kinds you have before contacting buyers, as this will definitely give you the edge.

Demands are intensifying on the timberlands in spite of growth. Commercial expansion and “rural sprawl’ are the main reasons. However, cutting is actually good for the land if done properly. It removes the mature trees in their prime and allows for regeneration.

Timber is sold either per unit or with a lump sum. If it is sold per unit, a price is negotiated per tree and the buyer pays after it is cut and the volume is determined. With a lump sum payment, the buyer and seller agree on a price for all the timber and payment is made before it is cut. There are no daily market prices for standing timber as there are for crops and there are no government support prices, but rather the law of supply and demand rules in the timber business.

Many factors determine the value of lumber. Quality and grade is the big one. The straighter a tree is and the fewer branches it has, the higher price it can command. These are called clear logs because they have fewer knot holes, which make them better for board lumber, veneer and export products.

Diameter is also a major factor. Log rules use the diameter of a trunk at 4 1/2 feet above ground and the height of the tree to determine how many board feet each tree will yield. Then price is usually negotiated per board foot. Beware of buyers who use high grading. They will walk your land and select the most commercially valuable trees from the stand, leaving the inferior ones. You will be hard pressed to find any takers for the ones left behind. For this reason, lump sum purchases can be to the seller’s benefit.

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