Standing Timber Can Be Good Source of Added Revenue

Standing 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.

If you have a fair amount of timber acreage it may be worth your effort to get a professional consultation. What you pay out in consultation fees is usually offset by a higher price for the product. Competition is always good. You can also go the auction route or sell by sealed bid, which often leads to higher sales than auctions or negotiated sales. Remember, it never hurts to advertise, the more people interested, the better.

Just because you have valuable timber does not necessarily mean that it is viable for sale. Location is everything. Loggers use high capital equipment that is expensive to move. Low volumes or small acreages cannot be logged profitably. Consideration must also be given to the distance lumber must be hauled to the mill, accessibility to good roads and ease of logging. These all affect the price.

Another factor will be your neighbors. Sometimes a large forested area is shared by more than one landowner. We have a woods and pond that we share with two other neighbors. When it was surveyed, the property lines ran smack-dab in the middle. I imagine the surveyors were so thrilled with us!

However, this can work to your advantage. If a group of people in an area get on the band wagon and all sell timber, it will be more profitable for a logging company to move its equipment to one area for a higher volume. One word of warning, make sure boundaries are clearly marked. The last thing you need is a neighborhood feud over whose trees were whose.

Be sure to check the laws regarding the sale of timber in your area. Standing timber is sometimes considered real property while cut timber is personal property. This can affect your tax liability.

Of course the big thing to consider is reforestation and it is best to have this plan in place before the first cut. By doing this you can have a steady source of additional income not only for a single year but for many to come. It can be determined what the best mature size of a tree should be to be harvested. According to foresters, hardwood trees should be harvested at 14 to 16 inches in diameter. A properly managed hardwood tree, such as a red oak, adds 1/2 inch to its adult diameter each year.

Everyone looks for new sources of income. The sale of timber can be lucrative for landowners and lumber buyers alike. It can also be good for the land as long as a reforestation plan is in place. This just may be the avenue to consider for a few extra bucks and who couldn’t use a few.

Photo: Fotolia/yuratosno

  • Published on Sep 3, 2015
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