This isn’t always necessarily the case, but it usually is. Most Pennsylvania forest landowners may only conduct one or two harvests during their ownership tenure. USDA Forest Service data shows the net growth in board feet per acre per year for different age classes and different site productivity classes averaged across all timberland in Pennsylvania (Table 2). In many cases, they are hired by the landowner to do an assessment of the timber on the property and send notice of the sale to multiple Wood Dealers. How to Close a Cash Land Transaction In-House (Full DIY Instructions! The answer was s. As someone in the forestry profession, he had a natural eye for seeing the value of the natural resources that land has to offer (something that rarely occurs to most property owners, appraisers, and assessors). You may be surprised to learn that harvesting timber is one of the best ways to preserve the health of your woods. The intangible benefits of a forest, for hiking, biking, hunting or aesthetics, can be more valuable than the price tag that a buyer puts on the trees. The trees cut in each thinning can be sold as lower-grade lumber, pulpwood for paper, and pallet stock. It can be more costly per unit of wood removed to cut only a few, selected trees, rather than cut most or all trees in the stand. At these times, shifting consumer demands, changing markets, and even weather can affect prices. The dealers then submit bids to the consultant and the consultant oversees the harvest, which would typically be done by the highest bidder. Generally speaking, hardwood is considered the “cream of the crop” in terms of value. In this article, we’re going to cover all the essential information you’ll need to know in order to handle the timber harvesting process correctly. Under most conditions, financially optimal harvest ages are often considerably shorter than the MSY rotation. There are several variables that can have a big influence on the value of the standing timber on any property. In most cases, the mill will pay one lump sum to the Wood Dealer, who then pays the logger, landowner, themselves, and any other parties involved. If you harvest xmas trees as a way to thin out the stand, you can have early income. Timber harvesting is just one of many management practices--not an end in itself, but part of an integrated, long-term management plan. Harvesting timber is a valuable tool you can use to take care of your forest land while also serving as a source of income. A final thought. Sometimes the value will be more than enough to justify a harvest, and sometimes it won’t. By selling your timber, you are using a very easy way to get a large sum of money. Practically, prices are derived from the Timber Market Report (second quarter 2007, northwest area). Perhaps one of the most important financial decisions a forest landowner will make is determining when to harvest timber. Softwood is typically used for things like structural framing, flooring, decking, beams, poles, and paper pulp. For example, red maples approach this maximum before 150 years, while sugar maples can thrive beyond 200 years of age. Landowners should also think about revenue from the harvest and the implications of regeneration costs, income taxes, and other carrying costs associated with managing the land. *The standard deviation is a statistical measure of variability computed from all reported data. He started by telling me about the property he lives on – a 35-acre lakefront lot, which cost him nothing. Biological maximum refers to the age when a tree begins to decline in vigor and health in a forest. Factors affecting individual tree growth are competition among trees, sunlight, tree age, and soil conditions. However, if the landowner can find an investment today that receives a rate greater than 7 percent, then it would be financially wise to harvest now. PATLive Review: How Helpful is a Virtual Receptionist for Busy Entrepreneurs? By harvesting timber today, money received can be used elsewhere. At maturity, a typical stand may have 80 to 120 trees per acre and the volume of sawtimber can range from 5,000 to 15,000 board feet (BF) per acre. Landowners clearly need to consider multiple factors before making forest management decisions; financial return is only one of these. Timber is often harvested to create wildlife habitat or to remove diseased, burned, or insect infested trees. In this case, the landowner should wait the 5 years to harvest if he or she cannot get better than 7 percent from investing that harvest revenue (i.e., if the landowner's alternative rate of return is less than 7 percent). If the tree's expected rate of value increase is less than the desired rate, the tree is financially mature and, based on that criterion alone, should be cut. Trees in a closed-canopy forest may grow slowly. Dividing the expected future value ($2,436) from the present value the landowner can receive today ($1,800) results in a ratio of 1.4. For simplicity’s sake – it’s easiest to separate tree types into two basic categories. The rotation at which MAI is maximized is often called the biological rotation as opposed to the economic rotation (financial maturity). However, it should also be noted that over the past century, logging tactics have become much more environmentally responsible than they were when the early settlers first came to North America. Land has MANY potential uses. Tree size for forest products is expressed as diameter at breast height (DBH), which is measured at 4.5 feet above the ground on standing trees. In this example, waiting 7 years provides a return of 5 percent; waiting 14 years provides a rate of 13 percent; and waiting 21 years to cut the tree provides a rate of 18 percent. For most landowners, the decision to harvest timber is a difficult one. ), Wholesaling Made Simple! And in case you were curious what happens once they get to the mill, check out this video…. To establish a fair market value for ad valorem tax purposes, those harvesting under this method Poorer-quality sites may only have a few large trees. Your forest land is a renewable resource that can provide you with additional benefits and enjoyment when cared for properly. Situated in close proximity to the sawmill. The annual volume growth per year is 200 board feet per acre per year. This value increase can be expressed as an annual compound interest and compared with alternative investments or a desired rate of return. We recommend that you engage the services of a consulting forester and a timber buyer/harvesterwhen selling your timber. Let’s cover some examples of both hardwood and softwood trees…. When these two rates are economically equal, it is time to cut. Even if you could accurately predict which species will become more valuable over time, not all species are suited for growing on a particular piece of land. Often, a harvest design intentionally creates wildlife habitat and enhances biodiversity and, if done properly, will increase long-term timber value. Some are ready for harvest in just a few years and others may take 40 or more years before they are … This is typically the biggest human bottleneck and obstacle to a successful (and profitable) timber harvest. Those who care about improving the land should not select cut their forests. Timber is alive and has a lifespan as all other living things. Young trees generally grow faster in height than older trees, and they add relatively little stem diameter. Timber harvesting is an integral part of forest management. It is likely that some trees are growing faster than others. Given the costs involved, it only makes sense for a sawmill to utilize every last part of each tree that comes through their doors (and that’s exactly what they’ll do). If you can think outside the box, you may find that these natural resources hold a TON of hidden value – in some cases, it could be enough to pay for your holding costs, other times, it may be even enough to multiply the value of your investment many times over. For this individual tree, it pays to wait at least 7 years to cut the tree if your alternative rate of return is 5 percent or less. Volume growth of trees over time showing optimal rotations. Our few advertisers help us continue bringing lots of great content to you for FREE. But a carefully managed, sustainable timber harvest isn’t just about cutting down trees and cashing in on their commercial value. A well-planned harvest may actually improve some values. The current stumpage value is $1,800/acre. Should the landowner harvest now or wait 5 years? Since the European colonization of North America, many of the largest and oldest trees in the continental United States have been logged – leaving the present-day forests with many trees that are still sizable, but smaller in size than the original, virgin timber. When you understand what your property really has to offer, your selling efforts will be MUCH easier than they are for other property sellers who didn’t understand the facts. These specimens are often taken out in a highly selective manner, which usually entails expensive harvesting operations. To request a site visit and find out more about timber sales, contact your local GFC forester. If you’ve decided to harvest and sell some of your timber, here’s what you need to do: Step 1: Get helP. Often, landowners who sold their timber based on the price regret their decision. here are many factors to consider when deciding to conduct a timber harvest. Thinking of this from an individual tree perspective, if the tree's expected rate of value increase exceeds the desired rate, the tree is not financially mature and should be allowed to grow for the specified time period. In this example, we used an average growth rate across all the species present. Or, the proxy for grade value increase can be included in the growth period (volume adjustments) over which the trees are expected to shift into a higher grade value. These include sustainability issues, such as ensuring adequate desirable regeneration, and financial and legal considerations, such as timber prices, taxes, boundaries, logging contracts, and liability. Such a contract will help everyone understand what is expected of all parties involved in the sale. One standard deviation on either side of the average theoretically contains 90 percent of the reported data. In many cases, not all large-diameter trees have the same or even comparable growth values of black cherry. In most cases, a forest contains both high- and low-value species. When appropriate tree species for the site are grown on good soils in a managed forest, they may increase their diameter 3 to 4 inches in 10 years. In many ways, the age of a tree is closely correlated with its size and species. Determine what your goals are for your forestbefore making a decision to remove timber. Future volumes can be estimated using information on local growth rates. As you may have noticed from this first video, the loggers don’t butcher every living thing from the land. Sure. Average hardwood growth is about 2″ – 4″ in diameter per decade, so a small tree can easily grow to a size big enough to harvest within the average period of time timber lands are held. Here’s one way to look at it… a smaller property should have at least one of the following attributes: Again, less acreage is certainly doable, but without one or more of these attributes, smaller parcels will be limited in how much value can be extracted. This website uses cookies to ensure you get the best experience on our website. Prepared by Michael Jacobson, associate professor of forest resources. If these benefits are important to you, you may … When timber gets too big, it will eventually fall over and die, returning to the soil it grew from. Generally speaking, hardwood trees have broad leaves and oftentimes produce flowers. Even if you choose not to harvest the natural resources on your property, simply being aware of what’s there can be a tremendous selling incentive that makes your property appear FAR more valuable to potential buyers. Many of us are stuck with the idea that the only real value is in living on the property, but it can go so much further beyond that. Eventually, average annual volume growth decreases. Timber sales are often once-in-a-lifetime transactions; they should be accomplished through contracts and sealed bids, with the input of a reputable professional forester. For example, to calculate the expected rate of return from postponing a harvest, compare the ratio of future value to the present value as shown in the hypothetical example (Worksheet 1) on the next page. As you can see, most of the prime areas for logging are in the Northwestern, Northeastern, and Southeastern United States. I want you to make GREAT money from real estate, in a way that helps people, doesn't require a lot of risk and leaves plenty of space for you to live your life. If we assume there are approximately seven rings to an inch of radius, the tree increases 2 inches in diameter every 7 years. What will my forest look like after a Timber Harvest? Instructions for filling out the worksheet and assumptions are given below; a blank worksheet is provided at the end of the publication. If the time value of money and interest rates are not considered in calculating timber values, you would cut timber when the volume growth over time produces the maximum MAI. This article discusses financial decisions to harvest timber, including how to determine and calculate when to cut timber to maximize financial returns. This gives an expected future stumpage price of $348/MBF in 5 years for a total stumpage value of $2,436/acre (7 MBF x $348). How much earlier depends on the timber-value growth rate and the acceptable or alternative rate of return that is set. Tree-stem diameter determines the type of product (e.g., sawtimber, pulpwood). Having a tract with close to 40 acres of timber or more would be a big step toward doing that. Finally, the example does not include tax considerations, so income tax and perhaps some deductions for reforestation or other expenses may alter net returns. This ratio allows you to calculate the expected rate of re- turn from waiting (Line 15), which in this example is 7 percent. Site conditions and species strongly influence this biological maximum. Grading trees depends on a number of factors beyond the scope of this publication. Get Free Access to Videos, Guides, Downloads and More! The following assumptions are made about the tree's growth: the tree will increase in diameter, the tree will increase in height, and the tree will become more valuable. By entering your email, you consent to receive communications from Penn State Extension. When I started putting the pieces together – I realized we were talking about some major untapped value that wasn’t even hitting the radar of most real estate investors. Active forest management can address forest health problems and increase growth rates driven by species composition or forest-stocking conditions. As such, hardwoods tend to be more durable than softwood, which means they are ideal for certain uses than softwoods aren’t well suited for. If the woodlot has been properly managed it could possibly be harvestable about every ten years. Why do we need this? There are fixed costs associated with logging, such as equipment-moving and site-setup costs; therefore, the more volume a landowner can offer spreads these fixed setup costs over more trees and should yield higher per-unit stumpage prices. Learn what successful investors aren’t telling you. Indeed, the income you get from selling timber will often pay for a number of other woodland management activities. Biological growth is not constant over the life of a tree and follows an S-shaped curve (Figure 2). Generally speaking, these variations have everything to do with the species and age of the trees. However, when you do decide to harvest some timber on your property, make it as attractive as possible when marketing it to ensure you get the best possible price. The silvicultural system used and type of harvest (e.g., thinning, improvement harvests, clear-cutting, shelterwood regeneration cuts, or single-tree and group-selection harvests) also affect logging costs. In this case, the annual growth period is 5 years. This silvicultural system is normally implemented in forests that are considered mature, often after several thinnings.The desired species are usually long-lived and their seedlings would naturally … However, a seller should seldom allow cutting periods exceeding 18 months. How did he pull this off? When Do I Harvest My Timber? In 2006 and 2007, such a downturn occurred for northern red oak (see Table 1). How can you find a specialist to help you out? Often, to keep things simple, it is common to ignore inflation and price increases. Wood Dealer / Broker: This person works as an intermediary and usually wears a few hats. Future values can be estimated using appropriate average historical annual rates of real stumpage price increases during the growing period (Timber Market Report). The answer depends on what you have to start with, and how much you take out at each cutting. Let’s take a quick look at each one: Land Owner: This is the property owner (i.e. That’s why it is important to harvest timber in its prime to prevent losing value on good timber. He had other stories from his career too. The value of higher-quality desirable hardwood tree species can increase dramatically over time as it adds additional diameter growth. The first section is a brief overview of how to estimate timber value and price. When you fully understand what the natural resources of a property have to offer (e.g. Often, the larger the sale, the higher the price per unit of wood that can be offered. The consultant typically receives about 10% of the sale as payment for services. It is likely that some prices will be outside this range (i.e., there may be prices above or below the price reported in the Timber Market Report. Although the tree may be merchantable for a number of reasons, including financial gain, it may be best to wait before cutting. As you can see, most of the prime areas for logging are in the Northwestern, Northeastern, and Southeastern United States. Growth value increases as volume increases. One way to find out if there’s a sawmill near your property is to search for one on a sawmill locating services like Wood-Mizer or PortableSawmill.info. How can you tell what type of wood is on your property? 1. The timber basis is established for the date of acquisition; this represents the total volume of wood on a property. Assuming no other agreements have been made with outside parties, this person/entity is privileged to make the final decision as to whether or not the timber will be sold and who it will be sold to. How often can I have my Timber Harvested? Too often, landowners dismiss the importance of grade value and growing quality timber. The Timber Market Report only provides a range of prices for each species per 1,000 board feet (MBF); a below-average price (which is one standard deviation* below the average); an average price; and an above-average (mean) price (one standard deviation above the average). the depletion allowance). Black cherry, a high-value early successional species common in Pennsylvania, may begin to reach physical maturity at 120 years and decline rapidly and die, affecting economic returns. Occasionally a tree of exceptional value may be considered. Five years multiplied by 0.2 MBF gives total volume growth over the period at 1 MBF. The growth value of trees has three dimensions. In 5 years the expected future volume will be 7 MBF/acre (Line 1 + Line 6). Logically, if a harvest is postponed, the money remains invested in the trees. Two dimensions shown in the example worksheet are growth and stumpage value increases. Most hardwood trees are “deciduous” (meaning, they shed their leaves annually). Timber Mill Log Buyer—A private timber manufacturing business, which commonly sub-contracts timber harvesting, log hauling, and road construction to harvest. Finally, this example illustrates the importance of timing in marketing timber. Often, a harvest design intentionally creates wildlife habitat and enhances biodiversity and, if done properly, will increase long-term timber value. Return to the top What is the best season to sell my timber? After all, cutting down trees doesn’t sound like a good way to protect them. You must have JavaScript enabled in your browser to utilize the functionality of this website. With multiple or infinite rotations, the formulas change. See Figure 2a. High-quality grade 1 and veneer logs are usually more than 16 inches DBH. Ultimately, the value of hardwood trees is set by market demand. In the rain forest areas on the west coast of British Columbia or Alaska you get faster growth even on the shallow soils. Contract provisions that address important considerations should be included in a timber sale contract or deed (see the section entitled “Basic Contract and Deed Provisions”). It’s a process known as “selective harvesting”, where only the most substantial and valuable trees are harvested, while the smaller trees are left to repopulate the forest over the coming decades. If you’re looking at a property with a lot of small, twiggy trees, there probably won’t be an abundance of value for harvesting timber. If you take away nothing else from this article, my hope is that you’ll understand one simple thing. However, to calculate the expected future financial return from a harvest in today's dollars, you must include a discount rate and growing-period length in the calculation. Certain types of trees grow faster than others – but it’s usually a safe bet that when a tree is really big it’s also really old. Tree species that offer an abundance of value. To highlight the importance of grade in determining value, we examine the growth of a black cherry tree and estimate its value at different diameters as it grows in volume over time. Become a member, achieve financial freedom and In this case, it is 3 percent. Now that you know how many acres of aspen exist, you can determine which stands will be harvested. It goes without saying that larger trees are better. This video gives a good overview of the differences between hardwood and softwood trees: Note: I realize this video was made a long time ago, but that’s okay! As the tree grows in DBH--provided there are no forks on the bole--the diameter of the future log's small end will also increase. Financial maturity is different from its biological counterpart and generally occurs earlier in the life of a stand due to the concept of earning "interest" from the forest investment. That's how my business works and yours can too. Eventually, the rate of value increase is too slow to justify keeping it as an investment. When the expected rate of return drops below what the landowner considers acceptable, there still may be good ecological or silvicultural reasons for delaying a harvest. If you choose to hire a forestry consultant, this is something they’ll be able to offer significant help with. It is interesting to note that it takes a tree about 50 years to reach 12 inches DBH. Within the first few minutes of our conversation – I realized this guy was onto something big. If you decide to delay a harvest, you will need to determine whether the rate of return from continuing the investment in the trees is worth more than the rate of return received from investing that money in other opportunities (also known as alternative rate of return or minimum acceptable rate of return). The example used 5 years, but adjusting for shorter or longer periods will likely change the outcome. Another hugely important variable in determining the potential profit from a timber harvest is the proximity (distance) of the site from the final destination of the trees – the sawmill. Professional Forestry Consultant: A consultant can be hired to act in the best interests of the landowner (as we’ll explain in more detail below). If only half of the stand is removed on the second cut, then a third cut is used 10 to 20 years later to remove the last half. In order to explain this properly, we need to start with an understanding of who the key players are in the timber harvesting process. Given its significance, when selling timber (1) gather information about your property; (2) learn about timber markets, laws and regulations, and people and agencies that can help (or hinder) your progress; and (3) define any needs and expectations. This involves cutting down all the trees at once and replanting seedlings. This publication discusses issues pertaining primarily to the financial decision to harvest timber. Generally, New York forests can be logged between every ten to thirty years. Stated another way: Will the increased value of the trees not cut outweigh the alternative return if the money was invested elsewhere?

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