Once a landowner has decided to implement a timber harvest on their land, there are several different ways to approach the process of selling timber. There are two primary approaches to being paid for timber: a stumpage sale or a direct sale.
A stumpage sale is money paid to a landowner for standing trees on their land for which the logger paying the stumpage is permitted to harvest the trees and sell them to market. The logger or purchaser is buying the trees “on the stump.” The money paid to the landowner is some portion of the total value of the wood delivered to the mill. In the stumpage method the landowner may be paid a fixed amount for the right to harvest timber, known as lump sum stumpage or they may be paid “pay-as-cut” stumpage.
In the pay-as-cut method a landowner is paid a fixed stumpage rate per unit of any given timber product delivered to the market. In either stumpage scenario, the cost of roadwork and logging are factored into the price offered to the landowner for the standing trees (stumpage). Landowners may sell stumpage to a logger, a logger with a forester on staff, or contract with a consulting forester who negotiates stumpage rates with a logger.
The second approach for selling timber is a direct sale, where the landowner, or landowner’s forester sells the timber directly to markets at mill delivered prices. In this direct sales method, the logger is paid a service rate for the act of cutting, processing and delivering the wood to market. In the direct sales method, road construction and other logging costs are paid by the landowner, rather than the logger. The remaining money after paying for the cost of logging services is the landowner’s revenue. A stumpage vs. direct sale income analysis on a Hancock County timber sale shows that direct sales net landowners more money as a percentage of gross income generated from a harvest. In this instance, county average stumpage to the landowner was 23% of gross sales, the actual stumpage offered by the logger was 15% of gross sales and the direct sales method left the landowner with 36% of gross sales, even after paying the consulting forester who assisted the landowner in their timber harvest. The direct sales method consistently leaves the landowner with a larger portion of gross timber sales than does a stumpage arrangement.
Regardless of how you choose to sell your timber, choose someone you trust to represent your interests. Some other key items a landowner should consider. It’s your resource, make sure you get the best value for your trees:
- Every landowner has different goals, objectives and interests, have a professional forester represent your interests
- Expect full transparency in your transaction
- Stumpage transactions factor in a financial buffer in the logger’s favor for worst case scenarios
- Ask questions, you deserve answers