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The highest bid isn’t always the best

By Jim Griffith
Registered Forester #1616

If you have ever sold your timber by the ton where you are paid as the buyer hauls it from your property, then you may have found yourself in an unnerving and confusing situation. For anyone who may be considering selling by this method, often called a cut-&-haul, pay-as-cut, or per-ton sale, you should be aware that just because a company gives you a higher per ton bid does not mean you are going to have more money in your pocket at the end of the sale. This is due to the variance in specifications buyers may give you for your trees.

By specs, I am referring to the size and quality of the tree being hauled to the mill for a specific product. Some timber companies give specs in terms of butt log diameter, which is understood in the industry as being the diameter at stump level. Another common measurement term used in the timber industry is diameter at breast height (DBH), which is understood to be 4.25 feet above ground level. When considering a buyer’s bid, it is important to note if the buyer is quoting his mill specifications on butt diameter or DBH. If you are trading at the same price per ton for the same diameter, the taper in the tree from butt-cut level to the DBH level of the tree can cost you money. With as much as two inches difference in diameter between these points of cut on a tree, the number of trees suitable for the higher value product may be drastically reduced depending on the varying specs offered by your buyer.

I recently received the following chip-n-saw mill specifications from four different companies of 10″ butt to a 6″ top at 25′, 10″ butt to a 5″ top at 33′ and 10″ butt to a 5″ top at 29′. A fourth company gave me specs of a 9″ DBH to a 6″ top. If there is not a stated difference in B-Grade chip-n-saw, also called super pulpwood, you might see specs like 7″ butt to a 4″ top at 25’or 7″ butt to a 5″ top at 25′. This could make a lot of difference in the value of chip-n-saw removed from your property. Sawtimber specs can be even more confusing.

To choose the best bid, you must understand the specs on which each buyer is basing his bid. If your high bidder was high on his bid for each product and his specs were better than the other bidders then you have an easy decision; but that is a rare occasion in the timber business. Either their price is going to be high in one or two categories, or maybe in all products but one, or they are high and their specs are less advantageous than the others. This is when it gets difficult to make the correct decision.

To make the decision process even more confusing, I recently had a timber buyer give me a blended price on the chip-n-saw and sawtimber. That means he gave me one price per ton for all combined chip-n-saw and sawtimber that they would remove during the sale. How do you compare that blended price to separate prices for the products individually? Whether you sell with blended or separate product prices, it is important to know what you have. You need to know how many tons of each product you have in your sale. With this information you can project the final cut value that each of your timber buyers will be removing. This can also be done with the percentage of the whole each product makes up if you do not have a full-fledged cruise on your timber. Either way, you must have some accurate information about what you are selling to make an informed decision. With the knowledge of what you are selling, even the blended offer becomes a matter of simple calculations.

But, there is nothing simple about picking a logger who will merchandise your timber for the highest value to you, which is another reason you need the assistance of a professional forester to help you make the right decision.

Jim Griffith is general manager of the Georgia Farm Bureau Timber & Real Estate Companies.
Georgia Farm Bureau News – April 2007

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