Green HorizonsVolume 15, Number 3
Hank Stelzer, MU Forestry Extension
What does the phrase "stumpage price" mean to you? Most landowners have heard the words "stumpage value" or "stumpage price" but probably are not certain what the words mean to them. Basically, a timber buyer will offer landowners a price for trees standing "on the stump." Webster's Dictionary defines stumpage as "standing timber with reference to its value," or "the value of such timber."
The word is derived from stump + age, which means that older trees generally have more value over time, "on the stump." For example, pole-size trees (5-10" in diameter) have less value "on the stump" compared to larger trees (diameters greater than 12") such as saw, stave or veneer logs according to their size and quality. Of course, we also know that trees blown down or broken during storm events also have a residual value, although that value is less than standing trees.
Most stands of timber increase in value over time if managed properly. This includes timber stand improvement and intermediate commercial harvests, resulting in increased growth rates. Remember that trees are a crop and need to be managed like any other crop to produce good quality products. The time frame is longer compared to row crops, so proper management becomes a critical factor for good tree health and quality. More volume per acre created by bigger trees is another benefit achieved from proper management and will be worth more to most timber buyers.
A common phrase among buyers and sellers of any product is that 'anything is worth only what someone is willing to pay' for that product, or what someone is willing to sell that product.
Some landowners make the mistake of selling their timber to the first buyer that makes an offer, without seeing other offers. NEVER tell a buyer what you are willing to accept for your trees without seeking other offers. Better yet, advertise your timber and accept sealed bids. More detailed information will soon be available in a new MU Guide, "Selling Your Timber."
Landowners may be offered several different prices for different products. Products are generally determined by size class ranging from pulpwood, saw logs and stave logs to veneer logs. Quality also factors into the equation, as a low-quality saw log might only be marketable for pulpwood and the units of measure might vary with the product. Throw in the fact that pine prices will be different from hardwood prices, and now I hope you can see the value of having a professional forester assisting you in the sale of your stumpage.
Landowners should not get stumpage prices confused with "mill delivered prices" for several reasons. Woodconsuming mills pay different prices according to the products they manufacture from trees.
Trees are then valued by timber buyers "on the stump" after deducting costs associated with cutting, transporting the felled tree to the log landing at the edge of the forest (a process called 'skidding'), hauling the logs to the mill and other costs. These costs vary with equipment costs, maintenance, fuel prices, insurance, labor, markets for forest products (supply and demand), logging conditions, volume of timber per acre, road conditions and other variable costs.
Loggers pay very high prices for equipment that has a limited lifespan and high maintenance costs. With all their costs of doing business, they must cut and haul a minimum amount of timber per day just to meet their minimum costs. Remember too that skilled labor is required to get all this work done safely and efficiently. Weather is also a factor that may increase costs for loggers, along with equipment breakdowns that stop all production.
So, when a logger finally gets a load of pulpwood, saw logs, or veneer logs to the mill, they have a tremendous amount of money invested in the process involved in the delivery. They are paid "mill delivered prices" to hopefully compensate them for all their costs, plus a minor profit for their labors.
All the costs of "stumpage prices" + cutting + skidding + loading + hauling + other fixed costs + variable costs = "mill delivered prices." Many loggers have gone out of business over the past few years as they have not been able to sell their products to make payments and feed their families and workers.
This relationship between supplier and customer plays out again and again as we go up the value-added chain. Forest products manufacturers are at the mercy of the markets, and can only pay "mill delivered prices" for raw materials (trees) that allow them to make a modest profit and stay in business.
Unless you have been on the moon for the past two years, you know that domestic and world markets for forest products have declined dramatically, thus affecting both "mill delivered prices" and "stumpage prices."
However, markets for high-value species like black walnut and spot markets can be very favorable IF you are in the position to take advantage of the situation. And how do you get in position? BY HAVING AND IMPLEMENTING A FOREST MANAGEMENT PLAN that gives you advance notice of what needs to be done to maximize your profit!
To develop your forest management plan, contact your local consulting forester or state service forester today. In Missouri, consulting foresters can be found online at www.missouriforesters.com. To find the Missouri Department of Conservation resource forester in your county, go online www.mdc.mo.gov/contact-us and select your county from the drop-down menu in the "Who's My Local Contact?" box.
And if you are approached by a prospective buyer who wants to purchase your timber, remember to CALL BEFORE YOU CUT. The toll-free number is 877-564-7483 or online at www.callb4ucut.com.