1. the nature of the timber species, total volumes, grade, etc. 2. the nature of the tract on...
TRANSCRIPT
STAND VALUATION
Factors Affecting Value of Timber
1. The nature of the timber Species, total volumes, grade, etc.
2. The nature of the tract on which the timber is located, and its market access; and
3. The circumstances surrounding the sale
Stumpage price is paid by the mill. They expect to absorb the cost of logging and still make a profit from the lumber.
The Desirability of the Timber
CHARACTERISTIC POOR STAND EXCELLENT STAND
Timber volume per acre Low High
Total Volume in tract Low High
Size of trees Small Large
Frequency of limbs and knots
Multiple limbs Merchantability length generally clear
of limbs
Desirability of the Timber Location
CHARACTERISTIC POOR STAND EXCELLENT STAND
Exterior Access Intermittent Road All weather road touches property
Interior Access No log roads Log roads within ¼ mile of all of tract
Average number of months loggable per year
Four months or less due to:a. Soil trafficabilityb. Obstructionsc. Severe slopes
Year round except during severe weather; no obstructions which block skidding or hauling
Distance to delivery point
Lack of proximity to:a. Rail transportationb. Concentration
yards
Close to wood using facilities
Quality of the Transaction
FACTOR PRICE WEAKENING PRICE STRENGTHENING
Number of bids Only one Many
Buyer & Seller Seller: poorly informed or under financial duress.Buyer: facing facilities shutdown due to low wood supply
Seller: knowledgeable and under no duressBuyer: knowledgeable and under no supply problems
Bid results Wide spread between high and second bid
Narrow spread between high and low bids
Adequacy of time allotted
Hurry-up sales cutting contract of six months or less
Wide exposure of sale to market and adequate cutting time
Involvement of middlemen
Sales to middlemen Sealed bid from forest products firm
Form of payment
Below-market interest rate on deferred payment
All cash transaction
Sources of Timber Pricing
Comparable timber sales Timber price reporting services
Timber Mart South http://
www.tn.gov/agriculture/publications/forestry/tfbp.pdf
Extraction from delivered log prices
Data from Tennessee
Not ready for harvest?
LEV – Land Expectation Value
Present Value = a/(1+i)t-1 a = value received every t years in
perpetuity i = interest rate t = years between annuity payments
This is covered in Timber Management class