Stumpage Bids vs Cutting Timber on the Shares

Logging companies tend to purchase timber from landowners in two main ways—through a bid “on the stump” or by “cutting on the shares.” While both arrangements have their pros and cons, it is important to understand the differences between them to make an informed decision about harvesting your standing timber.

Buying on the Stump

Buying timber on the stump is when a logging company offers a timber owner a certain price for the right to harvest and remove timber from their property. This price varies greatly depending on the species and quality of the timber, as discussed thoroughly in this blog post, and can pertain to either a specific number of trees or to all merchantable timber, essentially meaning anything in the woods with a commercial value greater than the cost of logging and hauling the forest products away.

In the case of Timber Works, we always state in our logging contracts that we purchase only those trees that both parties mark, number, and agree upon.

market the timber

Why Stumpage Prices Are Lower Than Log Values

This point may seem unimportant, but many times landowners who sign contracts to sell “all merchantable timber” end up unhappy with the condition in which they leave their woodland.Numbering and agreeing on the trees prior to logging is a great way to avoid confusion and keep a timber harvest from becoming a regrettable experience.

Though the price paid on the stump varies, it is important to keep in mind that this price is always much lower than the value of the logs once we have harvested and removed them from the woods. This is essential because the logging company must be able to make money to remain in business, but it may not be the best arrangement for the landowner.

Stumpage bids rarely pay landowners much additional money for veneer trees, and the bids utilize market prices which allow the logging company to sell the timber for at least twice what it was purchased for once it is removed from a woods and hauled to various hardwood product companies throughout the region.

Not being paid top dollar for your veneer trees may seem unfair, but there is a justification for it—as our blogs on the subject have revealed, it is very difficult to ascertain the value of a veneer tree, or any tree for that matter, until it is cut down.

Timber Pricing and the Benefits of Shared Cutting

In other words, it is really impossible to accurately value a veneer log until we get to see the stump. A logging company would face a significant financial blow if it paid top dollar for what it believed to be veneer quality trees, only to find they were cut down with stain and rot in the trunk. For this reason, we typically buy standing timber at fairly conservative prices.

While the landowner is up front in this arrangement, the amount of money they receive can be considerable less than the amount earned by cutting on shares. In a way, cutting on the shares allows the logging company and the land owner to share the risk, and the possible reward, that the trees will cut down cleanly and sell for a high price. For this reason, unless a customer insists on a bid price, Timber Works strongly encourages shared cutting

Cutting Timber On Shares

Cutting Timber on the Shares

Higher Earnings Lower Risk The Share Cutting

When a landowner agrees to cut their timber on the shares, they essentially agree to allow the logger to cut, remove, and market the timber. Once a sale takes place, the landowner receives 50% of the gross value of the timber.

In cases where the timber is of high quality or contains a significant percentage of veneer trees, this arrangement usually results in much larger earnings for the landowner and insulates the logging company from the possibility of overpaying for low-quality trees.

Benefits of Cutting Timber on Shares for Landowners

By building very niche markets for the timber we harvest—selling certain species to one company, other species to another, and ultimately marketing the timber to its highest value use, Timber Works yields impressive averages for the timber we harvest. If you agree to cut your timber on the shares with our company, you benefit from this sophisticated market.

Give us a call today for a no-hassle assessment of your standing timber.