Stumpage Bids vs Cutting on the Shares

There are two main ways timber tends to be purchased from landowners by logging companies—through a bid “on the stump” or by “cutting on the shares.” While there are pros and cons to both arrangements, it is important to understand the differences between them in order 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, our logging contracts always state that we are purchasing only those trees marked, numbered and agreed upon by both parties.

This point may seem unimportant, but many times landowners who sign contracts selling “all merchantable timber” are unhappy with the condition their woodland is left in. 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 they have been harvested and removed from a woods. This is essential as the logging company must be able to make money in order to remain in business, but 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. In other words, it is really impossible to accurately value a veneer log until you get to see the stump. A logging company would be served a significant financial blow if they paid top dollar for what were believed to be veneer quality trees, only to find they cut down with stain and rot in the trunk. For this reason, standing timber is typically bought with 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

When a land owner agrees to cut their timber on the shares, they are essentially agreeing to allow the logger to cut, remove and market the timber. Once a sale has taken place, the land owner is paid 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 to the land owner, and insulates the logging company from the possibility of overpaying for low quality trees.

Through aggressively 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 is able to yield impressive averages for the timber we harvest. If you agree to cut your timber on the shares with our company, you too can benefit from this sophisticated market.

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