In my opinion as an active consulting forester, the service I (and some other consultants) provide extends true financial value toward timber harvesting revenues to clients (and economic values to society in general) in several ways:

#1 is assistance on getting the properties defined and delineated by assessing survey corners set by licensed or registered surveyors and then using purpose-produced marking paints for delineation – this is a value that can and does prevent criminal trespass from occurring (which often involve lawsuits – I generally get 3 such complaints a year and have been retained and authored reports as an expert witness several times regarding lawsuits that have been brought all associated with lands that lack properly delineated property boundaries).

#2 is assistance in prescribing and preparing treatments that will best assist in the positive outcome of achieving landowners objectives and goals without a direct conflict of interests. The private consulting forester is the only professional with a primary fiduciary duty to assist the landowner. All timber purchasers have primary fiduciary duties that result in interests that conflict with the landowners BY DEFAULT. In the primary real estate profession, a conflict of interest is illegal. Not so with the forestry sector of most U.S. states, which also involves the sale of real estate (standing timber is real estate).

#3 is assistance on marking the timber properly, which I define as marking trees that follow what is recommended based on outcomes shown in silvicultural research that has been conducted by university, public and private entities. The U.S. Forest Service is probably the most well-known authority on this type of research, though agencies such as the Ontario Ministry of Natural Resources, among others are certainly worth noting. It is blatantly obvious to those of us who manage forests that stands of timber that are marked for liquidation will have a drastically negative impact on the future timber revenues (if it is even feasible) of that land. There have been studies done based on comparisons of values based on proper vs. improper treatments, though they also are not without assumptions.

#4 is assistance in appraisal and marketing (this is typically what is “measured” in “scientific research”) the client’s timber sales. This is where the clearest difference in prices of timber sales between landowners (without the employ of consultants) and landowners (with the employ of consultants) come into play.

Every consulting forester who markets timber for landowners can show you sealed bid sales where the bids solicited by different mills have a significant value difference in them (significant difference meaning nearly or actually double in bid prices). Not only that, but it isn’t hard to compare similar sales sold directly to mills by the landowners vs. sales marketed to the mills with the assistance of consultant(s). The consultant prices are consistently higher. The “rub” in the argument is that the “similarities” of sales are difficult to establish – most often these studies do not involve compared sales with identical species grown on sites with identical site indices and identical physical properties (height, diameter, taper, grade, density, access, etc.).

Despite these factors, there are reasonable explanations for researchers to conclude positive financial outcomes for landowners who hire consultants vs. those who don’t. There are a lot of marketing skills a consultant forester knows that most landowners (saving for the ones who are consultants themselves) cannot gain by reading books or talking to others, and these skills will increase the net (e.g. after the consultants costs are figured in) price of timber sales.

Probably the largest skill a consultant has that the typical landowner does not have is in obtaining a reasonably accurate figure of the volume of timber using technical sampling procedures that most landowners are not going to be able to emulate without formal training. Timber volume x price of current market value (published, but again – very technically specific) = appraisal. Also, when a purchaser is sent a prospectus sent by a consultant forester who they have worked with before, they are not going to have to spend the time looking through the woods vs. a prospectus sent to them by a landowner. The purchasers often have an idea of what to expect from the forester when they bid. Landowners may not even have an idea where to send the bids – not to mention who is legitimate vs. who is not. Many landowners take the first offer from a solicitor (timber purchaser), because they are inexperienced in the value or specifics of the cut. They can avoid this through using a consultant to conduct an appraisal or simply have a look at the trees marked, price offered and discuss conditions and specifics. Many landowners make mistakes in tree identification that foresters will not make. Many landowners do not even have an idea if their timber is even merchantable or operable.

#5 assistance in drafting a timber sale contract. Most landowners have no idea how to write a timber sale contract that includes legal methods of sales or specifications that protect their interests, nor what specifications to use in specific situations. Many do not understand the liabilities they face by signing a purchase agreement nor that verbal agreements are insufficient in real estate sales. Consultants can save landowners from some serious problems they might otherwise face with details associated with timber harvesting methods.

#6. assistance in administration. Contracts are only as good as their enforcement. Most landowners don’t know what to look for as violations in contract specifications or logging methods, lack techniques of valuation of incorrectly cut trees, nor do they know how to talk to the harvesting crew while on site to assure the project continues to . To most people, a timber harvesting operation is a very unique environment and one they are not used to. Part of the sale is making sure it is enforced. This is particularly important for absentee landowners, but even landowners who can be trained to administer the sale are at a professional disadvantage when compared to foresters.

The real value for a landowners is in the combination of gaining all of these services. I personally believe the value of the whole of these services is higher than 20% if it were adequately valuated, but because of the difficulties in establishing controls as explained above, I do believe it is impossible to truly support my belief scientifically. Despite this, landowners should be aware the services that are available to them so they can make their own value judgments in acting on what is best for them.

Have a great day!

Geoff

mosquitoes, their habitat, their effects, controlling and living with them.

This morning, I went to paint some timber sale boundary lines. While I was doing this, a Coyote had come out of its den, walked 40-50 yards from me, turned to look at me and then kept moving. It never moved very fast, but unfortunately, I didn’t have the camera with me.

Unlike the Southwestern United States, it is quite difficult to spot Coyotes here in the Lake states. The primary reason for that is the abundance of trees which obstruct the view. While I missed the picture of the “song dog” leaving its den, I was able to photograph the den (attached). The hole is approximately 10-12″ in diameter. I have no idea how deep it is, but quite deep. This isn’t the first Coyote den I’ve seen, but its the first time I’ve ever seen a Coyote exiting one so close to me. It’s surprising how such a large animal can fit into a small den.

A little while later, I saw a smooth green snake. Again, I wasn’t able to capture a photo of this (more about this snake here, but it was about 20″ long. I don’t see these snakes often. The last time I saw one was several years ago. A garter snake spotting was next on the agenda and it was sliding through the sweetfern just 30 feet or so from the first snake.

Perhaps another mile in my traverse of the 120 acre land inspection, I noted an old dilapidated blue trailer with a rotting frame. I suspect Porcupines were feasting on the interior wood framing, as Porcupine poo spilled out of the base of the camper. There is no question that they were making it a den. Then, about half a mile later, I encountered a big porcupine. It was frightened of me and hid its head underneath a fallen tree, exposing only the quills on its back and tail.

Today was a day that I was elated with the nature. The smell of the Red pine, the breeze, the sun, the sounds of the field birds adjacent to the pine stand and the discovery of these animals – all a reminder that it’s not only our resources we’re conserving!

This post was c&9d from the late Karl Davies’ website.  Karl Davies was a colleague of mine who operated a consultancy in Massachusetts.  It is one of a series of papers here showing how forest landowners can make more money hiring a consulting forester vs. contracting with log buyers without assistance from a consultant.  Karl had spent a good deal of time focusing on forest economics.  I am not sure how much longer his website will be on there as he passed away several years ago.  RIP Karl!

This paper was published in the The Consultant, Winter 1995.  The Consultant is a quarterly publication of the Association of Consulting Foresters.

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Valuation of Consulting Foresters’
Contribution to Timber Sale Prices

by
Ian A. Munn
Department of Forestry
Mississippi State University
Mississippi, 39762-9681

and
E. Carlyle Franklin
Woodlot Forestry Research and Development
North Carolina State University
Raleigh, NC 27695-8006

Ian A. Munn is an assistant professor at Mississippi State University specializing in forest economics with ten years experience as a timber manager in the forest products industry.  E. Carlyle Franklin is a full professor and Director of the Woodlot Forestry Research and Development Program at North Carolina State University. Prior to 1980, he was a Project Leader with the Forest Service.

Introduction

There has been very little scientific research on whether private forestry consultants actually generate higher timber prices for their clients.  Anecdotal evidence abounds.  Almost every consultant has one or more stories of landowners doubling or tripling the price offered by a timber buyer by opting to go with a consultant.  Unfortunately, timber buyers have as many contradicting stories of landowners rejecting a good offer from a buyer, hiring a consultant and then actually netting less money after consultant fees are subtracted.  A study of North Carolina timber sales was designed to evaluate financial returns from hiring consultants. Several key issues were examined including differences in tract size and timber quality between consultant and non-consultant sales, the effect of sealed-bid auctions, net returns to landowners after accounting for consultant fees, the influence of buyers and which types of sales benefited most from consultant participation based on attributes of the offering.

Related Research

Most scientific research has focused on effects of public agency foresters.  [See Henly et al. (1990), Callahan et al. (1979), Budelsky et al. (1989), Cubbage et al. (1985), Jackson (1985) and Bullard and Moulton (1988).]  Typically, these studies evaluated the benefits of a forester’s assistance on the basis of a variety of criteria such as adherence to best management practices, condition of the residual stand, provisions for regeneration and financial returns to the landowner.  In general, these studies found better results associated with public forester participation.

With respect to financial returns, studies which examined public forester participation shared a number of weaknesses.  As a rule, they relied on small samples of matched pairs which were not necessarily representative of the population as a whole.  Volume estimates were based on post-harvest stump cruises which characteristically are imprecise.  Statistical analyses were weak, usually restricted to comparisons of means.  Differences due to species and commodity composition, sales procedure (sealed-bid auction versus negotiation) and silvicultural prescription were recognized but not incorporated into the statistical analyses, except in the matching process.  Only Jackson (1985) attempted to control for differences in the timber sale characteristics by using regression techniques.

Only two studies, summarized below, specifically examined the effect of private consultants.  Although both found higher prices associated with consultant sales, the support was not overwhelming.  Hardie and Wieland (1987) surveyed Maryland landowners for information on stumpage sales.  They found consultant sales averaged almost $100 more per acre than non-consultant sales.  However, this comparison was made without adjusting for differences in the quality and quantity of timber offered in comparative sales.  The authors concluded that they could not provide a definitive answer to the question of the effect of a consultant on stumpage sale prices.

Hubbard and Abt (1989) collected information on 45 timber sales in northern Florida: fifteen unassisted sales, fifteen sales handled by consulting foresters and fifteen sales which had received price and buyer information from the public forestry agency.  Volumes were determined by post harvest stump cruise.  They found no significant effect due to public agency participation.  Surprisingly, the estimated effect of consultant participation on sales price was negative if the tract consisted primarily of pulpwood.  If the tract consisted primarily of pine sawtimber, however, the overall effect of consultant participation was positive.

Study Design

The fundamental purpose of this study was to determine if consultants did, in fact, generate higher prices for their clients.  During interviews in the data collection phase of this study, timber buyers frequently expressed opinions on consultants and their effect on timber prices.  Several statements were made repeatedly.  1) Consultants only handle the bigger and/or better tracts.  The higher prices these tracts receive are due, not to the action of the consultant, but rather to the differences in timber volumes and quality.  2) The only action consultants take that increases timber prices is selling the tract by sealed-bid auction.  If the landowner would conduct the auction himself, he would capture the same price increase without paying the consultant’s fee.  3) Even if consultants do generate higher prices, it is not enough to offset consultant fees. These three issues formed the basis of our investigation.

Two additional issues were also addressed.  It is not enough to know that consultants can increase timber prices on average.  Landowners want to know if consultants can increase prices for their tract!  Price increases due to consultants were broken down by species and commodity class in order to identify which tracts would benefit most from consultant participation.  Finally, some timber buyers may pay higher prices for timber than others.  If certain buyers do consistently pay higher prices,  consultants will want to target these buyers.

Data

Timber sale data was collected from timber buyers throughout North Carolina.  All timber buyers listed in Buyers of Forest Products in North Carolina (1989) were contacted either by phone or mail and asked to participate in the study.  Information on 475 timber sales was collected.  Of this total, 298 were complete and pertinent to this study.  For each sale the following information was collected:

1. Purchaser,
2. Acres in the sale,
3. Timber volumes by species and commodity class,
4. Timber quality (ranked from poor to excellent),
5. Type of sale (clearcut, partial cut or salvage),
6. Logging conditions (ranked from poor to excellent),
7. How the sale price was determined (negotiation or auction),
8. Whether payment was per unit or lump sum,
9. Geographic region of the sale (mountains, piedmont or coastal plain),
10. Whether a consultant handled the sale,
11. Distance to the buyers mill,
12. Contract length,
13. Price paid for the tract.

Number of sales: 298
Distribution of sales by categories
By region	Mountains: 42	Piedmont: 107	Coastal: 149
By sale type	Clearcut: 221	Partial cut: 64	Salvage Cut: 13
Consultant Sales: 105		Non-Consultant Sales: 193
Sealed bid: 87	Negotiated: 18	Sealed bid: 24	Negotiated: 169
- lump sum: 87	- lump sum: 10	- lump sum: 21	- lump sum: 112
- per unit:  0	- per unit:  8	- per unit:  3	- per unit:  57
Means of selected variables Tract means: acres: 62 pine sawtimber: 126 MBF Scribner pine chip-n-saw: 43 cords pine pulpwood: 183 cords hdwd. sawtimber: 95 MBF Doyle hdwd. pulpwood: 213 cords misc. sawtimber: 4 MBF Doyle total bid: $33,656.37 distance to mill: 37 miles contract length: 18 months  (24 open contracts) Per acre means: pine sawtimber: 2.9 MBF Scribner pine chip-n-saw: 1 cord pine pulpwood: 4 cords hdwd. sawtimber: 1.5 MBF Doyle hdwd. pulpwood: 4 cords misc. sawtimber: 0.1 MBF Doyle bid: $669.85

	Consultant sales	Non-consultant sales
Per acre values
Pine sawtimber (MBF-S)	3.85	2.45
Pine chip-n-saw (cords)	0.59	1.02
pine pulpwood (cords)	3.28	4.18
Hdwd. sawtimber (MBF-D)	2.00	1.16
Hdwd. pulpwood (cords)	4.30	3.73
Misc. sawtimber (MBF-D)	0.05	0.12
Price	$934.46	$525.90
Tract values
Quality (1=poor, 5=excellent)	3.73	3.39
Acres	73.07	56.15
Distance to mill (miles)	42.13	33.57
Contract length (months)	22.28	16.49
Number of Sales
Total	105	193
Clearcuts	79	142
Partial cuts	25	39
Salvage cuts	1	12
Mountain sales	11	31
Piedmont sales	41	66
Coastal plain sales	53	96

These data had several advantages over data used in previous studies.  The sample was much larger, thus providing many more degrees of freedom for statistical estimates, and it included detailed information on tract attributes.  Estimates of timber volume, quality, species and commodity composition were made while the timber was still standing as opposed to post-harvest stump cruises used in previous studies.

The data set was not without its own potential problems.  Buyers who responded might have tried to influence the results by selectively reporting sales or adjusting information on individual sales.  If so, it seems reasonable to assume that they did so to portray themselves in the best possible light, i.e., they paid the best prices and consultants were not really necessary.  If buyers submitted biased information, the effects of  consultants are underestimated by this study.

Results

Consultant sales contained significantly greater volumes of pine and hardwood sawtimber per acre but significantly less pine chip-n-saw volume.  Differences in pine pulpwood, hardwood pulpwood and miscellaneous sawtimber were not statistically significant.  Timber quality on consultant sales was significantly better as ranked by the timber buyers.

The average price per acre (adjusted for inflation) for consultant sales was $934.46 in contrast to an average price per acre of $525.90 for non-consultant sales, a difference of $408.56 per acre.  Per acre prices for consultant sales were 78% greater than non-consultant sales in the sample.  Closer analysis, however, revealed that $257.35 of this difference was due to greater volumes of pine and hardwood sawtimber and other attributes on consultant sales.  Nonetheless, $152.83 per acre could not be accounted for by timber volumes, quality or other sale attributes.  Claims that greater returns for consultant sales result solely because of better tract characteristics were not supported by this study.

Our study also indicated that consultants increased sale prices above and beyond the price increase generated by sealed-bid auctions.  Sale prices increased by an average of $89 per acre when a tract was sold by sealed-bid auction regardless of whether the auction was held by the landowner or consultant.  There was an additional increase of $78, on average, when a consultant handled the sale. This was true even if the consultant negotiated the sale.

This does not mean that consultants should not take credit for increases in sale price resulting from the sealed-bid auction.  It most cases, once a landowner has hired a consultant, the consultant determines how best to sell the tract. If the consultant chooses to sell the tract by sealed-bid auction and in doing so, captures increased prices, the consultant deserves the credit.

For consultant sales in the sample, returns to hiring a consultant averaged 20 percent.  This is substantially larger than the 8.5 percent average fee charged by consultants in North Carolina (Kronrad and Albers, 1983).  Based on these results, consultants increase net dollar benefits to landowners as well as gross sales dollars.

We found that attributes of the sale were important in determining the magnitude of the price difference. Price differences were directly related statistically to only one commodity in this study, pine sawtimber.  Consultants generated an additional $20.35 for every thousand board feet of pine sawtimber on the tract.  Per unit price increases for other commodities were not significantly different between consultant and non-consultant sales. It should be noted that hardwood sawtimber prices for consultant sales were $10 more per thousand than non-consultant sales.  While this difference was not statistically significant, there were relatively few sales of quality hardwood in our sample.  In addition, in a related analysis, we found significant increases in timber sale prices in the mountain region when a consultant handled the sale.  Because the mountain region is predominantly hardwood, we think it likely that consultants generate higher per unit prices for hardwood sawtimber also.

Finally, our study found certain timber buyers did pay higher prices than others and these buyers tended to buy more consultant sales.  It is statistically possible to separate the price premiums paid by these high price buyers from price increases generated unambiguously by consultants.  This reduces apparent returns to hiring consultants to slightly above the average consultant’s fee.  From a landowner’s perspective, however, the source of the price increase is not important.  It makes no difference to the landowner if the consultant generates higher prices or simply targets higher price buyers.  The net result is the landowner receives more for his tract of timber.  A consultant who knows the high price buyers in the sale area and aggressively solicits bids from them will capture additional price increases for his client.  It is reasonable to argue that any such consultant should take credit for directly increasing timber revenues and also for capturing the premium paid by high price buyers.  Without knowledge of who the high priced buyers are, a consultant can achieve the same effect by soliciting bids from all buyers in the sale area.

Even if we argue that consultants should not be credited with any of the premiums high price buyers pay, higher prices are only one of several benefits received by the timber owner when a consultant is employed.  Typically, a variety of other services are performed by a consultant in the preparation and administration of a timber sale.  Most consultants locate property lines, establish the appropriate buffer strips, provide reasonably accurate volume estimates, check the title and sell the timber either by auction or negotiation.  Also included in the consultant’s fee is harvest supervision and contract enforcement.  These extra benefits accrue to the landowner at no additional cost, indicating it is worthwhile to hire a consultant even if expected price increases do not exceed the consultant’s fee.

LITERATURE CITED

Budelsky, Carl A., John H. Burde, Fan H. Kung, Dwight R. McCurdy and Paul L. Roth. 1989. An evaluation of state district forester timber marking assistance on non-industrial private forest land in Illinois. Dept. of Forestry, Southern Illinois Univ. at Carbondale. 93 p.

Bullard, Steven H. and Robert J. Moulton. 1988. The economics of public assistance for nonindustrial private timber sales in Mississippi. Technical Bulletin 147, Mississippi Ag. and For. Exp. Stn., Mississippi State University. 9p.

Buyers of Forest Products in North Carolina. 1989. N.C. Dept. of Natural and Community Development. Division of Forest Resources.

Callahan, John C., John M. Toth, and Joseph T. O’Leary. 1979. The timber marketing process in Indiana. U.S.D.A. Forest Service, Research Paper NC-177, U.S.D.A. For. Serv., N.C. For. Exp. Stn., St. Paul, MN. 7p.

Cubbage, Frederick W., Thomas M. Skinner and Christopher D. Risbrudt. 1985. An economic evaluation of the Georgia rural forestry assistance program . Ag. Exp. Stns., University of Georgia, Athens, Georgia. 59p.

Hardie, Ian W. and R. C. Wieland. 1987. Seller practices and sales returns in local stumpage markets.  Proceedings of the 1987 Joint Meetings of the Southern Forest Economics Workers and the Mid-West Forest Economists.  Asheville, N.C. pp. 63-78.

Henly, Russell K., P. V. Ellefson and M. J. Baughman. 1990. Minnesota’s private forest management assistance program: an evaluation of aspen timber sale assistance. Northern Journal of Applied Forestry , 7(1):31-34.

Hubbard, W. G. and R. C. Abt. 1989.  The effect of timber sale assistance on returns to landowners.  Resource Management and Optimization, 6(3):225-234.

Jackson, David H. 1985. An investigation of some physical and economic effects of private forestry assistance in Montana. Unpublished manuscript. University of Montana. 26p.

Kronrad, Gary D. and Catherine A. Albers. 1983.  Consulting forestry services and fees in North Carolina.  National Woodlands, 7(1):9-12.

Munn, Ian A. 1993. Forestry consultants: Their effect on timber sale prices. Unpublished PhD dissertation. North Carolina State University. 142p.

This afteroon we will be taking a drive through the area with camera in hand to take a few images of forests and ongoing management to be used on the blog later.  Expect to see these spaces loaded up with photos shortly.

One of the worst problems in forest management is “high-grading”.  This is often called “select-cut” by certain timber buyer, loggers and saw mills.  The way this works is they select your nice trees and then cut them to maximize profits.

One of many “prescriptions” to this liquidation of assets is called a “‘14″ diameter limit cut”, where all the finest formed trees over 14″ (measured at the base of the tree – since D.B.H. wasn’t defined nor specified in the contract) are cut and low grade & cull trees left (since it’s more financially rewarding to take the best and leave the rest).

The result of this style of mis-management is a forest full of trees unsuitable to make lumber out of, which will continue to grow while suppressing decent seed stock, seeding the ground with seeds that probably will result in a less desirable tree, and possibly increasing a number of environmental disturbances that can negatively affect the forest.

I know of no data that gives a % of how many high-valued deciduous forests are treated via a high grade, but based on what I see while I am driving down the roads, I would expect 60% or more of these stands are high graded.

This is not conducive to permaculture, and not a sustainable practice.

The best way to prevent it is to hire Timberline Forestry to assist you with forest management services.

There are several papers authored by leading University researchers that explain why hiring a consulting forester is more financially rewarding for landowners compared to those that contract directly with a timber buyer without assistance from a consulting forester.

I will have those posted here soon.

This is a annual date to remind people about the values that trees offer everyone.

For events associated with arborday, check www.arborday.org.  I would recommend spending time in an outdoor environment.  The forecast for Northern lower Michigan is sunny and a high in the mid-high 70 degrees F.

This is the first comment of the new blog.

Currently, I am juggling several duties in addition to running  Timberline Forestry’s website/blog/media and social networking venues & field operations (currently marking Red pine stands & putting together one management plan).

As we experience rain days this spring, the blog should be updated several times/week.

Stay tuned…