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Southern Timberland Owners: Are You Requiring $/Ton Bids for Your Timber Sales?

Southern Timberland Owners: Are You Requiring $/Ton Bids for Your Timber Sales?

When a truckload of cut pine timber crosses a scale at a mill facility, it is the weight of the load itself—not the volume of timber on the truck—that is measured and ultimately purchased. This is a standard practice in the US South that is oftentimes confusing to landowners, who have historically associated volume units of measure, i.e. MBF (thousand board feet) for sawtimber products and “cord” for pulpwood products, with the value of their timber. Unfortunately, when converting from a measure of volume to a measure of weight, variability in results is inevitable.

When timberland owners put a tract of timber up for sale, multiple dealers bid on the right to harvest that timber. Often, every dealer interested in harvesting the tract will submit a bid that estimates a different volume for each type of timber product since each uses different scaling practices (i.e., a different way of measuring trees and calculating log defects). This is necessary because trees on the stump cannot be weighed on a scale.

A variety of conversion methods are used to transfer standing timber volumes to weights. The most common of these are the Doyle and Scribner Log Rules, which provide a per-ton conversion factor for each specific diameter and length. The Doyle log rule is the most commonly used log rule in the Southeast, but it often underestimates volume on small logs and overestimates volume on large logs. Although it is considered intermediate in accuracy, the Scribner rule tends to underestimate volume as well.Southern_White_Pine_05

In most cases today, the ton (2,000 lbs.) has replaced both MBF and the cord as the industry standard for purchasing pine products in the Southeast. A ton is a consistent, objective measure (no matter the species, size of age class of the trees) and is used by most mills when purchasing wood. Timber estimation practices have adjusted as well and many times (but not always), timber cruises estimate timber in terms of weight, especially for pulpwood.

When landowners receive a bid in which volume is reported in MBF or cords, they must then convert those units to tons in order to gain an accurate understanding of what their timber is worth on the market. Unfortunately, when converting a pine sawtimber MBF price to a ton basis, different log rules affect the conversion.

The two conversions can result in very different prices. For example, a price of $350/MBF Doyle for a stand with an average diameter at breast height (DBH) of 14” may convert to around $38/ton, whereas a price of $335/MBF Scribner at the same DBH would convert to around $49/ton. Without knowing the details, one might assume that the $350/MBF bid is the better offer. Once the likelihood of underestimation is understood, however, it is clear the $335/MBF price would yield considerably more profit for the seller.

One solution to this problem of inconsistency for timberland owners would be to require all potential buyers to submit their bids in dollars per ton ($/ton). This requirement can be made clear in the timber sales notice when it is published; doing so will remove any margin for conversion discrepancies.

At the very least, however, sellers should always be aware of what methods a buyer is using to determine the value of a stand of timber, and they should include this information in every contract. A solid understanding of how the different conversion methods relate to each other is imperative and will help landowners make more informed sales decisions. Only then can landowners truly make like-kind price comparisons in assessing the value of their timber.

Are you planning a timber harvest? Learn the value of your timber with Forest2Market's Timber Owner Market Guide. Volume weighted average prices are reported for pine sawtimber, pine chip-n-saw, pine pulpwood, hardwood sawtimber and hardwood pulpwood for 39 local wood basins in the US South, and all pricing data is based on actual timber sales agreements.