MARKETING THE TIMBER SALE

When I am preparing to administer a timber sale for a client, it is not unusual for the client to ask me how I plan on selling the timber before I have even designated the timber to be harvested. It is also not unusual to see that look of concern spread across my clients face when I answer "I don’t know".

Timber can be sold a number of different ways, and foresters tend to differ in opinion as to which is the preferred method. Personally, I don’t believe there is a preferred method, and the best method is that which best meets the land-owner’s needs.

The first decision that needs to be made is to determine if the timber is going to be sold through a bidding method or through direct negotiations. Bidding is just as the name implies in that potential purchasers are asked to submit bids for the purchase of the timber being sold. In most cases the high bidder will be awarded the bid; however, all good bid sales will allow for the landowner to reject any bid regardless of the bid amount. A negotiated sale is when the forester enters into direct negotiations with a potential buyer or buyers and negotiates the price that will be paid for the timber. One of the advantages of direct negotiated sales is that it allows the forester to match the logging operator with the prop-erty. Depending on the desired results, there are times when a forester wants to have a specific operator who he/she is familiar with executing the timber harvest because that operator is a known entity. The forester knows the type of work that the operator is capable of.

There are advantages and disadvantages of each method. The advantage of bid sales is that competition breeds prices. A landowner may receive a higher price for his/her timber simply because various buyers are bidding against each other. Remember, basic economics for the buyer is to buy low and sell high. There is nothing unsavory about that prem-ise and it is a basic business method. Bid sales imply that an individual purchaser is not the only purchaser looking at the timber; therefore, the potential buyer needs to consider that when submitting a bid. Additionally, bid sales tend to reach a broader audience which may result in a higher bid due to a niche market or a specific situation of a potential buyer that is not publicly known. For poor or mar-ginal lots, reaching a broader audience can be very important as it may allow for the opportunity to harvest these poor lots due to the individual circumstances of the potential buyer. Having to show a lot to a potential buyer on an individual basis is very time consuming.

If bidding is chosen as the appropriate sales method, a decision then needs to be made pertaining to the payment method. Is payment to be made based on a lump sum, a series of fixed payments, or is the timber to be paid for as the timber is harvested based on a price per species and/or product.? Again, there are advantages and disadvantages of each method.

While it may appear to be simply choosing between one method over the other, the reality of the situation is that this is usually not the case. Most forest-ers with experience have developed hybrid methods which combines the best elements of each method. Many years ago it was thought that if a landowner wanted the best money for his/her timber, the landowner would have to sacrifice the level of the quality of the logging job. This really is no longer the case. Expecta-tions of loggers have reached the point where high quality work is expected regardless of the price paid for the timber. While there are a few exceptions to this concept, top prices and quality work are not mutually exclusive goals. A good for-ester should be able to develop a sale and payment method that works for all parties and achieves the goals of the land-owner.

I have sold timber in a variety of different ways, and there are even other methods that I want to try in the future. Each method has its advantages and disadvantages, but the most important consideration is selecting a method that best meets the landowner’s needs. Personally, I usually do not make a recommendation to a landowner until I have at least started the process of setting up the harvest on the ground. In addition, I need to understand the landowner’s financial needs and consider the tax implications based on timing of payment. Additionally, the current timber market will have an effect on the selection of the sale method.

So, when I tell my client "I don’t know" it doesn’t really mean that I don’t know because I am ignorant. It means that I am collecting as much information as possible to insure that the sale method will best meet the landowner’s needs before I make a recommendation.

TIMBER MARKET WATCH

If you had wood to sell in 2014, there is no denying that it turned out to be a very good year to sell it. The prices were strong, and the mills couldn’t seem to get enough to meet their needs. But as many have pointed out, we can expect to see a drop in prices throughout 2015, but they probably still will remain above what was being paid in 2012 and 2013.

The species that will continue to remain strong are sugar maple, ash, and red oak. Sugar maple, which is primarily sold domestically, did very well and was $200 mbf or more over what has been seen in the past. Traditionally, it’s a finicky species in respect to pricing because it’s not a product that’s in heavy demand in foreign countries. This is especially true for veneer, and going forward we may see a higher than average drop in veneer prices. This is relative to saw log prices though, as veneer prices are historically some of the most stable, due to the rarer nature of veneer logs. Red oak and ash stayed strong through-out the end of 2014 and into 2015, because the majority of red oak and ash lumber (some estimates peg it as high as 75%) end up overseas in countries like China and Vietnam, which is experiencing faster growth and development than we are here. In the Vermont area the price of ash dropped around $100, as did oak, but it is expected to remain stable throughout the new year.

In Maine as well as in New Hampshire, hardwood pricing has stayed stable save for a few minor adjustments, and pro-jections are that 2015 will be similar to 2014. Low grade hardwood saw an increase that may last indefinitely and softwood prices have stayed higher than normal, as difficult weather conditions have prevented mills from procuring the inventory need-ed to keep their yards stocked through spring. Oil prices have dampened the demand for firewood, and as oil continues to stay lower, the cordwood end of things might suffer a bit, but certainly not in the long term.

The previous year ended up being one for the books for timber buyers, timber harvesters, and landowners. Retrospec-tively. The bottom line is that there is a good year on the horizon for wood prices, and although we might not see the prices that we saw in 2014, it is safe to say that mills will be paying above average for both hardwoods and softwood sawlogs, and the pulp market will remain strong. Ultimately, we will continue hoping for someone to invent a working crystal ball, but in the meantime we cannot predict the price of wood with 100% accuracy. The market will remain strong but timber prices are not the only thing a landowner needs to consider before harvesting. Management goals play an important part in harvesting time-lines, as well as the "interest" of having uncut wood sitting on the stump.

LEGISLATIVE UPDATE

It seems like every time we decide to write an article about state legislature activities that affect woodland owners, Vermont has the most bills under consideration. This time is no different. Maine, New Hampshire, and Massachusetts are pretty quiet at this time concerning potential legislation. New York is considering some changes to that states "current use" program, and Vermont has a plethora of items that could significantly affect woodland owners.

Like many other states, Vermont is facing a $120 million dollar deficit. Additionally, the federal government is pressur-ing Vermont to fund the Clean Water Fund to clean up Lake Champlain, and the legislature is looking to raise $6 -$12 million for that purpose.

The Senate Agriculture Committee appears poised to propose a per acre tax of $.50 on forest land and $1 on all other lands. This is on top of what is paid in property taxes. The House of Representatives has come forward with a different pro-posal which is a .2% increase in the Property Transfer Tax. A Senate bill that has not been acted on suggests a per property parcel tax with a cap of $100 per parcel for 500 acres or more and $500 per landowner per year.

The Vermont Governor proposed a moratorium on new entries into the Current Use Program; however, this was re-jected by the House. His proposal for a 20% increase in taxes for UVA participants who post their land has not gained traction either. There has also been talk of increasing the minimum lot size that is eligible for UVA from 25 acres to 50 acres.

House Bill 35 contained a provision making Accepted Management Practices mandatory. Most landowner and forestry groups have opposed this provision as has the Vermont Department of Forest, Parks, and Recreation. The comparable Senate bill does not contain this provision.

House Bill 355 is proposing that foresters be licensed. The Vermont Forest Products Association has come out in oppo-sition of this bill citing that there is little evidence of the benefits of licensure and there are a number of flaws in the wording of the currently proposed bill. The Department of Forests, Parks, and Recreation initially remained neutral on this issue, but re-cently the Commissioner has expressed support for licensing.

House Bill 26 proposes to end the current exemption for incidental taking of endangered species during the practice of timber harvesting. This bill should be of significant concern for all timberland owners as it will require the implementation of a permitting system that will increase the cost and legal exposure of conducting management activities.

The State of New York is currently considering some changes in that State’s "current use" program which is commonly referred to as 480a. Granted, there has been talk of making changes to this program for 15 years, but this year it seems to have some traction.

Basically the change would create two new options for sustainable forest management within the program called "Forest Certification" and "Time of Harvest". Parcels less than 1,000 acres would be eligible for enrollment in these two new options while parcels 1,000 acres and greater would continue in the current 480a program.

Both new options reduced the minimum acreage for enrollment to 25 acres from the current minimum of 50 acres. The "Forest Certification" option would require that the property be enrolled in a forest certification program; therefore, no forest management plan would be required to be submitted to NYDEC. The assessment reduction would be 70% and no harvesting would be required.

The "Time of Harvest" option would require that a harvest be conducted on the property and that the harvest fol-lowed a NYDEC Time of Harvest plan. The assessment reduction would be 40%. The obvious concern related to this option is that it does not appear to allow enrollment until a harvest occurs; therefore, a parcel that does not have an actual harvest take place will not be allowed to enroll.

Some of the proposed changes to the 480a program are welcome and have been needed for a number of years; howev-er, not allowing the enrollment of properties that are being sustainably managed simply because they do not have the need for an immediate harvest seems to be a bit short-sighted.

NEFCo strongly encourages landowners to become involved with their state forestland owner organizations. These organizations are often asked for input concerning proposed legislation and it is vital that you have a seat at the table. All of these organizations have informative web pages with

Vermont Traditions Coalition having what is probably the most com-prehensive information concerning current landowner issues. Below is a list of groups as well as contact numbers. Please consider joining and supporting at least one of these groups:

• Massachusetts Forest Alliance: 617-455-9918
• New Hampshire Timberland Owners Assoc.: 603-224=9699
• Small Woodlands Assoc. of Maine: 207-626-0005
• New York Forest Owners Assoc.: 800-836-3566
• VT. Traditions Coalition.: 802-238-0364
• VT. Forest Products Assoc.: 802-461-5688

A WALK IN THE WOODS

I was walking through a pine forest on an old, moss covered skid trail.  I was contemplating how to lay out new skid trails and access the stand for a planned timber harvest.  It was mid summer, or so and I was totally engrossed in what I was doing.  So much that I blundered right in to a real bad situation.  I heard a noise and turned my head to see what it was. First thing I saw was a bear cub scurrying up a tree.  Next, another cub stood on its hind legs, sniffed the air in my direction, and proceeded to start walking toward me at a brisk pace.  Not quite a run.  Much as I would have liked to pet that little guy, I new this was bad.  Without looking around, I raised my arms over my head, waving them frantically and yelled at that cub.  It skidded to a halt about 20 feet from me and found another tree worthy of his best impression of his sibling.  It was at this very moment I heard a noise to my right.  Wanna guess what that was?  Yep.  Mama bear and she was none too pleased.  She was about 50 feet away or so and started running toward me.  I immediately (I panicked) turned to run.  Two steps in to my flight the voice in my head said "Don't run!"  So as I turned around, I was greeted with the sight of that bear 10 feet from me.  When I turned, she also stopped.  She backed off a bit but was stomping the ground with her paws in a very stiff-like manner.  She was also showing me what great teeth she had, snapping her jaw at me.  She did several of these "false" charges at me, all the while I was yelling and screaming and waving my arms around.  Once, I even looked down to see a good-sized tree branch on the ground.  Thinking I had something I could use as a club, I reached down to grab it, only to have it fall apart in my hands when I raised it up.  Rotten.  Well, after some time of this, which was probably only a minute but felt like much more, she finally retreated back to about 50 feet but was still snapping her jaw and stomping the ground.  By this time I had stopped yelling and told her, more calmly than I felt, that it was alright and that she could just calm down.  I figured it was safe then to try to get out of there.  I backed away from her for a bit, then took a deep breath and turned my back on her, walking briskly away.  I looked back over my shoulder after going about 50 feet and she and the cubs were gone.  They knew when the getting was good, too.  I left the woodlot for another day.  Figured it was time to catch up on some paperwork.