Typically there are two main types of log sales – Managed Sale and Stumpage Sale.

1. MANAGED SALE

This is where the owner appoints a professional harvesting/marketing company to oversee all aspects of the project on behalf of the owner. The project is very transparent for the owner, with the owner receiving a detailed report of all revenues received and costs incurred from the project. The owner should receive a written estimate from the management company detailing revenues and costs, as well as an estimate of the bottom line return to the owner.
The owner pays the management company a fee for providing the service and this fee should be detailed prior to the harvest beginning. Fee structures are usually based on a $ per tonne figure, or a % of net revenue returned from the project.
Because it is an open book project, the owner takes on the market risk, and will make more money should the market rise during the operation but conversely may lose revenue should the market fall during harvest. We like to use the managed sale approach mainly because we feel it returns the highest revenues to the forest owner, while allowing the owner to retain a hands-on approach to the operation on their property.

2. STUMPAGE SALE

The advantage of the stumpage sale to the forest owner is that they have the surety of knowing exactly the $ per tonne figure they are going to receive for every tonne of wood harvested from their forest.  However stumpage buyers will discount their buy price to offset grade, volume and market risk, and thus returns can often be lower.

There are three subcategories to a stupage sale:

• Graded (pay as cut) sale: This is where the stumpage buyer pays a different price for each grade cut. The significant risk for the forest owner in this sale method is the stumpage purchaser’s lack of incentive to optimise the grade outturn.
• Composite (pay as cut): This is where the stumpage buyer pays a composite price for all logs removed. While this produces an incentive to optimise grade outturn, it is likely to result in a price discount-to mitigate the buyer’s risk that the grade mix is inferior to that assessed before harvesting.
• Lump sum sale: This is where a stumpage buyer pays a lump sum for all logs before the start of harvest. The buyer takes all the risk of grade mix and total recoverable volume, as well as market risk. This typically leads to the buyer heavily discounting their bid price to cover this risk.

Additionally the forest owner will typically need to pay a forestry company a fee to take their forest to the market, package the stumpage sale and oversee the stumpage process for them. We will arrange stumpage sales for forest owners if required, and/or purchase forests on a lump sum basis.

Read more about our sales services, here

Your trees have been growing now for 25 years and you are going to get one shot at optimising the return from your investment.

You need to consider:

• Revenue – Is the current log market the best for your stand of trees, and will it generate the best sales revenues for your logs?
• Seasonal issues – Does it fit in with other farm operations? Do you need to consider winter vs summer harvesting due to soil type?
• Costs – You need to consider harvesting and trucking costs, along with roading costs and the costs of transporting in a harvesting crew.
• Log value recovery – Does the harvesting crew you are using have the necessary skills to optimise each tree stem into the highest value log components, at the appropriate log quality?
• Return on Investment – Should you wait another year, or will you make more having the money in the bank or some alternative investment?
• Land use – Is your current tree crop the best use of your land going forward?

The final return from any harvest /market operation is a combination of all of the above.

CALL 0800 PHS LOGS FOR INDEPENDENT FRIENDLY ADVICE ON YOUR WOODLOT HARVEST.