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- TYPES
OF TIMBER BUYERS
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- Have you
been approached by someone who is interested in
purchasing your standing timber? Chances are that you
have received a phone call, letter in the mail, or a
knock on the door from a "timber buyer". Having an
understanding of who that person is and what their
underlying interests are is critical to making sound
decisions regarding the sale of your timber.
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- In
Northern Lower Michigan, as well as other parts of the
state, forest harvesting activities are driven by
individuals and/or forest product companies looking for
raw materials to run a sawmill. There are several means a
company will use to access private lands and the timber
resources contained on them. The system in place consists
of advertisements, letters of interest, brokers, snoops,
buyers, foresters and word of mouth. Who will you choose
to buy your timber? Or better still, how will you market
your timber to the industry?
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- A
"timber buyer" is someone who is willing to make you an
offer on your standing timber. The offer to buy your
timber may be legitimate, however you should not confuse
the offer to buy your timber with the management of your
forest. Timber buyers come in all shapes, forms,
attitudes, and utilize various methods to convince you
that they are the only game in town. Keep in mind that
many of these buyers do not always have your best
interest in mind when they are discussing the harvest of
your timber resource.
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- A
"Broker" is a timber buyer who will offer to sell your
timber for you. They generally do not work for a sawmill
but will have a relationship with one or two. They will
ask you to sign a contract and then sell your timber to
someone else. Their sales pitch works something like
this:
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- "I
noticed you have some valuable timber on your property. I
would be willing to market your timber for you. I can get
you top dollar because I am familiar with who is paying
the most for the type of trees you have on the property".
He or she will charge you a percentage of the timber sold
from the sale. Here are two examples:
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- EXAMPLE
1
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- The
landowner signed a contract with a timber broker. The
agreement was that the landowner would keep 50 percent of
the timber value and the broker would retain the other 50
percent. The broker called one sawmill and offered them
all of the trees on the parcel 16 inches and up on the
stump. The sawmill evaluated the timber, marked the
timber and made an offer of $160,000.00 for the right to
harvest the timber. They wrote a check to the landowner
for $80,000.00 and another to the broker for
$80,000.00.
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- EXAMPLE
2
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- The
landowner signed a contract with a timber broker. The
agreement was that the landowner would keep 90 percent of
the revenues. The broker would only charge 10 percent.
The broker called a few sawmills and asked if they pay a
finders fee for timber referred to them. The broker made
a deal with a sawmill to pay him a 10 percent finders fee
and sold the timber to them for $60,000.00. The landowner
paid the broker $6,000.00 for his services and the
sawmill paid the broker $6,000.00 for the
referral.
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- Both of
these examples really happened and happen every day
though out the area. The bottom line, don't sell your
timber to someone who is going to simply broker
it.
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- An
"Industry Buyer" is a timber buyer who works for a single
sawmill. They are paid by the sawmill to bring wood
products into the mill. Be aware that their job is to buy
timber for their sawmill as cheaply as they possibly can.
They are often paid on commission. An industry buyer
differs from a broker in the fact that they do not
typically charge for any services. However, there are
sometimes hidden costs associated with the purchasing of
your timber, such as trucking, skidding, or some sort of
handling cost. Do not deal with industry buyers who tell
you they will deduct these costs from the sale
revenues.
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- Industry
buyers are generally not foresters, that is, most do not
have any formal education or background in forest
management. They are trained to purchase a specific
product such as veneer logs, sawlog products, pine, or
pulpwood products. Their sales pitch works something like
this:
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- "I work
for XYZ sawmill. We noticed that your woodlot contains
the types and size of trees we are currently looking for.
We can selectively harvest the trees so there is minimal
damage to your woodlot. It looks like you have
approximately 150 trees in which we would be interested.
My company can pay you up front if you sign a contract
today."
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- He or
she will sometimes mark the trees they want or leave the
contract open regarding the tree selection. Here are two
examples:
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- EXAMPLE
3
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- The
landowner signs a contract to sell 150 trees from their
woodlot to an Industry buyer. The buyer agrees to pay
$10,500.00 for these trees up front. The buyer then marks
the trees they want and schedules the harvest with their
logging crew.
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- EXAMPLE
4
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- The
landowner signs a contract to sell trees 16 inches and
larger on the stump to the buyer. The buyer agrees to pay
for the wood on a "cut and scale basis" which means the
trees are cut, moved to the sawmill, and graded and
scaled, and thus their value determined. The buyer agreed
to pay the landowner 60 percent of their value. The buyer
agrees to provide the landowner with the "scale slips"
from the sawmill, so they know exactly what has been
removed and what its value was.
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- Neither
one of these examples (3 & 4) benefits the landowner.
In example 3, the landowner has no idea what trees will
be selected for harvest (they have agreed to let the
buyer decide). In addition, the landowner has no idea if
$10,500.00 is a fair price for these trees. In example 4,
the landowner again has allowed the buyer to select the
tree he wants from all of the trees of merchantable size
in the forest (16 inches and larger on the stump = most
of the trees 12 inches in diameter). Also, the landowner
agreed to allow the sawmill to grade and scale the trees.
Payment is not guaranteed and you will never really know
what was produced from your woodlot.
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- "Loggers
and Jobbers" are independent small businesses or
companies. Often they will buy timber on shares or on a
cut and scale basis. Occasionally, they will pay a lump
sum price. They sell their products to a variety of
sawmills. Here are some typical examples of loggers who
are offering to cut your woodlot:
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- "I am
Joe Smith, I am a logger. We are cutting next door and
noticed that you have some trees we would be willing to
purchase from you. We are a small company and only do
selective harvesting. We are willing to cut your woods on
shares. You will receive 60 percent of the market value
for the trees we cut. We will sort all the log grades and
products and sell them to various sawmills in the
area."
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- EXAMPLE
5
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- A
landowner agrees to sell their trees to a local logger.
The logger agrees to pay for the trees on shares. The
landowner will receive 60 percent of the marketed value
as the logs are produced from the property. The logger
agrees to provide the scale slips from the receiving
sawmills.
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- EXAMPLE
6
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- A
landowner agrees to sell their trees to a local logger.
The logger agrees to pay the landowner $5000.00 for 100
trees that he will mark in the woodlot.
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- When
working with local loggers/jobbers you are relying on
their ability to merchandise your trees and market your
trees. In examples 5 & 6, you are also allowing the
logger to select the trees to be harvested. In addition,
you don't really know if you are being paid a fair market
price.
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- "Timber
Snoops" are individuals who make an initial contact and
refer you to a sawmill representative. He or she is paid
a percentage of the timber value from the referral.
Similar to a broker, many sawmills pay a finders fee to
individuals who refer wood products to their mill. If you
are approached out of the blue by someone you do not
know, and they refer you to a specific company who they
say pays top dollar, be wary, they are likely just trying
to make a fast buck at your expense.
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- "Industry
Forester" More recently, some of the larger forest
product companies have been hiring foresters to
administer the purchasing and harvesting of raw materials
for their sawmills. Industry foresters have a formal
education in forest management and generally have a
better understanding regarding tree selection and forest
management. You should keep in mind that they are
employed by a forest product company and operate as such.
Industry foresters do not charge for their services and
often offer other services such as long-term agreements,
plan writing, inventories and general technical
assistance.
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- Something
else to consider when thinking of selling your timber is
how it is priced. "Stumpage prices" are prices paid for
standing timber. Stumpage prices are constantly changing
within the market place. The quality and in some cases
the quantity of the trees being sold will dictate the
value of your trees.
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- Stumpage
prices are often confused with mill prices. The mill
price is the price paid for a log at the sawmill. Loggers
and producers typically receive a mill price. Landowners
are generally offered a "stumpage price". One exception
would be the price offered for veneer products. Veneer
products can be marketed by the receiving sawmill or by
the producer from a job site itself. Veneer prices
fluctuate and vary across the board. Landowners should
receive a percentage of the veneer products marketed from
their woodlots. Percentages between 70 percent and 90
percent of the marketed price are commonly paid for
veneer. Currently the price paid for #1 sugar maple
veneer is around $4000.00 per one thousand board
feet.
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- So
what should you do if you are approached by a timber
buyer? Do your homework! Do not rush into a deal or sign
a contract. Contact a public service forester for
assistance.
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In
Antrim and Kalkaska counties, contact the local
Conservation District at (231-533-8363) or
(231-258-3307).
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