Q. What is my timber worth?
The value of your timber tract is based on the type, grade, size, and condition of your timber and the current market price.
Q. What pricing mechanisms and contract types can I use to sell my timber?
There are two pricing mechanisms and two contract types used in the timber selling process. The two pricing mechanisms are either negotiated or sealed bid pricing. Timber is usually sold using “by the ton” or “lump sum payment” contracts. There are advantages and disadvantages to each pricing mechanism and bid type.
Q. What is the difference between negotiated and sealed bid sales?
Negotiated sales involve face-to-face bargaining between the seller and the buyer. It is used more frequently for products such as high-value hardwoods, in which there are typically fewer bidders.
Sealed bid sales require that potential buyers submit confidential offers in writing for your timber. This requires management of a sealed bid process.
Q. What is the difference between per-ton contracts and lump sum contracts? What are the advantages and disadvantages of each?
Per-ton contracts provide for payment as the timber is cut. The sum received is based on the actual volume and type of timber cut.
Lump sum contracts provide payment made in full at the time the contract is signed for a specified tract of timber. The amount paid is a sum agreed between the two parties before the timber is cut.
When you sell your timber on a per-ton basis:
- A price per ton is negotiated for each timber type and product class.
- The per-ton price is determined in advance, the amount of timber to be harvested is not.
- The final amount you receive is based on the volume of timber cut.
- You get paid for what is actually cut.
- The contract offers more flexibility as the amount cut can be adjusted by buyer and seller as the contract proceeds.
- Sorting logs into highest-value products is critical to maximizing profit.
- Trust is paramount.
- This method offers the least risk to the buyer and the largest potential upside to the seller as the buyer does not have to include a volume risk premium in his price. This is because the buyer is not basing his payment to you on an estimate of the volume of timber on your land, but the actual amount of timber he cuts.
- Estimating timber volume is an art, not a science, and every timber buyer has to include some room in his bid for error.
- Payment is based on the weight of the timber cut at the first point of delivery. The landowner will receive a copy of each scale ticket from the mill.
- The timber buyer provides the seller (you) a complete accounting of all harvested types and products by delivery point.
When you sell your timber on a lump-sum basis:
- You receive a fixed dollar amount agreed in advance at the time the contract is signed for a certain location of standing timber.
- The sale price is not a function of the volume cut.
- It is difficult to adjust the area being cut.
- Payment for the full contract is made when the contract is signed. However, payments can be deferred by mutual agreement.
- This contract provides you with cash most quickly.
- This contract provides certainty as what you are going to receive at the time the contract is signed is fixed.
Q. When will you cut my timber?
We will cut your timber as soon as feasible, but within a maximum of twelve months after signing a contract.
Champion Legacy Resources has participated in both negotiated and sealed bid sales. We have utilized both per-ton and lump sum contract types. We look forward to discussing your needs with you and are confident we can put together a package that will meet your objectives.