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The Value of a Consulting Forester

Posted by Joe Clark on December 17, 2015

This is an abbreviated version of an article written by Greg Conner, ACF and Joe Clark, Stumpage Forester at Forest2Market that was recently published in The Consultant, the annual journal of the Association of Consulting Foresters (ACF). To view the article in its entirety, please click here. To learn more about the ACF, please visit their website.


“If I hire you to sell my timber, will I get my money’s worth?” It is a question that every consulting forester has been asked. As an advocate for consulting foresters, I would like to say that yes, foresters are indeed worth the money. But can we prove that with hard analytical data?

Earlier this year, I set out to prove the value of consulting foresters by using Forest2Market’s proprietary industry data. Accessing Forest2Market’s distinctive databases that track prices of raw materials for the forest products industry, including stumpage prices, I built a study process that would include factors unique to consultant involvement during timber sales. Forest2Market’s data is exclusive within the industry, as it is the only comprehensive set of data that is collected at the transaction level; no survey data is used or incorporated into the database. Data are collected on both a tract and sale basis, and the details of each transaction are methodically verified before being added to the database.

 

Study Considerations

There are many different factors that affect stumpage prices across the southeastern United States. Stumpage price – the price paid to a landowner for the right to fell trees and remove them from the owners’ timberland – can vary dramatically across local and regional wood basins. Through the vast data points collected by Forest2Market, the results indicate that increases and decreases in price are typically tied to one of five primary factors that affect stumpage price variation:

  • Competition

  • Inventory

  • Seasonality

  • Tract Size

  • Tree Size and Quality

 

Study Design

The primary goal of this analysis was to distinguish the effect forestry consultants have on the outcome of timber sales (price paid for stumpage). Because of the numerous dynamics that affect stumpage pricing, all factors (or as many as possible) were held constant to properly assess the impact consultants had on a sale. To accomplish this, sales were first separated into two categories: pay-as-cut (per-unit sales) and lump sum sales. The data was then analyzed by each sale type.

Once sales were broken out into their proper segments, the affects that each sale/tract attribute had on overall sales were analyzed. At this point, we were also able to compare sales that included a consultant and sales that did not involve a consultant.

 

Results

Per Unit Sales

The results begin with a very broad analysis of the data. Figure 1 illustrates a southwide average of per-unit prices for pine pulpwood and chip-n-saw, comparing negotiated vs. sealed bid per-unit sales. The data in this graph consist only of per-unit sales, with timber type being held constant at “plantation” and harvest type being held constant at “row thin;” both tract areas (less than 50 acres and greater than 50 acres) are also examined. Sealed bid sales, as stated by timber buyers in previous studies, typically bring higher per-unit prices across all products as well as both tract sizes. For tracts less than 50 acres, sealed bids brought 9% higher prices for pine pulpwood and 3% higher prices for chip-n-saw. On tracts greater than 50 acres, both products had 3% higher prices.

 

PPW_CNS

Figure 1: Comparison of per-unit sales (Negotiated and Sealed Bids) on tracts that are both less than and greater than 50 acres.

Lump Sum Sales

The analysis of lump sum sales began very broadly as well. Figure 2 highlights consultant vs. non-consultant lump sum sales, and this graph does not hold any variable constant that might otherwise impact total bid; the only constant included is the involvement of a consultant with the sale. The data illustrates a consistent pattern of higher total bid sales when a consultant is involved. It is also important to note the yearly fluctuations; 2012 demonstrates a 33% increase in consultant sales over non-consultant sales, while 2014 shows a much lower 3%. However, the data show that average sales that included a consultant from 2010-2015 YTD brought a total bid that was 17% higher.

total_bid

Figure 2: Comparison of consultant vs non-consultant sales consisting of lump sum sales (Sealed Bids), 2010-2015 YTD. Average total bid for both consultant and non-consultant sales.

Figure 3 presents a more defined look at product allocation, as it shows consultant vs. non-consultant sales where pine sawtimber makes up 26%-75% of the volume of the sale, as well as all of the other factors examined before this. In both cases, the same pattern illustrated in previous charts reveals itself yet again: sales involving consultants consistently bring higher total bids when compared to sales that do not involve consultants.

When harvest type was held constant at “clearcut,” the average increase in total bids for consultant sales was 15%. When product allocation is more strongly defined (sawtimber being 26-75% of volume), the average increase in total bid was 17% while the per-unit sawtimber price on these consultant sales was 6% higher on average. Not only are the total bids higher, but the per-unit price for sawtimber on consultant sales is also consistently higher as well.

PST

Figure 3: Average total bid for both consultant and non-consultant sales.

The last view of the data is shown in figure 4, which illustrates that consultants improve the total bids that landowners receive across the spectrum of acreage. Whether it is a very small tract that is less than 25 acres or a large contiguous tract of 200+ acres, consultants consistently bring a higher total bid. This data set shows that consultants bring a very high value to small (<25 acre) tract sales, raising the total average 51% over bids with no consultant involvement. Consultants have success in the other three acreage categories as well, bringing in 18%, 17% and 14% higher total bids, respectively.

CC_tracts

Figure 4: Comparison of consultant vs. non-consultant sales consisting of lump sum sales (Sealed Bids) that were clearcut and timber quality described as “good,” 2010-2015 YTD. Acreage has been categorized as less than25 acres, 26-50 acres, 51-200 acres and 200+ acres. Average total bid for both consultant and non-consultant sales.

 

Conclusion

Sales that involved a consultant in the process—whether it was a per-unit or lump sum sale—brought higher value to the landowner. On per-unit sales (sealed bids in particular), sales that involved consultants exceeded the non-consultant sale prices by no less than 11%.

The data also showed that consultants did equally well on lump sum sales, bringing an average increase of 12% on total bids. Not only did the trend hold over time, but it also held over various tract sizes, with consultant sales bringing higher total bids on all four separate acreage categories.

It should also be stated that increasing overall profit on timber sales is only one of several benefits that a landowner should consider when contemplating hiring a consulting forester to help manage their land. Consulting foresters also provide other valuable services that improve the quality of the timber and, therefore, the overall value of the timberland. These services include:

  • Locating property boundaries
  • Handling all aspects of timber sales administration, i.e. advertising the sale, managing the bidding process, etc.
  • Logging performance inspections
  • Harvest coordination in conjunction with logging crew leader
  • Marking sale boundaries (including Streamside Management Zones)
  • Determining thinning requirements, harvesting method, skid trail layout, location and quantities of decks, road building, intensity of tree removal and density of residual stand
  • Post-harvest clean-up
  • Site preparation, herbicide and fertilizer application, prescribed burns for hazardous fuel reduction and hardwood control
  • Reforestation
  • Mapping
  • Wildlife habitat improvement (deer, turkey, quail, duck, etc.)

While this analysis does not definitively prove that hiring a consulting forester on a timber sale will automatically increase a landowner’s profits, it does demonstrate that, on average, timber sales that involve a consultant do offer value-added benefits that would be in a landowner’s best interest.

How do I sell my timber

Topics: timber prices, consulting forester

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