Arkansas Tree

Farmer Conference

Pete Prutzman, RF, ACF

June 18, 2015

Marketing Your TimberMarketing Your Timber

© 2015

Factors to Consider in Any Sale

Because timber sales are infrequent, planning is especially important. Each property is different and a landowner should plan the sale with input from their accountant, forester, etc.

http://www.fs.fed.us and search for “Tax Tips” www.timbertax.org www.msucares.com/forestry and search for “Basis” www.acf-foresters.org

Taxes

How will the timber sale affect annual income?

Will the sale qualify for capital gains?– holding period, method of sale

Is there timber basis available for depletion?– Ice and wind storms heightened awareness

How long between sale income and tax time?– some sell early in the year, so they have use of income longer; others

sell timber to pay last year’s taxes

Professional Marketing

Timber buyers and mills are notnot the enemy; to practice forestry we need active markets for our products.

Our goal is to make it easy for buyers to pay a high price.

Successful Sale Ingredients

Good maps (location, tract, aerial photo, topo)

Well-marked sale boundaries

Logging access

Clear instructions / conditions – including contract time or terms of sale

Reliable timber inventory– 100% tally of sawtimber whenever possible

Actual Actual TimberTimber

SaleSaleNoticeNotice

Actual Actual TimberTimber

SaleSaleNoticeNotice

Actual Actual TimberTimber

SaleSaleNoticeNotice

Actual Timber Sale NoticeActual Timber Sale Notice

Actual Actual TimberTimber

SaleSaleNoticeNotice

Actual Actual Bid Bid

ResultsResults

Statewide pine sawtimber stumpage price $25.30/ton in

1Q 2015

Utilization

•Different product specs / sorts•Grow a variety of products if possible•Include a variety of products in sale•Specialty products

Utilization

•Hardwood utilization has improved

Timing

Timber will continue to grow as it is, “stored on the stump,” until markets are favorable.

Except when insects or disease threaten, there is a sale opportunity window of several years.

We have learned not to speculate on future market conditions, can only tell about past experience.

A few thoughts on timing a sale…

As much as possible, offer for sale accessible, “high ground” timber in the winter season.

– Bottomland hardwood should not be advertised in winter.

When possible, mark a timber sale after most annual growth has occurred, so that estimates reflect optimum volume. Also, visibility better in dormant season.

Allow buyers enough time to prepare a bid

Allow sufficient time for harvesting; one “dry season” may not be enough.

Additional Comments

Clearcut vs. Select Cut– Often, clearcuts generate a higher per-unit price than

selectively marked sales.

Too many restrictions on sale often mean less buyer interest.

BMPs Know the buyers

– An active consultant forester will constantly update their buyer lists.

Pay-as-cut Sales

There are also some sales where competitive bidding is not practical. Salvage of damaged timber or first thinnings of pine plantations are two examples.

Request down payment (if possible)

Work with a conscientious contractor who will sort forest products, etc.

Actual Bid ResultsActual Bid Results

Good News

Mill Expansions

Pellet Mills

Global Markets

Key Driver of Investment Return is Tree Growth

Summary

In short, there are many factors beyond our control, but the key “sales strategy to maximize revenue” will continue to be planning and preparing a professional sale that makes your timber (or land) as attractive as possible.

Be flexible, reasonable, patient. Keep records on basis. With a professionally managed sale, the landowner will

receive full market value or above whenever they market timber.