VARDAMAN VIRTUAL FORESTRY COMPANY

The Most Direct Link to Knowledge Workers in the Southeast Forest Economy

ESSENTIAL STEPS IN GETTING TOP DOLLAR FOR YOUR TIMBER

If you want to make money growing trees, you must get top dollar in all your sales, and unless your ownership is large, you will sell timber only two or three times in your lifetime. Therefore, you should study carefully everything John Smith, the veteran timberbuyer, said in the interview recorded nearby. He is a prime example of your customer, trained by 30+ years of competitive procurement. You can never win in competition with him; you can win only by creating competitions between him and his peers and selling to the winner. Here's how to do it.

First, make sure that all buyers know about your sale. For many years JMV&CO has mailed 200+ invitations to bid on each sale, but even without our resources, you can locate 50 potential bidders within a 70-mile radius of the tract. In addition, you must list the sale on www.se-timbersales.com.  Doing so is free and will call it to the individual attention more than 1,500 interested parties.

Second, describe in detail what you offer for sale. An estimate of timber volumes is essential but only half enough; you must report the number of trees and volumes by DBH classes. For several reasons, big trees are worth more per cord or MBF than little ones; you can see how much more by visiting www.vardaman.com and inspecting our monthly stumpage-price reports. In pulpwood sales, tree heights are also important, for some small ones are not long enough to reach between the bunkers of a logging truck.

Third, provide accurate volume information. In sawtimber sales of $500,000 or less, individual DBH measurement of each tree is essential.  Distribution of these trees over the tract varies greatly from one acre to the next, even in plantations, and depending upon sample measurements often leads to very large errors.  All timberbuyers know this well and, therefore, always bid with caution when required to rely on them.  No seller wants a cautious bidder.

Fourth and the easiest step of all, furnish both road maps and tract maps.  Smith made it clear how valuable they are to him and why he might not bid if he has trouble finding the tract.  These maps are cheap and easy to prepare in digital form and can be used for decades with only minor changes.

Fifth and most important of all, pay extremely close attention to what your timber is worth and how much it is growing each year.  You can safely ignore state, regional, and JMV&CO reports of average prices; they are quite valuable for some purposes, but for yours.  Stockholders in Berkshire Hathaway (Warren Buffett's company) have a vital interest in the price of its stock, which has dropped from $81,100 to as low as $52,800 this year, and almost no interest in the Dow Jones Industrial Average, which has risen from 8,676 to as much as 11,366.  Results achieved by others are equally useless unless their properties are almost identical to yours.

The stock market evaluates BRK stock at no cost to its owners, but you must work harder  Your basic tool is an inventory of numbers and volumes of trees by DBH classes.  If you own a natural stand of trees, your only recourse is paying someone like JMV&CO to make measurements on the tract; this may seem an unnecessary expense, but you cannot make intelligent decisions without one.  If we have recently conducted a thinning of your plantation using PTAEDA2V as a guide, you already have the required inventory.   We'll be happy to show you how to use these inventories without charge.

The most important part of the process is evaluating the present stand, and good data for this are available, again without cost, on www.se-timbersales.com.  Just look for sales of stands that come close to matching yours in both volume per tree and per acre, and study the bids received.  Similar data are available on www.vardaman.com in the monthly stumpage-price reports posted among the articles by each JMV&CO manager.  Then add the estimated value of the land to determine what your total investment is worth now.

Estimating its value at some future time is more difficult.  For natural stands, a fairly-simple, reasonably-accurate method for predicting volume growth of trees is described at pages 98-100 in Jim Vardaman’s “How To Make Money Growing Trees.  For most pine plantations, much more accurate predictions are possible with PTAED2V; we'll do this for you or sell you a copy of the required software.  Predicting value growth is much trickier, for who can predict even one second of the future?  Many forecasters, especially those with properties for sale, predict that past trends will continue without change into the future and thus add a real-value increase of 2% or more.  We don't.  In making our investments, we assume that timber and land prices will remain unchanged; if we get extra real-price increases, we want them only as frosting on the cake.  Once you have both present and future values, any pocket financial calculator will figure the compound annual return.

What Return Did You Get For Your Tract?

If it was less than 10%, the cause might be the biological characteristics of the soil.  If this is the case, you're stuck with low financial returns and must settle for dividends partly in pleasure or find a buyer who is not as picky as you are. If, however, the cause is that you have failed to restore its productivity after the last cut, i.e., you have treated it as a mine and depended upon unaided Nature to produce future crops, the scientists of the Southeast have developed a large arsenal of techniques to solve your problem. We'll be happy to show you how they can boost your return to equal that of other investments.

Both investors and practitioners must continue to spend time studying forestry developments.  Dr. Harold Burkhart, leader of the Loblolly Pine Growth and Yield Research Cooperative, recently explained why, Forestry research is not rocket science; it is a lot more complicated.  The rationale is that we are dealing with a complex biological system being modified constantly by management and environmental changes.  In the case of physical science, such as rocket science, one can count on certain things, e.g., the law of gravity, remaining constant over time. Some fields of science advance more slowly than others, not because those working in them are less capable, but because the problems are less tractable, i.e., more complicated.