VARDAMAN VIRTUAL FORESTRY COMPANY

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

Success in selling timber depends strongly on knowing how the timber market works, and nothing exemplifies this market better than the independent timber buyer. These buyers, usually individuals or small companies, buy from and sell to everybody everyday, and they back their judgments with their own money, sometimes large amounts of it. (Many expert buyers work for big companies, but they use company money, which makes a difference.) We recently interviewed two of the best, Leon Hood of Adel, Georgia, and Ben Stevens of Hattiesburg, Mississippi, in their home territories on different days, and we have presented below each one's answers to the same questions.

JMV:	Tell us about your operations.
HOOD:	We operate in a nine-county area in south Georgia centered on Adel. Although we have bought timber from time to time for years, we didn't get into it full-time until 1983. We use one logging contractor (my uncle), who loads about 15 trucks a day. In 1986 our total purchases were $1,600,000, and we carry about $400,000 of purchased timber in inventory at all times.
STEVENS:	We operate in about 25 counties in the southeastern quadrant of Mississippi and have about 20 pulpwood yards. Starting with my father, we have been buying pulpwood in this territory for more than 60 years. In a normal year, we buy 200,000 cords of pulpwood, a large volume of sawtimber, and some poles.
JMV:	How do you learn about timber tracts for sale?
HOOD:	We get 85% of them from consultants and 15% from personal contacts with and referrals from landowners. We are in a very competitive market. We regularly receive about five sale announcements a week from one or more of 22 consultants (there are six in Moultrie alone). In addition to the big companies, there are four other buyers just like us and usually five to seven bids on each sale.
STEVENS:	Since we have been in the market for more than six decades, we have developed many contacts with landowners(some of whom have sold us timber several times), loggers, and pulpwood producers, and they produce many leads. But our territory is quite varied. Competition is fierce south of U.S. Highway 84, moderate between 84 and Interstate 20, and because the demand for pulpwood there is small, modest north of I- 20. The 17 pulp mills drawing wood from our area are all south of I-20. Eight to ten consultants produce 50% to 60% of the tracts south of 84, 25% or less between 84 and I-20, and very few north of I-20 The other tracts come from our contacts.
JMV:	How much information is usually furnished by the sellers?
HOOD:	Some consultants furnish a 100% tally of sawtimber; others provide a 20% line-plot cruise. I'd rather have the 100% tally; if you go out there and tape every tree, you know you've got the volume right. All of them usually furnish a good map and a right of way (ROW). Landowners rarely furnish anything except the land lot numbers and a general description of how they want you to cut the tract. Sometimes consultants, especially those using 20% cruises, overestimate a tract, but we and other buyers, because we can't afford to cut out short, will bid on what our check-cruises show the volume to be. Then it looks like no one is willing to pay a fair price, whereas the real problem is the consultant's overestimate. Poor estimates don't fool anybody.
STEVENS:	The consultants furnish detailed data, and most provide 100% tallies of sawtimber. We check-cruise these and bid on our own figures. Most landowners don't give us anything but the legal description.
JMV:	How do you outbid larger companies and then later sell part of the timber to them?
HOOD:	We concentrate on mixed tracts. When the tracts contain straight pine sawtimber, it's hard for us to compete. But if there are also some poles and hardwood and maybe 50% pulpwood, we can sort them out, deliver each product to a mill specializing in it, and earn a small premium by doing so. That's how we compete.
STEVENS:	The objective of most big companies is to get timber to operate their mills, and I learned a long time ago that, when a tract contains exactly what they want, we can't outbid them. Since we don't operate a mill, our objective is to get the most out of a tract. We are better sorters of trees for different markets; when there is a mixture of sizes and species, we are very competitive. When a tract is very large, we aren't strong bidders because we don't want to tie up a huge sum in one place; it's better for us to buy several tracts scattered over our operating area. On the other hand, there are times when the big mills have bought all the timber they want to carry in inventory, so they back off, and we become the major market.
JMV:	What steps do you follow in making a bid, and how much does it cost?
HOOD:	If a tract looks promising, we use an independent forester to check-cruise it, and his charges usually run $2.00 an acre. Then we go behind him to look at wood quality and ground conditions so as to estimate sale prices and logging costs. Some plantations here have a lot of Cronartium cankers, and since this part of the tree is suitable only for pulp chips, all the mills we sell to will cull it. When they are paying the price for wood to make lumber, plywood, or poles, they won't stand for too many chips. Someone has to be sure about the boundary lines too, so by the time we are ready to bid, our average cost in time and money is over $500.
STEVENS:	We check-cruise every tract, and one of our experienced people investigates quality of the timber and logging conditions, so preparing each bid costs us between $500 and $1000. We look at 800 to 1,000 tracts a year and manage to buy 20% to 30% of them.
JMV:	What do you do if there is no access to a public road?
HOOD:	Access to a public road is essential, and we require landowners to furnish it. If there is no access, we don't bid.
STEVENS:	We require landowners to furnish access. Our position is that, if a landowner can't get a ROW from his neighbors, we can't either. There are enough problems involved in handling a tract of timber without getting into a fuss about a ROW.
JMV:	How carefully do you check the seller's title?
HOOD:	We use a lawyer to do a complete check on all titles, for we buy lump-sum 95% of the time and can't afford to take any chances on this. In addition, the mills we sell to don't buy from just anybody; they want to know where every load is coming from and that we have good title to the wood.
STEVENS:	We check every title. Several recent court decisions have held that it's the buyer's responsibility to know where each load of wood comes from. If it later turns out to have been stolen, we are out the money paid to the person who hauled it to us, and we may also have to pay the same amount to the rightful owner, not just the stumpage but the delivered price.
JMV:	How do you log the timber?
HOOD:	All our logging is tree-length; we cut no short wood. We use nothing but independent contractors, some for logging and others for hauling. About 80% of our purchases are clearcuts. My uncle operates the loader and sorts the material into the most valuable products. To get any volume production, we have to log tree- length; when you start blocking up the trees, it takes much longer to get anything done and costs a lot more too. The shears we use for felling, the skidders, and the loaders are big enough to handle any tree in the woods.
STEVENS:	We use nothing but independent contractors, but the methods they employ vary with conditions in our area. South of 84 we have to use tree-length logging. The extra handling and other costs of running timber through a pulpwood yard can reduce the amount available for stumpage by 60% and render us non-competitive. Also the mills can't handle the traffic problem caused by the great number of shortwood trucks needed to bring in the necessary volume. So south of 84 60% of all logging is tree-length, and the proportion is growing. Along I-20 rail transportation is a big factor because the mills are far away. Tree-length logging is not feasible because you must cut wood into short lengths that can be loaded on a railroad car. The Stone Container mill at Hodge, Louisiana, is more than 200 miles from our yards in central Mississippi, a feasible haul on one railroad but much too far for a truck. This situation is one cause of the difference in stumpage prices up there.
JMV:	Do you have many chances to buy timber from tracts in the landowner-assistance programs run by many companies?
HOOD:	No. As near as we can tell, the companies running the programs sell the timber to themselves.
STEVENS:	No. Most of what we get are pulpwood thinnings, and all of it is north of 84.
JMV:	Once a logging contract leaves the woods with a load, do you worry that he will take it to an unauthorized mill and sell it for his own account?
HOOD:	I've had only one logger try to steal from me, and I caught him in the act and got my money back. Now I use one contractor for logging and another for hauling, so they check against each other. Most other companies do the same. Finally, since every buyer is responsible for getting clear title to all his purchases, "hot" wood is very hard to sell.
STEVENS:	No, because we have so many men in the field checking on our operations and because we deal with contractors whom we have known for years. Another reason is the responsibility I described that buyers must know where the wood comes from; everyone is scared to buy wood that may be stolen.
JMV:	How important is tree size to you?
HOOD:	Very. The tree shear has to get in position to grasp each tree, clip it, and then pile it for the skidder. The grapple on the skidder can grab and hold enough trees to contain two cords, so in five or six trips the skidder can drag the normal truckload of ten cords. We usually haul wood 80 to 90 miles and, in an unusual situation last week, hauled pulpwood 158 miles; therefore, each truck must carry a full load of ten cords. With chipping saw wood and ordinary sawtimber, we can load a truck with 35 to 40 trees. It would take 100 8-inch pulpwood trees to make a load. It would take 222 6-inch pulpwood trees, more than there is room for, and many of them wouldn't be long enough to a 3- inch top to reach between the bunkers of the 40-foot trailer; the shear and the skidder would have to work hard all day to get two or three loads. Consequently, 6-inch trees are worthless to us.
STEVENS:	Very, where we log tree-length, and not very, where we log short wood. The difference is in the amount available for stumpage, so landowners get a big price for big trees and a little price for little trees even when the trees are processed into the same product.
JMV:	Now we want to ask you some hypothetical questions. Look at these proposed cuts under typical forest management plans [Here we showed him the section labeled "A Typical Forest Management Plan" in the above article.] Look particularly at the proposals under the 300-trees-per-acre plan. What prices per cord would such timber bring in your area today?
HOOD:	Trees in the thinning at age 18 are big enough, but the volume per acre is only about half enough to load a truck. Such stuff would bring $18 per cord. If you got rid of all the cankered trees in the thinning at age 18, everything at age 26 would be chipping saw wood and be worth $54 per cord. The harvest at age 35 would be ideal for a plywood or lumber company; we could bid $64 per cord, but this is the kind of timber we get beat on. I notice that, under the 700-trees-per-acre plan, the thinning at age 18 contains 8.8 cords with an average DBH of 6.7 inches. The volume is better, and there is no doubt that the wood is there, but the trees are so small that their value to us would be zero.
STEVENS:	In most of our area the thinning at age 18 would bring $14 per cord. The small sawtimber at age 26 would bring $25 to $30 per cord. The harvest at age 35 would be all sawtimber, and I'd have to know the board-foot volume to express an opinion; it would be ideal, however, and I suspect it would bring $70 per cord.