VARDAMAN VIRTUAL FORESTRY COMPANY

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

The question in the headline is one that, sooner or later, all landowners will ask, and now Bill Grimes, a JMV&CO client, has helped with the answer. We have been making clearcut sales for him for years, and several recent results convince both of us that we know the true market prices in his area. A logging contractor, who is a kinsman of Grimes, urged him to save money by not using us and to allow him to log a similar clearcut to a local mill that buys by weight. The mill offered to pay the following delivered prices per ton: pulpwood $20.72, sawtimber $30.95, and poles $39.32. The kinsman offered to log the timber for per-ton prices as follows: pulpwood from tops $12.50, pulpwood from standing trees $11.50, sawtimber and poles $9.40.

To evaluate the proposition, Grimes told us to prepare for sale a 40-acre stand of pure pine timber and calculate what a sale by our method would bring, net to him. We measured all sawtimber trees and a large sample of pulpwood trees and reported to him the following results:

Next we calculated the weight of these trees using Tables 5, 8, and 9 in "Tables for Estimating Total-tree Weights, Stem Weights, and Volumes of Planted and Natural Southern Pines in the Southeast" by Alexander Clark III and Joseph R. Saucier, Georgia Forest Research Paper 79, September 1990. Copies may be obtained from the Georgia Forestry Commission. So that you may check our figures, here are details of the calculation:

At first glance, it appears that the kinsman's proposal is better by $388, but Grimes, experienced in both business and timber operations, realized that so far the analysis was comparing apples and oranges. In addition to studying these figures and how we calculated them, he considered the following facts:

1. JMV&CO sale proceeds would be paid in cash in advance, so that title and risk of loss would pass immediately to the buyer, whereas his money would be delayed and his risk extended by the other method.

2. He would not get paid for any trees left standing or on the ground.

3. The premium for poles was already figured into our sale estimate, but it might not be as large as estimated in weights. Because of careless sorting by the logger, other trees that were classified as sawtimber by JMV&CO might be delivered and paid for as pulpwood.

4. Some management would be needed on his part to be sure that the scale tickets were added correctly, that felling crews and hauling crews worked in coordination, and that the job was completed on time.

5. There might be extra costs because, even if the loggers carried enough insurance, he would be sued if someone were hurt or something went wrong and would have to defend himself without being paid for the time the defense required.

We don't enjoy smothering you with figures, but there is no simple way to analyze this transaction and give you a form that you can use when the question confronts you. If you had been Grimes, what decision would you have made?

Details of these measurements reveal other relationships that cannot be seen from the figures presented. For example, the variable weights per MBF for trees of various sizes are as follows: