Cherry Timber Prices

forester2 · Apr 9, 2011

Great stuff still gets good prices. Historically speaking 1200-1500 is a pretty darn good price.

jbos333 · Apr 9, 2011

forester2, around what dbh does a cherry start to qualify as a veneer log candidate? I think I was told 24"+. Of course, I know there are other factors involved as well. I was going to cut my lot at the peak of the cherry prices, but the avg size of my trees was 18"-20" dbh, so I decided to hold off. A wise move, I hope!

forester2 · Apr 11, 2011

Doubtful that all the trees you sell in a harvest are veneer grade. Hence, you will not get veneer grade prices throughout an entire sale when selling on the stump. You can do a roadside sale so logs can be inspected for quality but then the quality risk is entirely on your shoulders and income will be taxed differently. Also, doing a ' diameter limit' cut is rarely good stand management. Get yourself a good consulting forester- some great ones in WNY.

smstonypoint · Apr 11, 2011

forester2 said:
You can do a roadside sale so logs can be inspected for quality but then the quality risk is entirely on your shoulders and income will be taxed differently.

Please expand on this statement. Are you saying that if you do a "roadside sale" that your receipts would be treated as ordinary income rather than capital gains?

Thanks in advance for any clarification.

Steve

jbos333 · Apr 11, 2011

Thanks forester2, I actually had a consulting forester do a cruise and put an inventory together for a sale....he actually convinced me not to cut it at that time. I asked him what he would do if it were his timber- he said if he didn't absolutely need the money right then, he would sit on it for 5-10 years more. Also he said as long as I call him back in when it's time for a sale I owed him nothing for the 2 days or so he had into marking/inventory. So it's probably been 5 years since then; I will have to try to keep an eye on prices in the upcoming years.....

forgeblast · Apr 13, 2011

Everyone that I have talked to has recommended going with a forester route, those who didnt wish they did.
Most got a better price which paid for the forester, their properties were not high graded and left to degrade but instead cut to promote regeneration, and the sales were monitored.
(A timber company came to walk on my property said they would cut out the firewood sized trees and give me 23.oo a truck load, same company would turn around and sell them for (i think) 650 (could have been more) a truck load for fire wood. (truckload=tri-axel). (yes i know the costs involved in fuel, and manpower, but there is a road right back to the cutting site and its easy to drag them out. )
A forester works for you, which in the timber game is a plus on your side.

Gordon Gould · Apr 13, 2011

forgeblast said:
Everyone that I have talked to has recommended going with a forester route, those who didnt wish they did.
Most got a better price which paid for the forester, their properties were not high graded and left to degrade but instead cut to promote regeneration, and the sales were monitored.
(A timber company came to walk on my property said they would cut out the firewood sized trees and give me 23.oo a truck load, same company would turn around and sell them for (i think) 650 (could have been more) a truck load for fire wood. (truckload=tri-axel). (yes i know the costs involved in fuel, and manpower, but there is a road right back to the cutting site and its easy to drag them out. )
A forester works for you, which in the timber game is a plus on your side.

I totally agree with going the forester route. He is there to help you and protect your forest. But I have a comment to make also.
Most land owners are shocked at how little they get for low grade stumpage like pulp and firewood. But the truth is that nobody is getting rich. If you were told the costs for payments required on the equipment and its maintainence, the cost of insurance and workmans comp, and all the rest you probably would not believe it. It is a competitive world. If a logger did not pay enough for stumpage he would get no work. I am not saying that everyone is as honest as the day is long because we all know they aren't. This includes loggers, truckers, and foresters. There is a thousand ways to cheat. You have to select carefully. But low stumpage prices reflect the fact that extraction costs are very high compared to the value of the product. They do not reflect the fact that the landowner is getting the shaft.

Gordon Gould · Apr 13, 2011

smstonypoint said:
Please expand on this statement. Are you saying that if you do a "roadside sale" that your receipts would be treated as ordinary income rather than capital gains?

Thanks in advance for any clarification.

Steve

I'll try to answer this one but I am not an accountant. If you invest in forest land and you are not in a forestry business, ie you are a hobbiest or an investor, your profits from your investment may be considered as capital gains. You have invested in land and live growing trees. If you sell the live growing trees ( as stumpage ) the sales price is used along with sales expenses, timber depletion, etc, in calculating a capital gain.
If you cut the trees and sell the logs you are no longer directly cashing in your original investment which was live growing trees. You have become a manufacturer of logs. The logs are a manufactured asset which you are selling and things get way to complicated for me to explain. I have trouble seeing the difference between the two senarios my self but the IRS says there is a difference.

smstonypoint · Apr 13, 2011

Gordon Gould said:
I'll try to answer this one but I am not an accountant. If you invest in forest land and you are not in a forestry business, ie you are a hobbiest or an investor, your profits from your investment may be considered as capital gains. You have invested in land and live growing trees. If you sell the live growing trees ( as stumpage ) the sales price is used along with sales expenses, timber depletion, etc, in calculating a capital gain.
If you cut the trees and sell the logs you are no longer directly cashing in your original investment which was live growing trees. You have become a manufacturer of logs. The logs are a manufactured asset which you are selling and things get way to complicated for me to explain. I have trouble seeing the difference between the two senarios my self but the IRS says there is a difference.

Gordon,

I had given this some more thought after I posted my question, but didn't take the time to do any research.

It seems to me that the landowner's income from the sale of "roadside logs" could be separated into two components:

1. the value of the standing timber which would be subject to capital gains taxes (after allowable expenses), and
2. the value of the harvesting services (e.g., cutting the trees, etc.) which would be subject to ordinary income taxes (after allowable expenses).

I am not sure whether the IRS allows this separation.* All of my sales have been of standing timber. The alternative sounds like too much like work to me.

*

Steve

Edit -- Apparently the IRS does allow for this separation under IRS Code Sec. 631(a).

http://www.extension.iastate.edu/Publications/PM1162.pdf

Gordon Gould · Apr 13, 2011

smstonypoint said:
Gordon,

I had given this some more thought after I posted my question, but didn't take the time to do any research.

It seems to me that the landowner's income from the sale of "roadside logs" could be separated into two components:

1. the value of the standing timber which would be subject to capital gains taxes (after allowable expenses), and
2. the value of the harvesting services (e.g., cutting the trees, etc.) which would be subject to ordinary income taxes (after allowable expenses).

I am not sure whether the IRS allows this separation.* All of my sales have been of standing timber. The alternative sounds like too much like work to me. *

Steve

Edit -- Apparently the ITS does allow for this separation under IRS Code Sec. 631(a).

http://www.extension.iastate.edu/Publications/PM1162.pdf

Your way ahead of my level of thinking. I just repeated what I think I was told at a tax workshop for forest land owners. What you say makes sense.
What would stop you from paying yourself a high stumpage and breaking even on the harvest so that it would all be capital gains anyway ?

BTW: Thanks for the extension service pub. Looks very helpful.

smstonypoint · Apr 13, 2011

Gordon Gould said:
Your way ahead of my level of thinking. I just repeated what I think I was told a a tax workshop for forest land owners. What you say makes sense.
What would stop you from paying yourself a high stumpage and breaking even on the harvest so that it would all be capital gains anyway ?

Good question -- I suspect the fear of an audit. The link says the stumpage value has to be the fair market value as of the first day of the taxable year in which it is cut.

Steve

deerhunter2929 · Apr 13, 2011

Hi new here so bear with me please
I live just south of morgantown wv in fairmont and i am looking at the current price list from allegany hardwoods which is one of the locale buyers here and the price for cherry is going for 2000 to 5000 per thousand bft for veneer down to 300 to 400 a thousand bft for #2 and it has to be 8'6"long or longer and 12"and up in diam. hope this info will help you

Red Horse · Apr 13, 2011

Gordon Gould said:
In VT and NY area it is about $450 to $500 per MBF ( Thousand Board Feet )delivered to the mill for number 1 logs with 3 clear faces and 12" minimum top at least 8' long.
I agree with BeenThere. You could pick a better time than now.

Question- assuming a BF is 144 cu. inches, what is the proper way to calculate the BF in a piece of timber. Example, I cut a nice straight log that is about 15"D at the butt and tapers to about 12" in 15'. If I average the D at say 14", that puts the "Raw" cubic volume at 27,694 CI. 27694/144= 192 BF.

I recognize you would not get anything close to that number in terms of BF so what is the correct way?

smstonypoint · Apr 13, 2011

Red Horse said:
I recognize you would not get anything close to that number in terms of BF so what is the correct way?

Here's a link that describes the alternative rules (formulas) for estimating BF.

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Steve

Red Horse · Apr 13, 2011

smstonypoint said:
Here's a link that describes the alternative rules (formulas) for estimating BF.

Powered by Google Docs

Steve

Thx Steve

Gordon Gould · Apr 14, 2011

If you look at the scaling rules you will see large differences between the different scales. As between Doyle and International 1/4" for example. Scale usage varies widely by species and location. So make sure you understand what scale is being used when talking BF or MBF. If someone quotes $1000 MBF Doyle and someone else $1000 MBF Int 1/4 they are vastly different. A forester would help you here and keep the quotes on the same playing field.

forester2 · Apr 14, 2011

Sorry stonypoint; been busy. Standing tomber is treated as capital gains and road side ordinary income from my information. jbos333; galad to hear you are using a consulting forester. Another recommendation to all, if you are not doing so already, join your state forest owners association. We have a great one here in NYS. You can learn alot from their educational get togethers and publications.The New York Forest Owner's Association

smstonypoint · Apr 14, 2011

forester2 said:
Another recommendation to all, if you are not doing so already, join your state forest owners association.

Another plug. I am a member of the Forest Landowners Association -- an advocacy group for private forest landowners. Members receive the informative Forest Landowners Magazine (6 issues/year). Membership fees vary according to your acreage -- I pay $75/year for my 90 acres.

Forest Landowners Association

Steve