1. Stand Valuation

2. Factors Affecting Value of Timber
1. The nature of the timber
Species, total volumes, grade, etc.
2. The nature of the tract on which the timber is located, and its market access; and
3. The circumstances surrounding the sale
Stumpage price is paid by the mill. They expect to absorb the cost of logging and still make a profit from the lumber.

3. The Desirability of the Timber
CHARACTERISTIC
POOR STAND
EXCELLENT STAND
Timber volume per acre
Low
High
Total Volume in tract
Size of trees
Small
Large
Frequency of limbs and knots
Multiple limbs
Merchantability length generally clear of limbs

4. Desirability of the Timber Location
CHARACTERISTIC
POOR STAND
EXCELLENT STAND
Exterior Access
Intermittent Road
All weather road touches property
Interior Access
No log roads
Log roads within ¼ mile of all of tract
Average number of months loggable per year
Four months or less due to:
Soil trafficability
Obstructions
Severe slopes
Year round except during severe weather; no obstructions which block skidding or hauling
Distance to delivery point
Lack of proximity to:
Rail transportation
Concentration yards
Close to wood using facilities

5. Quality of the Transaction
FACTOR
PRICE WEAKENING
PRICE STRENGTHENING
Number of bids
Only one
Many
Buyer & Seller
Seller: poorly informed or under financial duress.
Buyer: facing facilities shutdown due to low wood supply
Seller: knowledgeable and under no duress
Buyer: knowledgeable and under no supply problems
Bid results
Wide spread between high and second bid
Narrow spread between high and low bids
Adequacy of time allotted
Hurry-up sales cutting contract of six months or less
Wide exposure of sale to market and adequate cutting time
Involvement of middlemen
Sales to middlemen
Sealed bid from forest products firm
Form of payment
Below-market interest rate on deferred payment
All cash transaction

6. Sources of Timber Pricing
Comparable timber sales
Timber price reporting services
Timber Mart South
Extraction from delivered log prices

7. Data from Tennessee

9. Not ready for harvest? LEV – Land Expectation Value
Present Value = a/(1+i)t-1
a = value received every t years in perpetuity
i = interest rate
t = years between annuity payments
This is covered in Timber Management class