Calculating Timber Prices: A Formula For Sawmills

Factors Affecting Pricing

According to the USDA Forest Service Southern Research Station, it's difficult to determine the value (i.e., worth) of timber because there are so many factors that influence price. Here are some basic things you need to know to calculate timber prices accurately.

Factors to Consider for the Price of Timber

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  1. While prices in the state or region reflect the typical rate, local market conditions are more important and prevail. For instance, if your timber grows near several mills, it might command a higher price than if it was located far away from mills.
  2. The value of a timber depends on the species, size and qualities of the trees growing.
  3. The value of timber relies, in large part, on how much timber is sold in a single sale and what kind of harvesting is done. Very often, the larger the sale, the higher the price per unit of wood. It can cost more per unit of wood to cut only a few, select trees rather than all of them.
  4. The price a buyer pays for your timber also depends on the growing conditions which affect the cost to remove them and bring them to a mill. Variables include the distance from the stand to the nearest road, slope and soil wetness.

How to Investigate Rough Lumber Prices

Workers at the Carson Sawmill prepare wood
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To research lumber prices, contact your state service forester, who might work with the state Department of Natural Resources, Division of Forestry or Forestry Commission. You should also visit the National Association of State Foresters website which has links to state service forestry agencies. You can also try your Forestry Extension or county Agricultural Service agent. Extension Forestry staff are usually located at your state's Land Grant university, often in the Forestry department. You might also want to give the USDA Cooperative Extension System a try because they link to every state's free services which often includes forestry assistance from professional foresters.

Sample Calculation: Let's say you want to determine timber prices for red oak on the stump. You call other sawmills in your area and determine the average price for red oak grade lumber is $800 per thousand board feet (bf). You determine your harvesting cost to be $100 per thousand bf, trucking at $100 per thousand bf, and milling at $250 per thousand bf. You take the $800 and subtract $450 in costs, and you have $350 per thousand board feet.

Calculating a Profit

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Before you start making phone calls and offering $350 per thousand for standing red oak, don't forget to factor in a profit. After all, you're not doing this for fun! Use your cost figure and add 50 percent to 70 percent. For example ($450 x 1.5 = $675 per thousand bf) or ($450 x 1.7 = $765 per thousand bf). Therefore, the price range you can pay for red oak on the stump is $35 to $125 per thousand board feet based on your cost figures. Lumber price, less cost and profit.

As you can see, determining the price you can pay for a piece of timber can be a complicated process. If it gets overwhelming it may be best to get started by buying your logs from a logger who'll give you a price for the logs you need shipped directly to your mill.