If you have your own plantation, or just have land that you wish to someday harvest trees from, you will eventually have to deal with selling your trees. The sale of timber is the most important step in tree farming. As a tree grower, you might sell timber only once or a few times in your lifetime. Therefore, when it comes time to sell your timber, you don’t want to make costly mistakes that will devalue your long-term investment. The future health and value of your forest depends on the management decisions you make during the sale process. Here are some general guidelines to help you maximize your financial gains and future harvests.

1. Get Professional Advice

A professional forester is an invaluable resource when it comes to selling your timber. In Costa Rica, the services of a forester are contracted through the local office of the Ministry of Environment and Energy (known as MINAE, Ministerio de Ambiente y Energía). The MINAE forestry engineer that we work with at Finca Leola is Antonio Rodriguez, and he has proven to be extremely knowledgeable and helpful in every aspect of managing our tree farm.

Do not even think of selling trees in Costa Rica without a forestry engineer. Not only are you likely not to get the amount of money you deserve, you could end up having serious legal problems. Even though you own the trees, MINAE decides which ones you can cut. MINAE implements strict cutting practices in order to protect the environment as well as those who live below the cutting area. For example, if you deforest a slope, it may result in a landslide or degradation of water quality, thereby adversely affecting those who live below you. In that case, you would be liable for any damages incurred as a result of deforesting that slope. 

Your forestry engineer will provide you with expert advice on what trees to cut, how they should be harvested, and what they are worth. The expense of contracting a forestry engineer is more than offset by the higher selling price he or she can obtain for your timber. Here in Costa Rica, forestry engineers have contacts at local sawmills (aserraderos) and will be able to negotiate the best price for your sawtimber. (Sawtimber is defined as trees that yield logs suitable in size and quality for lumber production. It is usually greater than 9 inches diameter at breast height (DBH)).

Another valuable resource for expert information on forestry issues in Costa Rica is a nongovernmental organization known as FUNDECOR that was founded to protect and increase the forests located in Costa Rica’s central plateau. FUNDECOR coordinates with forest owners in preparing management plans, provides them with an advance cash flow for their wood production through an advance wood purchase system, and helps them sell timber in timber auctions to guarantee the forest owners the highest market price for their harvests. For more information on FUNDECOR, visit their website at www.fundecor.org.

2. Prepare a Management Plan

The days of logging unmanaged forests are rapidly coming to a close. Years of profiteering from nature’s bounty are leaving worthless stands of trees in their wake. In Costa Rica, usually what happens is that a person acquires land and then realizes that there are some valuable trees on the property. A logger then goes into the forest stand and removes the valuable trees, leaving the immature and unmarketable trees.

This selective logging of the tropical forest is worse than clear-cutting, in terms of forest regeneration and future harvests. With a clear cut, even though you may have problems with erosion, many valuable pioneer tree species will start growing. In contrast, by selectively logging the valuable species and leaving worthless tree stock in the residual stand, you will have no future economically viable harvest.

In the United States, many private forests have no commercial wood available because they have not been managed for future generations. The key is managing your forest today to obtain the maximum health and value of your stand tomorrow.

If you don’t already have a management plan for your forest, you should contract a forestry engineer to develop one. A management plan is particularly important for a timber harvest, because it helps determine what you will have left after the harvest. A plan generally describes the forest by stands (defined by similar tree species, sizes, and history), and includes management recommendations based on your objectives. The management recommendations include what and where to harvest and how to promote the next generation of trees. A management plan helps you achieve your short- and long-term goals.

To protect the forest’s future, your forester will consider residual stand structure and forest regeneration as integral aspects of your timber harvest operation. The species composition and structure of the forest are key in determining the best type of harvest for your forest.

3. Base Your Harvest Decisions on Your Income Goals and Future Land Use Priorities

When you plan to sell timber, you have options ranging from a single harvest to get the maximum lump sum now, to a series of harvests over several decades that may decrease your short-term gain but increase your long-term income. You should view your forest as an investment that can grow and mature at various rates.

As an example, in one scenario, your objectives might include obtaining the maximum financial gain from this sale, but you are willing to invest some of the proceeds to achieve a subsequent sale as soon as possible. In this case, you might consider clear-cutting your present stand and then planting a fast-growing timber species such as teak to regenerate the site. The growth rate for teak is 12 to 26 cubic meters per year (compare that to the temperate growth rate of oak, which is only 2 cubic meters per year). With that growth rate, you could harvest a teak stand that is between 40 to 60 feet tall and 8 to 12 inches in diameter in 8 years.

In another scenario, your objectives might include maintaining the recreation potential and wildlife habitat after the harvest as well as providing some income now. In this example, you have some valuable timber in a stand of mixed species and sizes. Your best option in this case may be a selective harvest that provides some income now and a healthy residual stand on the site In this case, you may be able to harvest some of your residual tropical hardwood species in as little as 4 years.

In comparing tropical and temperate forest harvest methods, it’s interesting to note that in a temperate forest, clear-cutting is not an uncommon practice. This is because temperate tree species tend to clump together.  For example, if you have a white oak tree in your forest, you will probably have several white oak trees, especially if your forest has been left alone for several years. This is not true in the rain forest, where usually, the same tree species do not grow together. There are literally hundreds of tree species in the rain forest, mixed together. This is one of the difficulties in harvesting wood out of a rain forest. Usually there are only a few commercial trees per acre, and in getting to them, you tend to destroy everything. So, by selectively harvesting, you tend to do more damage than good.  Yes, you make money, but the environmental cost is not worth it.  For this reason, in Costa Rica, you are rarely permitted to harvest inside the rain forest. However, trees growing in pastures are permitted to be harvested as well as any you plant yourself.

4. Comply with Local Timber Laws

You need to work closely with your forestry engineer to ensure that you are complying with the requirements of national forestry laws. In Costa Rica, the major governing forestry law is Forest Law #7575 that was passed in 1996. This forest law supports the development of the forestry sector and introduced a program of payment of environmental services to compensate private landowners either for the maintenance of primary forest, establishment of forestry plantations, or forest management.

The acknowledged environmental services provided by forests include carbon sequestration, biodiversity conservation, scenic beauty, and regulation of hydrological cycles. Forest Law #7575 also provides incentives for natural forest regeneration projects, while larger investors receive fiscal benefits such as not having to pay property taxes or income tax on wood sales. As a timber grower, you should be aware that you cannot cut any tree without the inspection and approval of MINAE. There are also cutting restrictions based on environmental factors such as slope degree and proximity to water.

5. Know Your Timber Inventory

In order to estimate a fair price for your timber, you need to know its quality and marketability, and the associated volumes of wood. A forestry engineer can help you inventory your stand. Your forest inventory is your most important marketing tool. By relying on a professional forester to give you an accurate assessment of your timber volume and value (instead of directly negotiating with a timber company or broker), you will maximize your timber sale profit.

A forestry engineer will statistically sample your timber stand by collecting tree data at specific sample locations. The tree data collected includes species type, diameter at breast height, marketable trunk height, and trunk quality. The timber volume is then calculated by species and size class for each timber stand. The volume estimate usually has a margin of error of plus or minus 10 percent. The forestry engineer will then apply current market prices to the volume estimate to determine the financial value of your timber. Factors such as harvest method, accessibility, distance from market, and environmental concerns may also affect the pricing of your timber stand. The more it costs the logger to get the trees, the lower the profit on the sale.

6. Identify Prospective Buyers and Solicit Bids

Your forestry engineer will help you prepare a list of buyers. Most likely in Costa Rica, your forestry engineer will directly negotiate with sawmills in your region. In the United States, an effective way to sell medium to large tracts of timber is to sell it for a lump sum through a sealed bid sale. Prospective buyers, who are competing against each other to supply wood to their markets, can bid on the sale by submitting a bid in a sealed envelope. You or your forester then opens all the bids on a set date and time. A sealed bid system generally results in higher selling prices as compared to other sales methods. In Costa Rica, most likely the owner of each sawmill with whom your forester negotiates will give you a price, and you can then compare price quotes between the various sawmills.

If the potential buyers want to examine the timber for sale before giving you a quote, you should arrange a tour meeting at the timber sale area to allow all potential buyers to examine the volume and quality of the timber and to estimate their logging costs.

7. Execute a Sales Contract

After comparing price quotes from various sawmills and agreeing to the highest acceptable offer, you should then negotiate and execute a written contract. You should also collect from the buyer any agreed-upon deposit or performance bond. Your sales contract, at a minimum, should include a description of the timber sale, the selling price, terms of payment, which timber will be cut, the harvest schedule, performance expectations, damage restrictions, required clean-up activities, and compliance with forestry best management practices.

Other provisions in your sales contract may include location of logging roads and staging areas, conditions under which logging will not be permitted, protection of residual timber and other property, dispute arbitration procedures, responsibility for wildfire suppression, erosion and water quality control measures, subcontractor conditions, and so on.

8. Monitor and Maintain Your Timber Sale Area

During the harvest operation, you and your forestry engineer should periodically monitor harvest activities to make sure that the buyer is complying with the terms of the sale contract. After a satisfactory final inspection, you should return the performance bond or deposit, if any, to the buyer. After the harvest is complete, you should take measures to protect the land from erosion to ensure the productivity of the residual forest.

Information for this article was compiled by Lisa Sloate from the sources below, from picking Fred’s brain, and from asking around in Costa Rica, where she has lived and worked as a freelance writer.

·     “Selling Your Trees: An Introduction for Landowners©” http://www.foresters-inc.com/html/web/private/selling1.htm#tax

·     “Making That Important Timber Sale” http://forestry.about.com/cs/forestvaluation/a/timber_sale.htm

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