Stumpage Sale
A stumpage sale is when a forest owner sells the cutting rights to their trees before they are harvested. The purchaser is buying the right to harvest the trees and is aiming to cut them up and sell them at a profit.
When is the right time to harvest your trees?
If you have a forest that is 22 years or older, now is the time to turn your attention toward harvesting your trees. We invest in forestry with the aim of achieving a strong return. Choosing the right time to harvest and the best sales methodology are extremely important factors to consider when creating a harvesting and sales plan.
The optimal harvest age will depend upon many factors:
- The quality of your trees
- The expected growth and quality improvement of your trees over time
- Strength of domestic and export log markets
- Presence of any niche log market
- Your cashflow requirements
- Increased wind risk
- Any supply chain constraints
What do you need to do to become harvest ready?
- Engage professionals to complete a full map and inventory of your forest: This helps you understand your volume and class mix so that you can calculate your potential return as the market fluctuates.
- Appoint a harvest manager: Despite not necessarily being ready to harvest straight away, appointing a harvest manager means that you can act quickly when you decide to begin harvesting.
- Do the groundwork: Most forests require roads and load out areas to be established before any felling can take place. Having this work completed (or at least started) will give you a head start when you decide to get going.
- Obtain consents: If you think that you might harvest sooner rather than later, then be sure to undertake your harvest planning and obtain the necessary consents. Having these ready will mean you can mobilise faster to take advantage of favourable prices.
- Develop a harvesting plan: Your harvest manager can offer advice on the best way to go about harvesting and selling your forest. This will help you understand what infrastructure you need in place to undertake a smooth harvest. A harvesting plan should also explore the best sales methodologies for your situation. Whether you would be better off conducting a stumpage sale or a managed sales depend entirely on your objectives.
WHAT IS THE BEST WAY TO SELL YOUR FOREST?
WHAT IS THE BEST WAY TO SELL YOUR FOREST?
There are two main ways to sell your trees - as a stumpage sale or under a managed harvest. Both options have pros and cons, and which one is right for you will depend on your personal circumstances. Here are some key features of each sale option:
If you are considering a stumpage sale, give some thought to the points below:
- Get a professional forest appraisal so you know what you are selling and can de-risk the sale for purchasers.
- Seek payment terms that are secure and meet your cash needs.
- Seek legal advice on cutting right contracts.
- Think carefully about your requirements for harvest timing, infrastructure, and how you want the land left after harvest.
- Make sure the contract reflects these needs.
THERE ARE TWO TYPES OF STUMPAGE SALE:
- Land and trees - this is where you sell the entire forest including the land beneath the trees
- Forestry right - this is where you sell the rights to harvest and sell the trees to the buyer.
Managed Harvest
A managed harvest is where you engage a forest management company to manage the harvesting and marketing of your trees. This management should include all planning and regulatory requirements, engagement of contractors, full financial management, and development of a tailored marketing plan to maximise the profit from your forest.
A managed harvest gives you with the full opportunity to maximise profit from your forest. You can capitalise on market upswings, benefit from any additional log volume or quality as well as any cost savings.
Managed harvests are by far the most common method used by forest owners in New Zealand. However, which sales method is best for you will depend on your personal circumstances, need for cash, and appetite for risk.