Lecture 3: Stumpage & Forest Value

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Published on 13 Jan 2011
Lecture 3: Stumpage & Forest Value
Valuation & Stumpage
·with the exception of few countries (US, Finland, Sweden), all heavily forested regions are
dominantly owned by the gov't
orights to timber on much of this area is transferred via concessions to forestry firms
oownership maintained by gov'ts, harvesting rights sought by firms, cause it is perceived
that there is satisfaction to be generated in doing so
§satisfaction is generated cause the rights have some sort of associated value
·timber: primary purpose for which timber (/stand) is cut
· value is a human perception, worth of something to somebody at given place & time
oequivalent to other expressions one oft hears: worth, utility, & satisfaction
ovaluation: the process of quantifying value
§several diff. types of value:
·market value (value @ which the rights are exchanged in the market)
· value in use (+ satisfaction accruing to the owner)
·social value (value to society @ large, ex. fishery)
oat project value
§ valuation: finding potential investor's value of intervention
§appraisal: finding the market value
·as a result, valuation & appraisal can yield diff. values for project
§what is the purpose of valuation & appraisal?
·buying & selling land &/ timber
·forest planning
·damage & other legal claims
·stumpage: primary means of expressing value in terms of forested land
ostumpage A- the value of standing timber
ostumpage B- the value paid for a certain amount of timber felled
odiff ways to calculate stumpage:
§ valuation of separate stands on bare land
§old-growth timber valuation
§ young timber valuation
·comparisons betw. US & Canada
oUS has 10x's the pop. of Canada, & similar consumption patterns, though slightly less
forested area, hence much greater demand for forest products
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§56% of US forests are private
·US public land is mostly managed by the feds, which uses the market to
determine stumpage prices
§ vs. 93% of Canadian forests are publicly owned
·Canadian public land is mostly managed by the provinces, uses
administered stumpage prices
opublic forests in the US
§level of harvest/timing is @ discretion of appropriate fed agency, usu. the Forest
Service (FS) or the Bureau of Land Management (BML)
§prospective harvesters bid competitively @ the auction for harvesting rights,
which go to the highest bidder
§harvested timber can be directed to any mill/use at the discretion of the harvest
right holder
§responsibility for preparing & monitoring timber sales & post-harvest
regeneration resides with the fed agency
§timing & magnitude of the harvest are usu. set out in the local forest plan
§ however nat'l harvest level (for public land) is determined in advance, directives
(& budgets) allocated to the local FS & local BLM forests
§ over the last 15 yrs share of the total US harvest from public lands has decreased
significantly, from 15% in 1988 to 3% in 2001, largely cause of increased private
harvests & enforcement of endangered species legislation
opublic forests in Canada:
§diff legalities exist in each province on how to govern Crown land is managed,
but similar regulations
§timing/level of harvest proposed by license holder, which then are then
approved/rejected by responsible ministry
§level of harvest must be larger then certain minimum level (to ensure
employment & a steady supply), but must be smaller then certain max. levels
(the annual allowable cut (AAC))
§licensees usu. required to provide processing facilities (/direct their timber to
specific mills) + pay provinces stumpage fee for timber harvested, constructing
public access roads, regenerating all stands harvested, promoting certain habitat
values, etc ...
§AAC is determined by the provinces & allocated to the concessions
§stumpage fee is determined by the formula that incl. expectations 'bout product
prices, cost of harvest, transport, processing, regeneration, etc ...
§so stumpage in Canada is administered & takes company costs into
consideration while in the US it is determined by auction
·gives rise to the argument that Canadian prices are below market, &
thus are "subsidized," basis of the Softwood Lumber (SWL) dispute
betw. US & Canada
§a closer look @ ON:
·89% of ON's forest are owned by the Crown
·most of the area owned by ON is distributed into a series of
concessions called sustainable forest licenses
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