Sell the standing timber
You can arrange a stumpage sale to sell the standing timber for a lump sum or per tonne amount to a log buyer. The buyer plans and coordinates harvesting activities.
What is a stumpage sale?
Stumpage is the price a buyer pays for the right to harvest your timber. The buyer is responsible for all harvesting operations and sale of the logs.
The advantage is you know what you will get per tonne for your logs.
The disadvantage is that the buyer may pay you less because they are accepting the log grade mix, volume and market risks.
Health and Safety at Work Act 2015
As a landowner, you still have some responsibilities during a harvest as a person conducting a business or undertaking (PCBU).
It's important to have accurate and recent inventory data. You should have an independent professional get this data before you arrange a stumpage sale.
Types of stumpage sales
There are 3 types of stumpage sales – lump sum, graded and composite.
Lump sum sales
The buyer pays a lump sum for the woodlot before harvest starts, or a deposit and then pays in instalments. The buyer registers a forestry right over the trees for a limited period.
Advantages
- You know the price you will receive for harvesting your woodlot.
- You get paid in advance.
Disadvantages
- The buyer needs to have funds available to pay in advance, which can reduce the number of interested buyers.
- The buyer is taking a risk that the grade mix could be worse than estimated harvest volumes, so they will probably pay you less.
- Buyers may discount their offer to account for market risk and unknown costs.
Pay as cut (graded) sale
The buyer pays a differential price for each grade cut. This can mean there is less incentive for the buyer to optimise the grade outputs.
Pay as cut (composite) sale
The buyer pays a set price per tonne (composite price) for all logs harvested. Like with a lump sum sale, the buyer will discount their offer because they are taking a risk that the grade mix could be worse than estimated harvest volumes.
Arranging a stumpage sale
If you are arranging a stumpage sale, make sure you do your due diligence on the buyer. For example:
- check their health and safety policy and systems, environmental policy and systems, and quality management systems
- ask for client and customer references
- make sure they can meet their financial obligations
- ask the local authority’s resource consent officer for any previous non-compliance issues
- visit their current operations and previous harvesting sites in the area (if possible)
- ask if you can audit their systems so that harvest operations are transparent – log types, volumes, sale volumes and prices should all be transparent (if applicable)
- request they provide a bank guarantee for an amount covering all or part of the value of the sale
- obtain legal advice on the sale contract.
Post-harvest inspection
It is important you inspect your land before the harvesting contractors leave the site.