Sale and purchase options
- ‘Pay as cut’ stumpage purchase
Log Marketing (LM) pays the Owner a fixed price per tonne/m3 for all merchantable logs harvested and removed from the woodlot, shelterbelt, or plantation. Payment is made on a ‘pay as cut’ basis on or about the 20th of the month following each month of harvesting.
This method requires that LM invests both time and money in carrying out an intensive inventory survey of the standing trees in order to accurately predict log grade outturn to enable the calculation of a single average price per tonne/m3.
With this method, the Owner bears little risk, leaving most of the risk to LM. LM must therefore build this risk into the price offered. LM will enter into a sale and purchase agreement, if required.
- Purchase by log grade (graded log purchase)
Log Marketing pays a fixed price for each individual log grade produced from the trees during harvesting. The type of log grades produced depends on the quality of the trees and how they have been managed, for example, thinned and pruned, etc.
LM still require some inventory information, which can be as simple as a visual inspection to assess the likely log grades that may be produced. With this method LM is not faced with the same financial risk should logs actually ‘grade out’ worse than is anticipated.
For the Owner, the return is in direct relation to the actual quality of the trees that have been harvested, so if the grade outturn is better than expected then the Owner’s financial return may also be better.
- Acting as an agent for the Owner
This method is more suited to the larger woodlot as more money can be spent on preparing a sale. LM will carry out an intensive inventory as in Option (1) to predict log grade outturn by percentage. A reserve price is then able to be calculated. LM in consultation with the Owner, prepares a sale prospectus complete with inventory data, maps, photos and conditions of sale.
LM then invites tenders from a range of known purchasers. On closure, tenders are evaluated in consultation with the Owner to select a winner. LM then completes the sale and purchase documentation, and oversees the operation until completion.
For this service, LM will charge an agency fee usually expressed as a percentage of the gross stumpage or some other expression acceptable to the Owner. Fees may range from 4–8% depending upon the size and/or value of the sale.
LM is well placed to act in an agency capacity, given its experience and knowledge within the log marketing industry.