Recently I was standing on the landing of an active logging job with the landowner, who was my client. On this job, I was selling the logs to a number of buyers based on end product, as opposed to selling all the wood to a single buyer. Veneer logs, for example, were being sold to a veneer buyer, sawlogs with certain specs were being sold to one sawmill, while sawlogs with different specs and pallet logs were being sold to a different sawmill. Essentially, I was marketing each product separately in order to generate the highest return.
As the landowner and I were discussing the operation, he turned to the pile of short chunks on the landing and asked me about the lost income of those chunks. He felt that he was losing money because those chunks were not going to a mill and would, therefore, reduce the total volume being sold. Didn’t that pile represent lost income?
While I agreed with him that less volume was being delivered to the mill, I explained to him that, in fact, he was making more money by having those chunks removed from the logs than he would if they were to stay on and be delivered to the mill. The result? An “Are you nuts?” look from the landowner. How could it be possible to deliver less volume and generate more income? The answer, as I told him, is all in the grade.
The price paid for a log not only depends on the boardfoot volume contained within that log but also on the quality of the log. The quality is known as the grade. Grades range from high quality V+ veneer logs to low quality #2 sawlogs, and the difference in the price paid for each grade is substantial. For example, a high quality V+ veneer grade sugar maple log can pay up to $6,000 per thousand board feet (MBF), while a low quality #2 grade log of equal size will pay only $450 per MBF. Due to this difference, the cutting decisions made on the landing can have a big effect on how much income is generated from a timber harvest.
Table 1 illustrates the difference that grade can play on the income-generating potential of a timber harvest. In this example, I am assuming the log to be sold is a sugar maple that is 20 feet long, with an inside-the-bark diameter at the small end of 12 inches. The heart size is 1/3 of the total diameter, and there are defects on two different faces of the log. One defect is located at 9 feet and the other defect is located at 11 feet.
The first option would be the quick and easy way to cut the log. Simply cut the log in half to create two 10-foot logs, each with 3 clear faces, and load it on the truck. The landowner will be selling 165 board feet to the mill and will receive $160 dollars for the two logs. That’s not too bad. In addition, all of the wood is sent to the mill. But there’s a better way.
The majority of the volume and value in our hypothetical log is in the first 8 to 10 feet. This section should receive the most scrutiny. If we were to cut the first log at 8 feet, instead of 10 feet, we would be removing the defect and putting the first log into a much higher grade. In this case, that 8-foot log is worth $340, more than twice the value of the two logs in the first option.
Now we have to deal with the remaining 12 feet. We have three choices: sell the 12-foot log as it is, with 2 clear faces; cut off and discard one defect and sell a 10-foot log with 3 clear faces; or cut both defects off and sell an 8-foot log with 4 clear faces. The math is pretty simple. The 12-foot log will sell for $35, the 10-foot log for $39, and the 8-foot log will generate $68. I vote for this final choice, which will maximize revenue.
Cutting for grade as shown in this example results in two more chunks being added to that pile on the landing. In this particular example, the quick-and-easy option would have delivered 165 board feet to the mill, while the preferable option would deliver 130 board feet to the mill, with 35 board feet left in the chunk pile. Cutting for grade would pay $408 dollars while simply cutting the log in half would pay $160 dollars. Another way to look at it is that the landowner would essentially be paid $7 dollars per board foot to leave that wood in the chunk pile.
Cutting for grade is more important for some species than for others, depending on the variability in the price of the grades. Sugar maple, black cherry, yellow birch, black birch, and northern red oak usually justify cutting for grade. White ash, white pine, and red maple are usually less price sensitive. For spruce and hemlock, grade seldom makes a significant difference.
So, the next time you are on your landing and see a pile of chunks, don’t automatically assume that there is a utilization problem. That chunk pile may mean more money in your pocket.
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