Forest Service Timber Appraisals

Editor's Introduction "Forestry will be practiced when it pays" is a saying used by foresters since Bernhard E. Fernow and Carl A. Schenck first introduced the rudiments of economics to American forestry during the 1890s. Although economic theory and practice are today much more sophisticated than this early truism, certain fundamental principles apply now as then. But consensus has proved elusive. For example, the best method ofassigning value to standing timber continues to be debated, a situation that probably surprises many outside forestry who could logically assume that anything that basic must have been worked out years ago. George A. Craig is a widely respected analyst of timber appraisal methods. He recently retired as head of the Western Timber Association, whose membership is limited to companies that buy timber from the U. S. Forest Service. Obviously, appraisal methods are a central concern to this organization, and Craig is able to utilize his many years of direct analytical experience in the discussion that follows. Had he been allowed more space, he might have elected to say that not only is consensus lacking on general appraisal principles, it is lacking also for the equally fundamental methods of measuring the timber to be appraised. Board feet vs. cubic feet, Scribner vs. International logrules, and water scale vs. truck scale are only a few of the technical questions under perennial debate. One might conclude that many forestry problems are never solved, but each genera tion devises its own accommodation. F ederal law in 1897 required that timber authorized and selected for sale from the forest reserves be appraised and sold "for not less than the appraised value ." Although there have been many changes in the details, the foundation for setting stumpage rates has been a determination of "residual value"-the difference between the estimated value of products to be produced and the sum of all estimated costs plus a margin for profit and risk. This approach causes variations in appraised stumpage rates for timber of the same species to reflect differences in the timber size, quality and volume to be cut per acre, accessibility, topography and related characteristics of the sale area, contract term, and other conditions of the sale . Timber pricing has received increased attention as timber values have risen. There are now more pressures for fundamental change than at any time in the past. In part, these pressures have focused on a shift toward transactions evidence appraisals-that is, using recently bid stumpage rates to appraise new offerings . The USDA Forest Service has been able to resist such pressures in the past, and in this case the logic for doing so is sound . Residual value appraisals could be retained in the West with some refinement in timber sale practice and greater educational efforts.