Markets for forest products and services / Log prices, stumpages and royalties
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Log prices, stumpages and royalties

The price paid for a standing tree is called the "stumpage" or "royalty". Stumpages are based on the value of the product at the mill door minus the cost of harvesting and transport.

Stumpage price = Mill door price - Harvesting costs - Transport costs

As a guide timber harvesting costs are commonly between $20 and $40 per cubic metre depending on the type of machinery used, the type of the logs and the site conditions. Harvesting costs are generally lower for large plantations of large diameter logs on easy accessible country. Where manual methods (chainsaws) are used for felling and preparing the log, costs can be very high when working in heavily stocked, small diameter unpruned plantations.

Transport costs are commonly in the order of 10c/km/tonne. If this were the case then the grower would receive $10 less per cubic metre of logs for every 100 km.

The stumpage received will also reflect the ability of the grower to negotiate a favourable deal. As the native forest timber industry becomes more sophisticated and the quality of logs from native forests declines, the price differential between logs of high and low value appears to be increasing. Plantation softwood logs of similar wood characteristics have traditionally been sold on the basis of diameter, with larger logs receiving higher prices. In some cases there are minimum specifications that, if not met, mean the logs have no value.

For small growers, the differential between high and low value logs is expected to be greater than suggested by the stumpages received by industrial growers or government agencies, because of their lack of market power. It is common for farmers to say they "can not give away" their lower value timber, whereas if they had large diameter logs with special qualities, they could attract higher prices than the larger growers by carefully targeting premium markets.

Figure 1: The price gradient for quality in Victoria. Based on government royalties in 1995.

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