Consulting forester Scott Brundage says that a little help from a forester can keep landowners on the right side of a timber deal.

Timber is often sold on shares in Missouri, and most landowners don't really know if this is the best way of conducting business.

That's a startling statement when money is on the line. Still, many landowners sell on shares, even though they do not quite understand what they are doing.

Why? That's the way it's always been done. "The logger I sold to said that this is the only way he buys timber, so what was I to do?" thinks the landowner.

So what is "selling on shares?" Usually, this means the logger cuts the timber, hauls it to the mill to be scaled and sold, and once a week brings the landowner the mill scale tickets and pays him half of what the logs sold for--a classic buy now, pay later situation. However, in some cases, the mill will send a check to the landowner. A 50:50 or "halves" share agreement is the most common type of transaction. If the landowner has more valuable grade logs, the deal is sweetened so that he receives 60 percent and the logger 40 percent. Veneer logs can bring two-thirds to three-fourths share for the landowner one-third to one-fourth for the logger. Sounds fair, but is it?

Cropland owners often have share arrangements with farmers year after year, so to many producers selling timber on shares seems natural. But think about the differences, and you'll discover share arrangements for timber are tremendously different. Cropland is commonly shared with the farmer on a 50:50 arrangement. With this arrangement, the landowner furnishes the land, the farmer supplies the labor and equipment, and they then each share one-half of the costs of seed, fertilizer, spraying, harvesting, hauling and value of sold grain. Some landowners have a one-third/two-thirds agreement wherein they furnish the land and the farmer furnishes everything else and the grain value is divided one-third to the landowner, two-thirds to the farmer. Remember, crop-share arrangements are usually done with a neighbor whom the landowner has known for many years. A timber harvest share arrangement is not usually with someone the landowner knows or has previously dealt with. The landowner also knows market prices for soybeans and corn as well as the yield certain fields usually produce.

On the other hand, timber market value information is limited since most landowners don't know quality by log grades or the volume (board feet) to be harvested. Nor do landowners have much control when the logger shows up. There could be damage to property (rutted roads, tops left in fields or creeks, broken fences, etc.), not to mention liability issues.

Let's examine a two-thirds landowner/one-third logger share arrangement on black walnut veneer. The timber landowner gets a larger percentage of sold crop (logs) than the crop landowner. Sounds good, right? It isn't. An A-grade veneer log will usually bring $3 to $10 per board foot, depending on log diameter and length. Suppose your quality tree brings $6 per board foot. A logger's cost to fell, skid, load and haul your selected trees should be about 15 cents per board foot, which includes his profit. Thus, the landowner should receive $5.85 per board foot, and the logger 15 cents. On a large veneer log, for example, of 200 board feet the landowner should receive $1,170 and the logger $30. But, with a two-thirds/one-third arrangement the landowner receives $800 and the logger $400. On a three-fourths/one-fourth arrangement, the landowner receives $900 and the logger $300.

If you do the math on good white or red oak veneer logs, which could average $2.50 per board foot, again you will see that loggers are overpaid by cutting into the landowner's profits.

What about grade logs (saw out higher value boards for flooring, furniture, etc.) sold on a 60 percent landowner/40 per cent logger arrangement? These logs are more valuable than pallet, blocking or railroad tie logs and usually bring $0.40 to $0.80 per board foot delivered to the mill. Let's use an average of $0.60 per board foot. Because grade logs are cut throughout the woods along with the low-value logs, logging costs are less than for veneer. Average logging costs are $0.10 per board foot. Therefore, a $0.60 per-board-foot log delivered should make the landowner $0.50 per board foot and the logger $0.10. With the 60/40 share arrangement, the landowner gets $0.36 per board foot and the logger $0.24. On a 100 board foot log, the landowner should receive $50 and the logger $10. But on shares, the landowner makes $36 and the logger $24. Once again, the logger has profited by reducing the landowner's share.

Since most trees or logs are not veneer or grade logs, can a 50:50 share arrangement be fair? Most logs are of lower quality. They come from woods that have received little or no management.

Most sawmills pay $0.18 to $0.20 per board foot for lower quality logs delivered. At a delivery price of $0.20, the landowner would receive $0.10 per board foot and the logger $0.10. This is a nice 50:50 split and fair to all. But what if delivered price for low-valued logs is only $0.18 per board foot? The logger would barely break even or even lose a little. The temptation, which could occur, is that all the veneer and grade logs are cut and sold because the logger makes more money and the lower-valued trees are often not cut, leaving lower-valued top logs in the woods, etc.

Cutting on shares tends to encourage a logger to cut all the best trees and leave the poorer quality trees. The landowner receives less for his good quality trees than their fair market value, and many poor quality trees and logs are left in the woods. This is called "high grading," whereby the woods continually becomes less valuable by cutting only the best and leaving the worst. Additionally, the landowner usually receives less value for his saleable timber.

Some landowners complain that they never received all the money promised them. One load of veneer or grade logs is five to 20 times more valuable than one load of pallet or blocking logs. Do you know how many loads of logs were hauled from your property? Did the scale tickets you were paid on really represent your logs?

Most loggers do a good job and are honest, but there are a few problem loggers who take advantage of landowners. Why take a chance of having no control over how much timber is harvested, how much it is worth, and little to no injury or liability protection for workers on your land?

Don't sell timber on shares. Always have the saleable timber paint-marked by a professional forester. Know which trees you are selling and their value before you sell. Solicit bids for the sale, and get your money before any timber is cut. Always protect your liability and property with a good timber sale contract. Have the timber cost basis determined by a professional forester to reduce or eliminate income taxes on a timber sale.

A member of the Consulting Foresters Association, R. Scott Brundage works out of Columbia, Mo.

For a list of professional consulting foresters, contact the Missouri Consulting Foresters Association, P.O. Box 7596, Columbia Mo. 65205-7596, http://www.missouriforesters.com or contact the local Missouri Department of Conservation forester for information.