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Division of Agricultural Sciences UNIVERSITY OF CALIFORNIA :''{'■: ' ; -WWM' : . ?: :. wmmmsm mm TIMBER MARKETING AND LAND OWNERSHIP IN THE CENTRAL SIERRA NEVADA REGION DENNIS TEEGUARDEN • PAUL CASAMAJOR • JOHN ZIVNUSKA CALIFORNIA AGRICULTURAL EXPERIMENT STATION BULLETIN 774 i The Central Sierra Nevada Region, consisting of the greater part of El Dorado, Placer, and Nevada counties is rich in commercial forests — 1,248,000 acres, or 66 per cent of its total area; has almost half of its commercial forest resources in private holdings — more than * 6,000 private land owners hold nearly one million acres of land, two-thirds of which *' is commercial forest land suitable for ^ growing timber; has a high proportion of small holdings — two-thirds of the private commercial forest area is in properties under 5,000 acres. ^ Annual lumber production jumped from 188 million board feet \ in 1945 to 327 million board feet in 1946, has remained high since, reaching a peak of 376 million board feet in 1956 — 6.5 per cent of * the total state production. 4 The increased demand for timber made the small forest owner a major source of timber sup- ,> ply, although he has little experience or interest in timber marketing and his main interests commonly lie elsewhere; 4 expanded marketing opportunities — although the number of 4vJ mills dropped after 1946, increases in output and the number of timber operators created better markets for sellers; increased the need for efficient timber marketing — with much of the region's forests under control separate from that of the * utilization plant, operators had to buy needed timber from the land owners. ^ At first everyone seemed to prosper. small-forest owners had "windfalls" selling timber. ^ mill and timber operators found an available supply of <*" timber on these small ownerships. But then major imperfections in timber marketing became apparent, detrimental to sellers, buyers, and the region as a whole. Y » faulty marketing practices led to dissatisfaction with timber selling, timber-property damage, withdrawal of holdings from the market, and underestimation of the possibilities of v planned forest management on small woodlands. This study examines the marketing of stumpage and logs from privately owned, small forest properties in the Central Sierra Nevada Region. It brings together information essential to plan- ning for a sound, permanent forest economy for the benefit of the forest industries as well as of the forest owners. It offers basic in- formation; evaluates the effectiveness of present marketing pro- cedures; points out weaknesses; and offers suggestions as to how to overcome them. Specifically, the report examines several important questions pertaining to the region: What is the current land and forest ownership pattern and its significance to marketing? What is the present timber-marketing pattern? *• v Are markets operating efficiently to assure the forest indus- tries of a continuous supply of timber? Are returns from forest holdings encouraging purposeful man- agement for the production of timber? Readers will find the summary and evaluation of the findings on pages 5 to 9. «- P Owners of small timber properties and loggers and millmen who obtain stumpage and logs from such properties will find details of marketing practices on pages 30 to 55. All those interested in the relationship of marketing and land ownership to economic development and forest policies, particu- larly as they concern small forest properties, will find in this bul- letin basic data about the forest industries of the region, the pat- tern of land ownership, and the marketing system for standing timber from the small forest holdings. r THE AUTHORS: Dennis E. Teeguarden is Assistant Specialist in the Experiment Station, Berkeley; Paul Casamajor is Lecturer, School of Forestry, and Associate Specialist in the Experiment Station, Berkeley; John A. Zivnuska is Professor of Forestry, School of Forestry, Forester in the Experiment Station, and Forester on the Giannini Foundation, Berkeley. OCTOBER, 1960 CONTENTS The Findings 5 » j The Forest Economy 10 Land and forest resources 10 j The role of forests in the local economy 14 M Forest industries 15 Lumber and resource ownership 21 Forestry and markets 22 Land and Forest Ownership 23 4 Public ownership 23 in Pattern of private ownership 24 Woodland Marketing Practices 30 Timber marketing 30 Research method 31 Sales characteristics 32 Marketing practices 38 Variations in sales practices 48 Purchasing procedures of timber buyers 51 1 Prices and price-determining factors 51 ^ Why small forest owners don't sell 54 40 Appendix 56 4 Acknowledgments 71 ^ Literature Cited 72 < 4 TIMBER MARKETING and LAND OWNERSHIP in the CENTRAL SIERRA NEVADA REGION DENNIS TEEGUARDEN PAUL CASAMAJOR JOHN ZIVNUSKA THE FINDINGS The forest economy of the Central Sierra Nevada Region has undergone significant changes since the end of World War II. Output of forest products, principally lumber, has increased at a moderate pace following a boom in 1946; employment in the timber industries has grown substantially; and today forest- based industrial activity is more impor- tant to the regional economy than at any time in the past. These gains in forest-products output have been partly based on ownerships of less than 5,000 acres which constitute one-third of the region's commercial forest land and two-thirds of the privately owned commercial forest land. The out- put increases have resulted in expanded opportunities for marketing timber from these small-forest ownerships. On the other hand, the number of sawmills has steadily declined since 1946. And a major problem lies in the disorganization and inadequacy of marketing practices and institutions for the sale of standing timber. Timber sales between forest owners and timber buyers are developed sepa- rately and on highly individualized bases. Competitive bidding is not practiced and Submitted for publication August 1959. even sales on the "highest offer" received are rarely made. The methods of finding and selecting a buyer and determining the price depend heavily on the seller's familiarity with the buyer side of the market. Because of intermittant sales and other factors, many forest owners lack this knowledge. Sales are carried out very informally, considering the dif- ficult legal and forestry problems con- nected with marketing standing timber. The apparent satisfaction of owners with their arrangements seems to lie not in the adequacy of the arrangements but in a general lack of interest and knowledge of forestry possibilities and timber mar- keting. To some extent this is due to limited types of markets. At the moment the sole market available to most forest owners is that for sawlogs; the possibili- ties for marketing thinnings and smaller material are extremely limited. These limited markets, combined with geo- graphic and transportation factors, re- strict marketing activity and opportunity. The marketing process does not include stages with a high enough degree of con- centration to bring the forces of supply and demand into focus; there exist no centers of information where buyers or sellers can learn about timber availabil- [5] ity or mill requirements. There is not even a clearly defined and uniformly ap- plied unit for the measurement of the physical quantity of the timber bought or sold. The traditional estimating and scaling practices of the lumber industry may be adequate for transactions between experi- enced traders, but small-forest owners do not realize the importance of the details of these methods. This puts them in an unfavorable position in timber sales and obscures the price actually received per unit of volume sold. The main weakness in marketing practices lies in the seller's ready ac- ceptance of a passive role. Sellers do not realize the complex nature of timber sales; they are reluctant to participate with time and money in the various requirements of a successful sale. Timber sales usually give the buyer the cutting rights because the owner is unable to do the logging himself. But standing timber is not a standardized good separate from the property to be sold at the side of the road or in an organized market place. Instead, each property has its distinctive features affecting values and marketing possibilities, while the fixed nature of forest stands requires that the purchasers have the right to enter the seller's lands to cut and remove the trees. This directly affects the residual values. A successful sale requires an informed and active seller who can provide for the detailed administration and supervision of all procedures related to the sale. An informed seller should possess knowledge of methods of selling, avail- able markets, and prices. However, the study showed that inefficient sales prac- tices often were used where better alter- natives were available. In some cases owners did not use good marketing prac- tices because they did not know about them; in other cases owners evidently considered the returns from selling in- sufficient to justify greater efforts. Over four-fifths of the sellers claimed knowledge of current prices. On this < basis lack of such information does not appear to be a problem. However, there is doubt that such price information as "the going rate" and "what others were getting" is of much use in adequately reflecting the values at stake in individual sales. There is need for information which, when used in combination with price-determining factors, can be applied to establishing the market price for < timber on any single property. Accurate and meaningful price reporting for standing timber does not appear to be feasible under the condi- tions prevailing in the region. The de- tailed and time-consuming field inter- views of this study did not produce data adequate for the appraisal of price levels for individual properties or for the isolation of price-determining factors, except to the extent that gross correla- tions were found between prices and cer- tain marketing practices. A fundamental difficulty in price reporting is the lack of precise and fully defined information as to price received by the sellers. Often the price or other important sale details could not be recalled by sellers. One-fifth of the sales were on a lump-sum basis, which automatically makes the signifi- cance of any data on price per thousand highly questionable. In the remaining sales on a scaled-volume basis, variations in scaling practice, frequently unknown, substantially reduce the reliability of price data. In a number of cases the sale was based not only on cash payment for the timber but also on the supplemental services such as road building, the value of which cannot readily be determined. The timber itself ranges from residual old-growth Douglas-fir or incense-cedar to second-growth ponderosa pine, and varies widely in costs of logging and log quality. To these differences must be added variations in terms of sale such as length of cutting rights, liability for taxes, responsibility for slash removal, and similar matters, all of which must f6] be defined to give precise meaning to quoted prices. The quoted price for standing timber, therefore, is not as clear an indicator of the success of a sale as is true in many other areas of economic activity. Price is only one of several factors determining the actual return to the seller. Accurate determination of the volume cut also has a great effect on the gross cash income from the sale, while the condition of the residual stand and damage to roads, fences, and other improvements may often be the dominant factor in deter- mining the net benefits received. The seller's complaints usually centered on cutting and logging practices, slash dis- posal, and failure to provide services rather than on price. Far-reaching consequences. These weaknesses in the marketing practices af- fect returns to forest holdings as well as the long-range timber supply prospects of the forest industries. The region needs adequate markets and efficient marketing patterns to give owners the financial in- centive to practice forestry. In evaluating the adequacy of these returns in the past, it is significant that some 123,000 acres of private commercial forest land — one- fifth of all such land — were nonstocked and held in small-forest ownerships. Thirty per cent of all commercial forest land in small ownerships was classified as nonstocked and essentially nonproduc- ing. And the remaining lands character- istically were in a poorer productive condition than the large industrial ownerships and public forest lands. Fur- thermore, there is a tendency for an appreciable proportion of small-forest holdings to be withdrawn from commer- cial timber production. Nearly one- fourth of the owners interviewed who had salable timber during the study period would not sell timber because they believed logging would conflict with their primary purposes of ownership — mostly recreational or residential uses. These owners typically held very small areas, but together had 10 per cent of the total forest-land area in the sample. Such withholding of lands from logging has a direct and immediate effect on timber availability, while the extensive area of nonstocked forest land has a long-range impact. Even those small-forest owners who sold timber generally lacked interest in the income possibilities from forest land, as indicated in the passive role they played as sellers. The immediate pros- pects of a sale may be an important event — but beyond this there is little indica- tion of interest in investing either time or money in even the most elementary forms of forest management. Most cut- ting on these properties is done on fairly crude silvicultural bases, without in- formed, deliberate provisions for future growth. One fifth of the sales were made to remove the forest in favor of grazing uses. The problem of marketing is, of course, only one of several factors in- volved in this situation. But to the extent that marketing practices are inefficiently organized when better alternatives exist, these practices discourage the develop- ment of good forest management on small forests. How can marketing from small woodlands be improved? Successful timber sales can be and are being made on small-forest properties. A successful sale requires knowledge of good marketing procedures and methods. The successful seller keeps himself well informed, is careful in the selection of procedures, and remains active in the supervision of all aspects of the sale. However, the prescription of particular sales devices is not an adequate approach to timber marketing. For example, the advantages of a sale made on the basis of scaled-volume over lump-sum pay- ments may never materialize without proper contract provisions and sub- sequent sales supervision. Furthermore, in some sales in which the costs of super- vised scaling are disproportionately high, a lump-sum sale based on cruised volume may be better. To improve woodland marketing, the small-woodland owners must increase their knowledge and interest, and the forest industries must develop more stable and organized purchasing methods to facilitate the market access of the sellers whatever their state of knowledge. Needed: well-informed owners Increased interest and knowledge on the part of small-forest owners appears mainly as an educational process. Such education can come from public and pri- vate sources. Public agencies, through their serv- ice programs, can play an important role in this owner education. The objectives of such programs should be to develop in forest owners an awareness and inter- est in forestry and marketing, and to pro- vide necessary detailed information as a basis for informed marketing practices. To accomplish these objectives, the chief tool used should be a broad educational influence aimed at large groups of owners rather than primarily at individ- uals. This could be done, for example, by focusing attention on demonstrations and by assisting on some individual proper- ties which, in turn, could serve as centers of influence. In developing and extending these programs, the pattern and stability of ownership should be kept in view. There are estimated to be more than 6,000 owners of properties of less than 5,000 acres in the region. The large number of small-forest owners coupled with the rapid turnover in ownership represents a major problem in any program of direct assistance. If maximum benefits are to result from public-service pro- grams of this kind, the pattern of owner- ship should serve as a guide to effective action. For example, concentration of the program on properties larger than 180 acres would reduce the number of potential contacts to 15 per cent of the total number of small holdings, while covering 70 per cent of the total land area in such holdings. Over a period of time it is likely that improved manage- ment on these properties will directly effect the handling of smaller owner- ships. Private forestry consultants could also play an important part in providing marketing assistance and sales super- vision for small-woodland owners. Over half the sales reported in the study amounted to $2,000 or more; a third ex- ceeded $5,000. However, outside assist- ance of any kind was obtained in only one-third of the sales, while private foresters or cruisers were used in only 13 per cent of the cases. Improved handling of some of these sales would have pro- vided an ample margin to repay the costs of such services. Needed: stable, organized purchasing methods Possibilities of substantial improve- ment in small-forest marketing directly through the owners are limited because tenure is unstable, the number of owners is large, and their main interests lie else- where. There is a need for action on the side of the industry; just as the buyers have been more active in the current marketing situation than the sellers, they are also the primary source from which improvements in marketing may come. It is true, of course, that the immediate interests of buyers and sellers are in opposition. Over a short period increased profits for the one likely mean decreased earnings for the other. However, over a longer period, the development of perma- nent forest industries, based on wood grown on small holdings, tends to bring the interests of buyer and sellers into accord. Such permanent industries must rely on market forces to bring about the continuous supply of timber which they need from small holdings. [8] Opposite forces have been at work in the industry. One unfavorable element is that a substantial part of lumber manu- facturing in the region has been carried on by sawmills which were short-lived. Most of these were small mills which were particularly active in obtaining timber supplies from small private forests. Over the 10-year period ending in 1956, these small mills declined in numbers by over two-thirds. During the same period the total sawmill population declined from 136 mills to 51. Hence small-forest marketing has been influ- enced by unstable, temporary forest operations and a marked shrinkage in the number of market outlets. With pronounced instability and the domi- nance of short-period interests on both the buyers' and sellers' sides of the timber market, it is not surprising that the re- sulting pattern has been disorganized and not conducive to long-term forest management. Marketing improvement is likely to be achieved only through some stabilizing elements in the situation. The large popu- lation increase and related developments in land ownership in California make it more probable that such stability can come from the forest industries than from the woodland owners. To this extent, the reduction in number of saw- mills — largely of small, typically tempo- rary operations — and the shift of pro- duction to medium and large sawmills, may mark an increase in stability in the forest industries that will favor improved marketing on small-forest ownerships. If the development of additional per- manent forest industries in the region can be encouraged, it would be in their long-term interests to improve market- ing institutions and practices. This has been shown by the experience in other parts of the United States. The develop- ment of permanent forest industries has been accompanied by improved methods of measuring timber volumes, standardi- zation of terms of sale of standing timber, encouragement by the buyer to mark timber for cutting on a silvicultural basis, and greatly improved information about the availability and interest of timber buyers. Even long-term contracts with small-forest owners are being actively developed by some of the larger companies. What can the individual forest owner do to improve his market op- portunities? He can take a, more active part in the development of the sale; he can make use of the technical assistance available from public agencies and con- sulting foresters; and he can closely supervise all phases of the transaction. General improvement in small-forest timber marketing does not seem likely, however, through programs which con- centrate solely on the seller. Permanent and stable industries purchasing timber from small forests are requisite to gen- eral improvement in marketing. [9 THE FOREST ECONOMY The Central Sierra Nevada Region, as defined in this report, includes those parts of El Dorado, Placer, and Nevada counties which lie west of the Sierra Nevada summit and east of state high- way 49, except in Nevada County where the county line forms the western bound- ary (figure 1). This area includes the major portion of the commercial forest land in the three counties, but excludes the Lake Tahoe area where such land is predominately devoted to recreational use. Land and forest resources The region of the study is a mountain- ous area, totaling 1,870,000 acres, and comprising about 70 per cent of the area in the three counties. Its general aspect is westerly, facing and looking down upon the plains of the Sacramento Val- ley. Elevations along the western bound- ary average about 1,000 to 1,500 feet, rising in a distance of 40 miles in a west- to-east direction to mountains ranging up to 9,000 feet along the eastern bound- ary. Associated with the increase in elevation is a marked transition in land character and use. Between 1,000 and 3,000 feet agricultural land (used mainly for livestock grazing and fruit farming) is interspersed with second-growth pine forests. Within this upper-foothill zone are thousands of acres of former agri- cultral land abandoned before the turn of the century and restocked by volunteer second-growth timber, much of which reached merchantable size about the end of World War II. Above 3,000 feet, the general altitudinal limit of agriculture, there is a relatively unbroken cover of commercial forests, which finally ter- minates at about 7,000 feet in the alpine areas of the high mountains. The relief of this mountainous terrain is primarily determined by the drainages of the Cosumnes River, the South, Mid- dle, and North Forks of the American River, the Bear River, and the South Yuba River, whose deep canyons divide the region into a series of approximately parallel ridges extending east and west. Conforming to this west-east oriented topography, two major highways, U.S. 40 and 50, afford a means of transporta- tion west into the Sacramento Valley and east into Nevada. The only principal highway route extending in a north and south direction is state highway 49 in the foothills, which approximately marks the lower edge of the commercial forest zone and connects the region's major urban centers, Placerville, Au- burn, Grass Valley, and Nevada City. In addition to these major transportation routes, a system of county roads provides access to all the main divides where com- mercial timber operations are conducted. As logs in the region are hauled en- tirely by truck, both to local sawmills and to mills in the Sacramento Valley, the present road system is vital to the functioning of the forest industry. All mills are located either on or near hard- surfaced roads, and most mills depend on these roads not only for transporting logs but also for truck hauling of lumber products to markets outside the region. Several of the larger mills, however, use railroad services for reaching more dis- tant markets. Ninety-three per cent of the study region's land area is comprised of forest or brush land. Of the total of 1,870,000 acres, 1,248,000 (66 per cent) were clas- sified in 1952 as commercial forest land suitable for growing timber crops; an- other 489,000 acres (27 per cent) were classified as noncommercial forest land supporting mostly hardwoods and chap- arral. The remaining 133,000 acres in- clude nonforest land and land used for grazing or agriculture; the latter being located mainly in the foothills on rela- tively level terrain. [10 mw! ^ ir 'Ll/// Re 9 ion Boundary , i ( Fig. 1. The Central Sierra Nevada Region. As the table below shows, in 1952 the region's commercial forest was chiefly composed of two major timber types: pine and pine — Douglas-fir — fir. The lodgepole pine type is of limited com- mercial importance at present. TIMBER TYPE AREA IN ACRES Pine— Douglas-fir— fir 726,000 Pine 409,000 Fir 76,000 Lodgepole pine 37,000 A little more than half the commercial forest area in 1952 was comprised of stands containing both old- and young- growth timber, while the remainder was chiefly young growth or nonstocked, as shown here. TIMBER AGE CLASS AREA IN ACRES Old growth 5,000 Old growth-young growth 256,000 Young growth-old growth 409,000 Large and small young growth .... 378,000 Nonstocked 200,000 Total 1,248,000 Total 1,248,000 (Continued on page 14) [in Terms used in this Bulletin The classifications used in this study are based on those used in the Forest Survey conducted by the Pacific South- west (formerly California) Forest and Range Experiment Station, U.S. For- est Service. Some important classifica- tions used are denned below. Land area Forest-land area. Includes (a) lands which are at least 10 per cent stocked by trees of any size and capable of producing timber or other wood prod- ucts, or of exerting an influence on the climate or on the water regime; (b) land from which the trees in (a) have been removed to less than 10 per cent stocking and which have not been developed for other use; (c) afforested areas; and (d) chaparral areas. Commerical forest-land area. Forest land which is (a) producing, or physi- cally capable of producing, usable crops of wood (usually saw timber), (b) economically available now or prospec- tively, and (c) not withdrawn from timber utilization. Noncommercial forest-land area. Forest land (a) withdrawn from timber utilization through statute, ordinance, or administrative order but which otherwise qualifies as commercial forest land and (b) incapable of yield- ing usable wood products (usually saw timber) because of adverse site condi- tions, or so physically inaccessible as to be unavailable economically in the foreseeable future. Includes chaparral land. Nonforest-land area. Land that does not qualify as forest land. Includes land which has never supported forest growth; land from which the forest has been removed to less than 10 per cent stocking and has been developed for other use, such as grazing, agricultural, residential, or industrial; all land in thickly populated urban and sub- urban areas; and water classified by the Bureau of Census as land. Commercial timber types Pine — Douglas-fir — Fir. Areas with mixtures of the commercial pines and/or Douglas-fir, incense cedar and the true firs in which no one species comprises as much as 80 per cent of the commercial conifer cover. Pine. Areas with ponderosa, Jeffrey, or sugar pine comprising more than 80 per cent of the commercial conifer cover. Fir. Areas with true firs comprising more than 80 per cent of the commer- cial conifer cover. Lodgepole pine. Areas with lodge- pole pine comprising 80 per cent or more of the commercial conifer cover. Timber stand age classes Old growth. Stands in which mature trees (trees considered to have passed their optimum growth) compose more than 80 per cent of the conifer canopy. Old growth — young growth. Stands in which mature trees compose from 50 to 80 per cent of the conifer canopy. Young growth — old growth. Stands in which mature trees compose 20 to 50 per cent of the conifer canopy. [12] Young growth. Stands in which ma- ture trees compose less than 20 per cent of the conifer canopy. 1. Large young growth. More than 20 per cent of the immature trees are larger than 11.0 inches d.b.h. 2. Small young growth. Eighty per cent or more of the immature trees are less than 1 1 inches d.b.h. Type of private ownership To simplify the discussion, owner types are grouped in three major in- terest categories: Timber interests — owners who are primarily interested in timber opera- tions or holding timber for sale to others. They include: Timber-operating company. A corporation actively engaged in commercial logging and milling of timber as a major enterprise. Timber-holding company. A cor- poration holding timber land for future commercial timber opera- tions. The timber may be held for the company's own future use or to sell to other operators. Timber-operating individual. A person whose major enterprise is commercial timber operations. This includes individuals logging timber, operating a large or small sawmill, or splitting timber com- mercially for sale. Timber-holding individual. A person holding timber land for future commercial timber opera- tions. The timber may be held for his own future operations or to sell to other operators. Agricultural interests — owners whose primary interest and activity is in ranching or farming. They include: Range-livestock-farming company. A corporation engaged primarily in range-livestock-farming opera- tions. Range-livestock-farming individ- ual. A person whose major enter- prise is range-livestock-farming. Other farmers. Persons or corpo- rations that have farming as their major activity, but whose princi- pal agricultural enterprise is not range-livestock-farming. Miscellaneous interests — owners hold- ing land for recreational or other mis- cellaneous purposes. They include: Recreational property owners. Persons or corporations holding land principally for recreational purposes. Other classified owners (miscella- neous use). All other land owners whose classification is known but does not logically fit the classes listed above. Examples are owners of land held for residential pur- poses only, mining claims, and reservoir sites. Other terms Stumpage. In a general sense, standing timber. Also may mean the value of timber as it stands uncut in the woods. Log scale. The lumber contents of a log, or of a number of logs considered collectively, based on a specific log rule. Scaling is the measurement of a log, or logs, to estimate its lumber volume, as indicated by a particular log rule and scaling practices. [13 Detailed data on timber volumes and growth are not available for the region, but recently published estimates for the three counties place total timber volume at 25.5 billion board feet, of which 37 per cent is pine (California Chamber of Commerce, 1958). The role of forests in the local economy The importance of forests in the re- gion's economy has increased as the re- sult of the greater demand for lumber, increased production, and growing em- ployment in the forest industry. From 1930 to 1950 total employment in the three counties increased 42 per cent, from 18,510 to 26,329 persons. During the same period employment in lumber manufacturing increased more than five- fold from 405 to 2,119 persons (U.S. Department of Commerce, Population Census, 1930, 1940, 1950) . By the third quarter of 1956, 159 firms classified under lumber manufacturing employed a total of 3,339 persons, a 58 per cent increase in less than seven years (Cali- fornia Chamber of Commerce, 1958) . 2 This increase of employment in forest industry has been accompanied by a transformation in the nature of the re- gion's economy. Until about 1940 em- ployment largely centered around three basic industres, agriculture, mining, and lumber manufacturing. Since then em- ployment has shifted from these basic industries to service industries such as wholesaling, retailing, transportation, utilities, etc. The trend in the three coun- ties can be seen in the following figures : EMPLOYMENT BASIC SERVICE INDUSTRIES INDUSTRIES PER CENT PER CENT 1930 58 40 1940 46 53 1950 31 68 "This and the following section (pages 14 to 23) are based on data compiled for the entire areas of the three counties. Data for the study region alone are not available. However, since [14] The notable exception to this pattern of shifting employment, in which service industries have assumed prominent status in the local economy, is the lumber industry (appendix table 1). During the period in which employment in the basic industries showed a net decline of 25 per cent, employment in the lumber industry increased by 402 per cent. Underlying these changes is, of course, a moderately expanding economy in which services, trade, and distribution grow in importance. In recent years the region's scenic splendor and recreational opportunities have drawn increasing numbers of tourists, stimulating business and employment in the various services. Similar effects have resulted from the influx of new residents who have estab- lished homes in the region and commute to jobs in the industrial and business centers of the Sacramento Valley. At the same time the pleasant climate of the 4 foothill country has attracted people from all over the state to settle there after retirement; they, too, are lending impetus to the expansion of service in- dustries. < Lumbering and agriculture are the economic mainstays of the region today, employing, in 1950, 70 per cent of all | persons in the basic industries, and in- directly supporting to a large extent the various service establishments. At no time in the past has the role of the re- gion's forest industry been as important as at present. According to the 1950 census, one out of every four persons in basic industry was connected with the harvesting, transportation, conversion, and marketing of forest products. Since ^ 1950 this role has grown in importance. A substantial gain in the output of forest 1 products has resulted in greater employ- ment in the industry than ever before. The rapid fall in gold production in { the region includes nearly all of the forest in- A dustries in the counties, the general situation described is believed to be an accurate repre- 4 sentation of the economic setting of this study. Nevada County from 1.8 million dollars in 1955 to 800 thousand in 1956, and finally the closing of the mines in 1957 (California Chamber of Commerce, 1958), emphasized the important eco- nomic status of forests and forest indus- tries in that area. The national recession of 1957 and the subsequent closing down of many mills also had an impact on the local community and clearly proved that the economy depends heavily on produc- tive activity in the region's forests. Forest industries The forest industries of the Central Sierra Nevada have developed around lumber. Production of lumber fluctuated around 80 million board feet annually throughout the 1920's, declined drastic- ally in the depression of the thirties and, with a series of fluctuations, climbed to a record output of 376 million feet in 1956 (May and Baker, 1956). The lumber in- dustry of the area, producing originally for local consumption, has steadily ex- panded its market and today reaches both state and Eastern markets. The importance of lumber. By far the greatest share — almost the total — of log output goes to lumber manufacturing (table 1) . In 1956, for instance, the total output of the region's timber products was 476 million board feet, 472 million feet of which were sawlogs for lumber manufacture (May and Baker, 1958). This reflects but a slight proportional change during the decade since 1946, when 318 million board feet were pro- duced, 314 million feet of which were sawlogs (Burks, Vaux, et al., 1948). In 1946 sawlogs amounted to 98.8 per cent of total output; in 1956, to 99.0 per cent. The 4 million board feet of the 1956 output not used for lumber were mainly used as veneer logs and bolts; pole, piling, and mine timber logs; and pulp- wood. Output of veneer logs and bolts was relatively unchanged from 1946, amounting to about 1.5 million board feet. At present there is one green-veneer plant in the region, but two veneer plants in the Sacramento Valley operate on logs and bolts part of which are purchased in the region. During the period of study there was no special market for quality veneer logs especially valuable in ply- wood fabrication, as production of veneer was solely for container uses. This situation has remained essentially the same, although a new plywood plant at Table 1. Output of timber products in the Central Sierra Nevada Region, 1946 and 1956 Product 1946 Log volume Total production 1956 Log volume Total production Sawlogs Veneer logs and bolts Poles, piling, and mine timber logs Split products Pulpwood Shingle and shake bolts Totals Thousand feet 313,890 1,620 780 310 1,000 317,600 Per cent 98.8 1.2 100.0 Thousand feet 471,575 1,685 1,466 280 1,085 25 476,116 Percent 99.0 1.0 100.0 Sources: Burks, George F., Vaux, Henry J., et al. Commodity production from commercial forest land in California — 1946. California Forest and Range Experiment Station Forest Survey Release No. 6, Table 15. June, 1948; May, Richard H., and Baker, H. L. Output of timber products in California, 1956. California Forest and Range Experiment Station Forest Survey Release No. 35, Tables 4, 11, 12, 13, and 14. December, 1958. Also Cali- fornia Division of Forestry. Production of California timber operators, 1956. [15] II«I|::::::::M A large sawmill in El Dorado County. Mills of this size produced 65 per cent of the 1956 lumber output in the Central Sierra Nevada Region, and showed a high degree of operating stability during the period of study. Martell in Amador County is now receiv- ing some raw material from the area. On the other hand, output of poles and piling increased substantially during the postwar years; the 1956 production was twice that of 1946. But in general, mar- kets for such small material are limited, and few forest owners have outlets for these products. At present there are no pulpwood or fibreboard plants in the region, and pulp- wood production has been limited and declining in importance. Until recently the Fibreboard plant at Antioch pur- chased some pulpwood from private sellers, but reflecting the general substitu- tion in favor of chips, pulpwood produc- tion has declined steadily from 17 million board feet in 1951 to 1 million feet in 1956. As a practical consideration, there is no pulpwood market available to most forest owners. Trends in timber production. The postwar pattern of timber operations in the region is shown by the record of timber operators receiving permits from the California Division of Forestry (figure 2, appendix table 2) . This record is somewhat incomplete, since production reports are obtained only from those timber operators who provide such infor- mation during the following year; but it is the best available record of annual timber output. These reports show a decline in commodity output from 1947 to 1949, a sudden, rapid increase to a record output in 1951, a slight dip, and a new peak in 1953 of 475 million board feet. Then another decline and upturn followed with production leveling out in 1955 and 1956 at about 450 million feet. 3 In 1957 production dropped in re- sponse to the national economic reces- sion, this time to the lowest level since 1949. Although output data for 1958 are not yet available, the number of registrants were fewer than the preceding year and production probably stayed below the peak years of 1955 and 1956. The number of reported timber opera- tors reflected output trends, but showed 8 The 1956 data given here differ from those given on page 15 because reports by the U.S. Forest Service and California Division of Forestry are obtained through different proce- dures, and because of net shipment of logs out of the region. [16 pronounced differences for specific time periods. The 68 per cent increase in timber output from 1949 to 1951, for ex- ample, was achieved with a 53 per cent increase in timber operators. Evidently the increased production during the period was the result both of additional operators entering the industry and of greater activity by operators already in the business of cutting timber. In the period 1951-1953 total production re- mained relatively constant at 470 million board feet, while the number of timber operators increased 40 per cent from 185 to 259. This increase in timber operators continued through 1954, in spite of a 17 per cent drop in output, and finally reached a peak of 336 operators in 1955. These facts suggest increasing rivalry among timber operators in obtaining existing timber supplies between 1951 and 1955. At the same time average production per operator fell by slightly less than half. Beginning in 1955, and lasting through 1958, the number of op- erators declined as fast as it had in- creased during the previous four years. Trends in lumber production. Underlying the recent growth of the for- est economy in the Central Sierra Nevada has been the lumber industry. Lumber production doubled from 188 million board feet in 1945 to 376 million feet in 1956 (May, 1953; May and Baker, 1957) , the peak year in more than a cen- tury of lumber operations (table 2) . This period was marked by a tremendous ex- pansion in 1946 when, within one year, the number of sawmills in the region more than doubled and production rose from 188 million board feet to 326 mil- lion board feet. This remarkable increase in output largely was accomplished by small mills producing less than 10 million feet annually. Their establishment coin- cided with the greatly increased demand for lumber following the war and the availability of newly merchantable second-growth timber on lands cut over or abandoned during the gold period. Many of the small mills established dur- ing the early postwar period closed down after only a brief period in operation. 500 r 400 300 200 100 Total Volume Forest Products -l 500 400 V S Registered Timber Operators 300 200 - 100 J_J 1 L Pulpwood 1948 1950 1952 1954 1956 1958 Fig. 2. Timber production in the Central Sierra Nevada Region, 1947-1957. [17] Table 2. Lumber production and number of sawmills, Central Sierra Nevada Region, 1 940-48, 1951, and 1956 Year Active sawmills Lumber production Number Thousand bd. ft. 1940 27 142,229 1941 31 153,835 1942 31 142,563 1943 41 154,829 1944 56 175,578 1945 73 188,294 1946 135 326,539 1947 118 332,713 1948 115 305,890 1951 77 346,116 1956 51 376,099 Sources: Table 4, Forest Survey Release No. 20; Table 6, Forest Survey Release No. 30. California Forest and Range Experiment Station. The increase in lumber production after 1946 was more moderate in this region than in other areas and in the state as a whole. Between 1946 and 1956 lumber production in California in- creased by 82 per cent, but by only 14 per cent in the region (May, 1952; May and Baker, 1957). Until recently, ponderosa pine domi- nated the lumber output of the region (figure 3; appendix table 3) . Of the 1946 production 56.0 per cent was ponderosa pine, 16.8 per cent white and red fir, and 11.6 per cent Douglas-fir (May and Simontacchi, 1947). During the next decade ponderosa pine production de- clined steadily, while the output of true firs and Douglas-fir increased twofold, more than making up for losses in pon- derosa pine. In 1956 ponderosa pine out- put was down to 36 per cent of the total, while the true firs (principally white fir) had increased to 33 per cent (May and Baker, 1957). The increased lumber production in the postwar period was achieved by a steadily decreasing number of sawmills. From a peak of 136 mills in 1946 the number declined to 51 in 1956. Sawmill mortality was especially high for mills producing less than 10 million board feet annually. On the other hand, mills pro- ducing more than 10 million board feet 200 180 160 140 «o CO CO ■ 1946 1 1 1956 o *_ 0) 120 S!3 o CO 100 ill c o 1 80 60 40 20 " \ 00 0^ •O ^6 •q — ■ 00 b 6 ^S Csi 5* 2 ' i n 'ond P' erosc ne Tr fi je s Dou fi glas- rs Su P ga ne r Ce dar Other species Fig. 3. Lumber production by species, Central Sierra Nevada Region, 1946 and 1956. [18] increased both in numbers and in pro- portion of annual lumber output. These trends are indicated by a com- parison of the sawmill population and lumber production by mill-size class over time (table 3). In 1946, 58 per cent of the 136 sawmills in the region were very small mills each producing less than 1 million board feet annually. These very small mills, however, accounted for only 6 per cent of the total output that year. Small mills producing from 1 to 9.9 mil- lion board feet annually accounted for another 35 per cent of the mills operating and were much more important in total volume of output. Together, small mills and very small mills formed 93 per cent of the sawmill population and produced 51.5 per cent of the total lumber output. The remaining 48.5 per cent of the pro- duction was concentrated in 9 medium and large mills each of which produced 10 million feet or more. During the next five years the number of very small mills was reduced from the 58 per cent of the total in 1946 to 34 per cent in 1951. At the same time the pro- portion of annual output by these mills dropped from 6.4 to 2.6 per cent. The number of small mills producing 1 to 9.9 million board feet a year declined slightly, but lumber production by mills within the class expanded sufficiently to increase by 5 per cent their proportion of total output to 51 per cent. Production by medium and large mills remained nearly constant, but due to changes in the small and very small classes, accounted for a greater proportion of mills but a smaller proportion of output. Between 1951 and 1956 the decline in number of very small and small mills continued. In 1956 there were 39 such mills, as against 69 in 1951. Unlike the previous five-year period, the proportion of total output by these mills fell; by 1956, they accounted for about a third of the production, contrasted to half in 1951. Medium and large mills increased their share of output from 46 per cent fl 1 1 a CD OS in CO 1 o 5 u cd d CO co 1 8 1 ^ O a. CO tH in i o* cd s co o CO C7i £> CO t> o_ O <0 B g co~ of CO 1 «o m 3 (M ^ •> i co hJ tH CO 1 M ■ IT) OS m ^ 1 CO Pi O i> as ■^ o M cd in _0 00 tH CM l TH < CO T-i l u fc N "In a Pi CD CO <* o q ■— •£ O c4 tH cd d twm a CD Ph m ■^ o E o p. tH >s -Q CO CM 00 1 <° CD s -tf co o 1 rH v XI 00 00 "* 1 ^ C B 00 l> C75 1 - i to 3 t> m *■ *5> o OS hJ rH iH 1 M « 1 s "0 > ca 9 CD oq 00 ^J q £3 o CO LO d o 1 1 CO CD CO m iH 1 ^ o z CD > CD ■ u '+» 1 CO CO 00 1 t> < CM «* 1 t " im fc X | H r-T t> 00 " «>" •" 3 CD a OJ 00 C75 1 CO j- < t- "«* 1 CO 1 tH -Q E 3 — i 2 h > s |S < [19] to 65 per cent, while the number of such mills increased from 8 to 12. There were no entirely new medium or large mills established during the period, but several small mills expanded their operations so that they moved into a larger production class. These changes in the structure of the industry were marked by considerable instability within the sawmill population. Many mills were short-lived. For ex- ample, of 77 sawmills operating in 1951, only 37 were still operating five years later. Nearly all the 1956 lumber output — 92 per cent — was produced by these 37 surviving mills. However, 16 of the mills were under management difTerent from that in 1951. Approximately a third of the lumber output in 1956 was by either new mills or mills under new management. Two-thirds of the produc- tion came from mills which had under- gone no change over the five-year period. Lack of permanence was particularly striking for mills producing less than 10 million board feet annually. Of 69 such mills operating in 1951, only 25 were still operating five years later. All except one of the very small mills closed down between 1951 and 1956. The above analysis is based on data which do not account for all the changes that probably occurred. Undoubtedly some mills were established and closed down within one of the five-year periods, while others may well have changed ownership more than once. It is reason- able to conclude that the industry was actually more unstable than has been described here. Table 4. 1956 production of mills by change in ownership status classes, Central Sierra Nevada Region Mill status in 1956 Mills Production in 1956 Number Per cent MBM Per cent New mill since 1951 Same mill, different owner since 1951 Same mill, same owner 14 16 21 51 27.5 31.4 41.1 28,102 108,237 239,760 7.5 28.8 63.7 Totals 100.0 376,099 100.0 Source: Data supplied by R. H. May, Division of Forest Economics, California Forest and Range Experiment Station. Table 5. Number of active sawmills in 1956 by size classes with change in ownership since 1 951 , Central Sierra Nevada Region Change in status since 1951 Mill size class in 1956 New mill Same mill, different owners Same mill, same owners Very small (less than 1.0 MMBF) 7 7 14 1 14 1 16 Small (1.0-9.9 MMBF) 10 Medium and large (10.0 MMBF and over) . . Totals 11 21 Source: Data supplied by R. H. May, Division of Forest Economics, California Forest and Range Experiment Station. s v [20 During the period 1951 to 1956, which is of particular interest in this study, lumber production reached and remained at a comparatively high level. Thus timber owners enjoyed better market prospects over most of this period than at any time since World War II. The large increase in timber operators con- firms this conclusion and indicates that owners had greater opportunity to come into contact with potential buyers. But production has fluctuated, with wide variations in some years. And since 1956 the number of operators and output have declined substantially. High production has not been the result of additional mills. Sawmill-log markets have actually contracted in number while remaining mills have expanded their production and their share of raw-material pur- chases. Lumber and resource ownership Relationships between past and future trends in the lumber industry, log sup- plies, and resource ownership are vitally important to the forest economy of the region. The industry can only maintain itself on the basis of sustained log sup- plies, which in turn depend on various factors pertaining to forest ownership and management. A 1957 survey in the region, to be discussed more fully on pages 23 to 29, provides an up-to-date picture of the ownership situation. The survey showed that commercial forest land in the region was about evenly divided between public and pri- vate ownerships (table 6). Commercial forest land held in public ownership, largely national forest, included 56 per cent of the pine — Douglas-fir — fir type in the study region as contrasted to 27 Table 6. Commercial forest land in the Central Sierra Nevada Region by type of ownership and by timber types, 1 957 Total Timber type* Type of ownership Pine Fir Pine; Douglas fir; fir Lodgepole pine Thousand acres Per cent Thousand acres Public and Utilities Federal State, county, and munici- pal 583 16 32 46.8 1.3 2.6 109 8 6 50 1 4 404 7 22 20 Utilities f Total 631 337 110 170 50.7 26.9 8.8 13.6 123 80 88 118 55 18 1 2 433 227 18 48 293 20 Private Timber interests 12 Range and farming inter- ests 3 Recreational and other classified owners 2 Total 617 1,248 49.3 100.0 286 409 21 17 All types 76 726 37 * Timber type areas from 1952 vegetation survey made by the California Forest and Range Experiment Station; ownership areas from 1957 survey by School of Forestry. f Less than 500 acres. r 2i i per cent of the pine type. Various utili- ties held 3 per cent of the commercial forest land, again largely in the pine — Douglas-fir — fir type. Timber operating and timber holding companies and in- dividuals owned 27 per cent of the com- mercial forest land, 67 per cent of which was in the pine — Douglas-fir — fir type. Range-livestock and other farming in- dividuals held 9 per cent of the commer- cial forest land, including a 21 per cent of the pine type. Individuals and com- panies interested in recreational and miscellaneous uses of the land held 14 per cent of the commercial forest land, and 29 per cent of the pine type. This group includes some mining companies which in recent years have either been disposing of their timber prior to selling the land or else holding timber for sale to timber operators. The pattern of commerical forest-land ownership shows a concentration of such land in small ownerships (table 7). In 1957, 33 per cent of all commercial for- est land in the region was held in proper- ties less than 5,000 acres in size. These small properties included 63 per cent of the pine type and 20 per cent of the pine — Douglas-fir — fir type. Private holdings of 50,000 acres and larger, by contrast, included only 10 per cent of the total commercial forest-land area. Evidently, small forest ownerships in which timber is not the main object of interest have been important sources of timber supplies. In 1957, timber-operat- ing companies and individuals controlled 17 per cent of the total (public and pri- vate) commercial forest land in the re- gion. Governed by sustained yield con- siderations, publicly owned forests could only partly supply the timber needed by these operators. In 1956 sawlog sales in the two national forests of the region (the Tahoe and Eldorado National Forests) were only 17 per cent of the log produc- tion reported by timber operators. For the five-year period 1951 to 1956, na- tional-forest sales averaged a fifth of the log output. Thus it is apparent that pri- vate timber supplies have supported a major part of total production, and that small-forest properties have been heavily used sources of needed timber. Forestry and markets These small-forest owners character- istically had limited marketing experi- ence and were primarily interested in other fields (marketing aspects are dis- cussed on pages 30 to 55). The rapid changes in small sawmills and the wide- spread role of independent loggers in supplying these mills have contributed to Table 7. Privately owned commercial forest land by size of ownership and by timber types. Central Sierra Nevada Region, 1957 Timber type* Size of ownership in acres Total Pine Fir Pine; Douglas fir ; fir Lodgepole pine Thousand acres Per cent Thousand acres Under 5,000 417 74 126 67.6 12.0 20.4 256 20 10 8 3 10 144 49 100 9 5,000-49,999 2 50,000 and over 6 All sizes 617 100.0 286 21 293 17 * Timber type areas from 1952 vegetation survey made by the California Forest and Range Experiment Station ; ownership areas from 1957 survey by School of Forestry. 22] the existence of an unstable but active market in which the forest owners usually played a passive role. The future of the region's forest in- dustry will partly depend on how well the market operates to ensure future crops of timber from these small properties. Since most of the forest land is not owned by sawmill operators, the timber market will play a fundamental role in providing necessary timber supplies and in deter- mining the role of the industry in the local economy. It is only through the market that the forces of demand can reach the nonintegrated timber owner and affect his management decisions — which in turn affect how much and what kind of timber is grown on his land. Similarly, it is only through the market that the nontintegrated wood-utilization plants can obtain raw materials for proc- essing. Thus an effective market is essential to an effective forest economy in the region. LAND AND FOREST OWNERSHIP To evaluate the effectiveness of the timber market in the region, it is helpful first to examine the characteristics of the supply source — the forest owners. What types of persons own forest land? What is the nature of their ownership? These are important questions, because the abilities and interests of forest owners as sellers are related to their purpose in holding land and how the land is used. The decisions these owners make deter- mine the use and management of forest resources, and directly affect their pro- ductivity. Thus a knowledge of land ownership is a necessary part of a study of timber markets, and is also basic to an understanding of the possibilities for future development of forest resources and forest industries. A survey of land and forest ownership in the region was undertaken in late 1957 to establish the pattern of ownership as related to the size, type, and address of land owners. Data collected on a sample of ownerships were combined with for- est-survey information supplied coopera- tively by the Pacific Southwest Forest and Range Experiment Station and used as a basis for estimating the total num- ber of owners and the area in various ownership classes (see description of methods in appendix, page 56). The de- tails discussed here are, therefore, based on statistical estimates rather than actual measurements of all ownerships in the region. All ownership information was obtained from public records in the counties studied. Public ownership According to the survey, about 49 per cent of the region, or 910,000 out of 1,870,000 acres, were in federal, state, UTILITIES STATE Fig. 4. Ownership of commercial forest land in the Central Sierra Nevada Region. 23 Table 8. Total land area by major classes of land and by ownership class, Central Sierra Nevada Region, 1957 Class of land Total all owner- ships Federal State County and municipal Utilities Private Thousand acres Forest land Commercial 1,248 489 583 253 5 5 * 5 11 1 12 11 23 32 17 49 3 52 617 Noncommercial 218 Total forest land 1,737 133 836 46 835 Nonforest land 73 All land 1,870 882 908 * Less than 500 acres. Sources: Commercial, noncommercial, and nonforest land areas from unpublished 1952 vegetation survey by the California Forest & Range Experiment Station; ownership areas from 1957 survey by the School of Forestry. county, and municipal ownership. Two- thirds of this publicly held land was commercial forest land, nearly all of which was in the federally owned El- dorado and Tahoe National Forests, and used mainly for the production of forest crops. In federal ownership were 882,000 acres, including 583,000 acres of com- mercial forest land. State holdings totaled 5,000 acres, all of which was commer- cial forest. County and municipal lands amounted to 23,000 acres, half of which was commercial-forest land. Most of the county and municipal lands were in domestic- and irrigation-water districts. Land held by utilities such as rail- road* and power-generating companies amounted to 52,000 acres, 32,000 of which were commercial forest land. Be- cause of the special nature of these hold- ings, they were classed separately and excluded from the analysis of private ownership. The balance of land area in the region, 908,000 acres, was held in private owner- ship. 4 In the case of railroads, only right-of-way and other special use lands are included in this classification. Holdings of affiliated land com- panies are included under general private ownership. Pattern of private ownership Size of ownership. An outstanding characteristic of privately owned land in the Central Sierra Nevada is its concen- tration in small ownerships of less than 5,000 acres (figure 5). An estimated 6,080 private owners held 908,000 acres in 1957. Only nine of these owners had more than 5,000 acres. Nearly 99 per cent of the ownerships, including over 70 per cent of the private land, was in small properties of less than 5,000 acres. More than four-fifths of the owners, with one-fifth of the land, owned less than 180 acres in properties averaging 37 acres in size. Ownership of commercial forest land follows this same pattern. Two-thirds of the privately owned commercial forest land in the region was held in small ownerships, and one-third in properties 5,000 acres or larger. Some further de- tails deserve special note. Forty-six per cent of the private commercial forest land in the region was in properties of less than 700 acres. Forest holdings of ownerships greater than 50,000 acres— where, incidentally, timber was the major interest — were slightly exceeded in area by such holdings in ownerships of less than 180 acres. Medium-size properties 24] between 5,000 and 49,999 acres included less than a tenth of the total land and only 12 per cent of the commercial for- est land (appendix table 5). Forest ownership in the region, then, fell into two broad size classes: large ownerships which included one-fifth of the commercial forest land, and small ownerships which totaled more than three-fifths. This demonstrates the im- portant position of small owners. Ownership size alone does not tell the whole story of the forest situation, how- ever. There are also important distinc- tions in the kind of forest land held by different sizes of owners. For example, two-thirds of the com- mercial forest land in small ownerships (under 5,000 acres) was composed of pine-type forest. In fact, nine-tenths of this important type was held in small properties. Much of this forest type is located throughout the upper foothills and is interspersed with agricultural lands and other woodland and brush types. Forest values are enhanced be- cause they are accessible by a compara- tively well-developed road system. Log- ging can often be carried on in these forests when winter has closed operations at higher elevations. Also, they often are on fairly level ground where harvesting operations are easily conducted. Medium- and large-size ownerships, on the other hand, were mainly in the pine — Douglas-fir — fir type forests in the higher mountains, where such ownerships in- cluded half the type. Thus, the pine type was mainly in small ownerships, while the pine — Douglas-fir — fir type was split nearly equally between the small and the medium-to-large ownerships. Important differences also were found in the proportion of various timber-age classes (see definitions on pages 12-13) by size of ownership. In general, forests in small ownerships have a longer history of cutting and have been cut more heavily in the past than those in larger holdings. As a result, small ownerships included less old growth and more young growth, in proportion to area, than did the others. Half the commercial forest land in small ownerships was classified as either large or small young-growth timber. Medium and large ownerships, SIZE OF OWNERSHIP 1-179 1 80 - 699 700 - 2,599 2,600 - 4,999 5,000 - 49,999 50,000 and over _J j2~3 | I Commercial Forest Land I All Rural Land 1 | Number of Ownerships 10 20 30 40 50 60 70 80 90 Per Cent of Total Fig. 5. The pattern of private land and forest ownership, by size of ownership, in acres, Central Sierra Nevada Region, 1957. [25] by contrast, largely included stands that contained old-growth timber; only one- fourth of the area was large or small young growth. One aspect of these relationships has important implications for the future. This is the fact that one-fourth of the private commercial forest land in the re- gion was large young growth held in small ownerships. As the old-growth timber is gradually cut out, this age class will become increasingly important as a source of potential timber supplies. Actual production will, of course, depend heavily on the kind of management these young-growth forests are receiving now and will receive in the future. A final consideration is the ownership and management of the 135,000 acres of nonstocked, idle commercial forest land. This land, amounting to slightly more than one-fifth of the private commercial forest land, was primarily held in small ownerships. One-tenth was in ownerships greater than 5,000 acres, while the bal- ance was in smaller properties. In fact, 30 per cent of the commercial forest land in small ownerships was nonstocked. If the forest resource is to make the largest possible contribution to the region's economy, the restoration of these idle forest lands to production will be re- quired. Whether this will actually happen is uncertain at present. Observations made during a survey among small-for- est owners in the region indicated a sig- nificant but limited interest in planting idle land. Bearing on the situation are a variety of social-economic factors, one of which is the extent to which returns on investment in forest holdings result in incentives to grow timber. Again, this underscores the importance of timber markets in the region. Type of ownership. Directly related to the size pattern of ownership is the type of owners who hold the land. In this study owners were classified into 11 groups differentiating between corporate and individual ownerships, operating and nonoperating owners, farm and non- farm properties, and recreational and , nonrecreational holdings (see Definition of Terms, pages 12-13). The pattern with respect to type of ownership is shown in figure 6 and appendix table 4. Timber interests. Of the more than 6,000 private land owners in the region, an estimated 14 were timber-operating companies. These 14 corporate enter- prises held one-fourth of the private commercial forest land and slightly less « than one-fifth of the total private land area. The bulk of this area, including more than four-fifths of all land in the class, was in four ownerships exceeding 10,000 acres in size. Thus, most land held by this type of owner was held in medium and large-size ownerships by companies actively engaged in commercial logging and milling of timber as a major enter- prise. In fact, more than half the land in ownerships larger than 5,000 acres was held by these medium- and large-size companies. Holdings of timber-operating com- panies were mainly in the pine — Douglas-fir — fir type, and consisted mostly of old growth-young growth and young growth-old growth stands. A high i proportion (92 per cent) of all land held by this ownership type was commercial forest land. « Noncorporate timber operators consist of individuals whose major enterprise is commercial timber operations. This group includes individuals logging tim- ber, operating large or small sawmills, or splitting timber commercially for sale. Owners of this type were comparatively unimportant, holding less than 1 per cent of all private land and of the private commercial forest land. * Thus, taken together, enterprises whose major activity is commercial timber op- erations controlled only 18.7 per cent of f all privately owned land and 25.1 per per cent of the private commercial for- est land. The balance of the private com- mercial forest land in the region — some [26] Timber Operating Company Timber Holding Company Timber Operating Individual Timber Holding Individual Range-livestock- farming individual Other Farmers Recreation and Other Classified Owners | ] Commercial Forest Land 1 .A All Rural Land I Number of Ownerships 10 20 30 40 50 60 70 80 Per Cent of Total Fig. 6. The pattern of private land and forest ownership, by type of ownership, Central Sierra Nevada Region, 1957. 462,000 acres — was held by owners not engaged in timber operations. Two other ownership types on which timber is the primary interest include individuals or corporations holding timber land for future commercial tim- ber operations, either for sale to others or for their own use. In terms of both numbers and area, timber-holding in- dividuals were the more important of the two types. This group accounted for nearly one-tenth of the private owner- ships and held one-fifth of the private commercial forest land. All but one of these 578 ownerships, with 91 per cent of the land area in the class, were less than 5,000 acres in size. In fact, 93 per cent of these ownerships, with 60 per cent of the land, were less than 700 acres. Thus, this type of ownership is characterized by small holdings. Included in it are properties held by owners not familiar with timber management or op- erations. Since property values and land- use possibilities were largely in timber and timber growing, they were classed as timber holders. Timber holding com- panies included 23 organizations holding 9 per cent of the private commercial for- est land. Four-fifths of all land in this ownership type was in one large owner- ship, while most of the remaining area was in properties between 700 and 5,000 acres. Commercial forest land in the type was largely in the pine — Douglas-fir — fir type, containing mostly old growth- young growth and young growth-old growth. By contrast, forest land held by individuals was more evenly distributed between the pine and mixed conifer types, and contained large and small young growth. One-fourth of this area was nonstocked. In summary, individuals and corpora- tions whose major interest in land was timber holding and operations totaled one-tenth of the private ownerships and controlled slightly more than half the private commercial forest land. Half the total land area held by these ownership [27] groups was in medium- to large-size properties, half in small properties less than 5,000 acres. All the remaining owners were those whose major interests were ranching, other types of farming, recreation, and miscellaneous types not appropriately classified in other groups. These ac- counted for nine-tenths of the owner- ships, half the land area, and slightly less than half (45.4 per cent) of the pri- vate commercial forest land. Miscellaneous interests. The most prominent of these nontimber interests, both in numbers and area, were the 4,289 miscellaneous ownerships. But because it was frequently difficult to differentiate this group from recreational ownerships, these two classes were considered to- gether. Ownerships in these two types in- clude those holding land for recreational use, organization camps, residential or business properties, mining claims, and for other miscellaneous purposes. Approximately three-fourths of all pri- vate ownerships in the region were in the recreational-miscellaneous class; it in- cluded more than one-fourth of all pri- vate land and commercial forest land, more than any other type of ownership. The outstanding feature of this class is the small size of its ownerships. With one exception, all properties were less than 5,000 acres; 93 per cent were less than 180 acres. Half the land area was in properties less than 180 acres; four- fifths in those less than 700 acres. Thus about one-fourth of the private commercial forest land in the region was held in some 4,500 very small ownerships on which timber is of secondary im- portance to other purposes of holding land. Characteristically, the ownerships contain mostly large and small young- growth pine forests, with a large propor- tion nonstocked. Agricultural interests. Owners whose interests in land were primarily agricul- tural included range-livestock-farming individuals and other farmers. Ranch- ing individuals held 23 per cent of the private land and 15 per cent of the com- mercial forest land. Most ownerships in this group were small, with four-fifths of the owners and 47 per cent of the area in properties less than 700 acres. Owner- ships from 700 to 5,000 acres held 56 per cent of the land area in the class. Most of the commercial forest land in the class is in the pine type of the foothill country, where grazing of forest land is common. Included in the class are prop- erties which form part of large ranches whose major holdings were outside the region. Other farmers were mainly those rais- ing fruit crops. As a group, they were comparatively unimportant, holding only 2 per cent of the private commercial forest land, largely in pine forests, and of all private land. All such holdings were less than 700 acres. Residence of owners. A third im- portant aspect of land ownership in the region is the owners' residence. Various studies in other forest regions have shown that the interest, approach, and knowledge of nonresident owners dif- fered from those who resided on their property (James, et al., 1951; Yoho and James, 1958). Accordingly, considera- tion is given here to the extent of non- residency in the region and its relation- ship to different ownership types. A comparatively large number of own- ers had addresses outside the region (figure 7 and appendix table 10). More than one-third of the owners — some 2,204 — had addresses outside the study area; they held 44 per cent of the land and 43 per cent of the commercial forest land. Since an owner with an address in- side the region may not necessarily live on his property, it is probable that ab- sentee ownership is more prevalent than these data suggest. How much more was suggested by a field interview of 160 small forest owners in which it was found that 40 per cent lived outside the region, 21 per cent lived in the region but not on [28 ADDRESS OF OWNER Central Sierra Nevada Region — -■•- 1 ^ i Central Valley Commercial Forest Land All Rural Land Number of Ownerships ] Bay Region titi ■L Other Northern California Southern California Outside California 10 20 50 60 70 30 40 Per Cent of Total Fig. 7. The pattern of private land and forest ownership, by address of owner, Central Sierra Nevada Region, 1957. the property, and only 39 per cent actu- ally lived on the forest property. These 39 per cent of the owners — those residing on their properties — held only 28 per cent of the total area in the sample. Of the 2,204 owners living outside the region, two-thirds were concentrated in the Central Valley and the San Francisco Bay Region. Nonresident owners in these two areas held one-third of all private commercial forest land in the region, and more than four-fifths of all land held by nonresident owners. Timber interests. More than four-fifths of the land held by timber operators, both corporate and individual, was in ownerships with addresses within the region; the balance was held by enter- prises with operations in the Central Val- ley. In contrast, two-thirds of the land controlled by timber holders was in ownerships with addresses outside the region, although the number of such ownerships was about half the total. However, the land held by timber-hold- ing individuals was nearly equally divided between residents in the region and nonresidents, as was the number of owners, so that the large proportion of land held by timber holders outside the region was the result of nearly all such land in corporate ownerships having ad- dresses outside the region. Agricultural interests. Owners classed as agricultural interests were mainly resi- dents in the region. About four-fifths of owners classed as "other farmers," with more than four-fifths of the land in the class, had addresses in the region. In contrast, only about two-thirds of the owners classed as ranching interests, with two-thirds of the land in the class, had addresses within the region. Recreationists, in terms of numbers, mainly lived outside the region, but the land in the class was about evenly di- vided between owners living outside and inside the region. The average size of the latter was 130 acres, compared to 72 acres for properties whose owners had addresses outside the region. Owner resi- dence in the other classified ownership group (miscellaneous uses) followed the general pattern for the region: a third of the owners, with a little less than half the land, lived outside the region. [29] WOODLAND MARKETING PRACTICES The preceding discussion has shown that in 1957 about one-third of all com- mercial forest land in the region was privately held in small-forest ownerships, and that such properties included nearly two-thirds of the privately owned com- mercial forest land. Since wood-process- ing enterprises control only one-fourth of the private commercial forest land and one-eighth of all commercial forest land in the region, it is evident that products produced on the bulk of the forest proper- ties necessarily move through the market to initial processors. The following exam- ination of the timber market and market- ing practices is focused on the small, non- industrial timber owners whose indi- vidual contributions are small but who, in the aggregate, control a large propor- tion of the wood-producing resource. Timber marketing Marketing has been described as "the focal point of the entire process of for- estry" (Duerr, 1949 ). 5 For this reason it is highly important that the marketing system provides both forest owners and timber buyers with adequate financial returns for their productive efforts. For small-forest owners in the Central Sierra Nevada marketing has a dual role: the sale of timber is also an act of forest management — usually the only one. Few owners engage in such preharvesting treatments as thinning and pruning. Development of timber quality is the re- 5 Duerr writes that ". . . In marketing, the products of the forest are released for consump- tion. The aims of forest policy and the work of forest management are culminated and made to bear fruit. It is the character of the market, as a reflection of consumer's demands, that shapes forest management policies; and it is the efficiency of the market as a reflector of those demands that determines how well the goal of optimum benefit may be seen by the forest man- ager as an individual negotiator in the mar- ket . . ." p. 162. suit of natural-stand conditions as in- fluenced by harvesting methods. The same is true of the regeneration of trees on cutover land. Thus marketing directly affects the future productivity of the forest. Because of this synthesis of man- agement and marketing, the impact of established marketing customs on the forest is important. Over a short-period, major imperfections in timber-marketing practices may favor one group or the other, but in the long run efficient markets work to the benefit of buyers and sellers and the economy as a whole. In this report timber marketing refers to the buying and selling of stumpage (the right to cut standing timber) or logs, with the emphasis on the exchange of these products between small forest owners and timber buyers. Sales involv- ing title to both land and timber are not included, although such sales are com- mon and often the timber is the major element in the transaction. This study is concerned with the market for the small owner who sells the product of the land, not with the market for the entire enter- prise. The term "timber market" is not used to mean a particular location where tim- ber is bought and sold; rather, it is an abstraction. Timber exchanges between owners and buyers are dispersed, sepa- rate events not easily compared. Hence the marketing of timber is different from the marketing of other products of the land. In the case of fruit, for example, two cooperatives or exchanges are located at Colfax and Placerville; they provide an organized market for fruit where many sales and purchases take place. The products are defined as to quantity and quality, and prices for dif- ferent fruits and grades are well known. Most of the sellers are specialized pro- ducers with knowledge of their product, [30 market requirements, and marketing methods. Terms of sale are well defined. Timber markets differ widely from this type of marketing. By its very nature, timber is fixed in place. Most sales are made at the stump, and products come from many scattered holdings. Small-forest owners usually are engaged in other activities for a livelihood. Timber is a variable commodity, not easily defined as to quality or quantity. Its value also depends partly on such factors as distance to processing plants and ease of logging. As a result there is no single market price generally appli- cable to every sale. The actual price often depends on the importance of a variety of factors, including the bar- gaining position of buyer and seller. And in timber sales, price alone is not an adequate measure of return to the seller. The way in which the timber is cut and the logging done affect values in the residual stand and land that are im- portant to the land owner. In the past, timber marketed by small- forest owners in the Central Sierra Nevada has largely been an unplanned "product of nature," the ownership of which often was incidental to the main objective of holding land. Because of this and other factors, small-woodland owners generally do not know much about timber and marketing. The cur- rent marketing pattern has developed in this scene and in response to an expand- ing industry. The extent to which this pattern provides equitable returns to woodland owners and the direct effect it has on the forest itself will partly deter- mine the extent to which timber is inten- tionally grown and the amount that can regularly be harvested. Research method To obtain information on timber mar- kets and marketing practices in the Central Sierra Nevada Region, detailed field interviews were conducted between July and November 1958 with a sample of 145 owners of small forest properties less than 5,000 acres in size. Mail ques- tionnaires were received from an addi- tional 15 land owners whose residence made personal contact impractical, for a total of 160 sample owners. Information was also received through informal dis- cussions with service foresters, consult- ing foresters, farm advisors and county officials, timber and mill operators, and other land owners not included in the sample. For each sample owner, data were col- lected on ownership and forest charac- teristics and on the sales of timber for the six-year period 1953-1958. Timber sales were discussed in detail with each of the 55 owners who had made a sale, except for four owners who were con- tacted by mail. Information on the fol- lowing was recorded on questionnaires: general sale characteristics, including year of sale, volumes and prices of products sold, point of sale, sales experi- ence, distance to sawmills, length of haul, and reason for making sale; mar- keting practices, including buyer selec- tion, method of finding buyer, price de- termination, knowledge of prices, con- tractual arrangements, method of pay- ment, product measurement, harvesting method, and marketing assistance; and seller attitudes. Owners who had not made sales were questioned about their contact with the market and their reasons for not marketing timber. Data were obtained for 68 separate timber sales made by the 55 owners, but YEAR OF SALE NUMBER OF SALES PER CENT 1953 13 19 1954 11 16 1955 13 19 1956 8 12 1957 10 15 1958 13 19 Totals 68 100 6 See appendix, page 56, for marketing sam- pling method and adequacy of sample size. [31] not all questions were answered in each case. Consequently, the number of sales used in the analysis varies with the sur- vey question. This is indicated where appropriate. Distribution of the sales over the study period was as shown in the table on page 31. Sales Characteristics Some general features of timber mar- keting on small forests include the extent of sales activity among owners, their experience in selling timber, products sold, reasons for selling, and location with respect to sawmill log markets. Sales activity in the region adjusts to changing market conditions for lum- ber chiefly through changes in timber- buying activities of mill and logging operators. During the period of study the level of production was comparatively high, with a decline in 1954 and a sharp fall in 1957 (figure 2, page 17). The number of timber operators increased rapidly to a peak in 1955, then dropped equally as fast up to 1958. Therefore owners faced fluctuating demands for timber at a comparatively high level, ex- cept in 1957 when production fell to its lowest level since 1949. The marketing activity of sample own- ers followed this pattern. As shown in the text table on page 31, a smaller propor- tion of sales were made in the recession years of 1954 and 1957. And of 160 owners interviewed, 55 — or about one- third — had sold timber. Types of owner selling. Most sales included in the study were made by own- ers with 130 acres or more, by nontimber interests, and by nonresident owners (table 9). Owners with less than 180 acres accounted for more than half the sample ownerships but for only about one-fourth the number of sales. Miscel- laneous interests accounted for two- thirds of the ownerships but for only two-fifths of the sales. As this suggests, sales activity varied with each group. The proportion of owners selling timber in- creased with increasingly larger owner- ship size; one-fifth of the owners with less than 180 acres sold timber, com- pared to nearly two-thirds of the owners with more than 700 acres. Activity by timber interests exceeded that of agricul- tural interests, who were in turn more active than miscellaneous interests. More than three-fourths of the owners whose major land interest was timber made sales, contrasted to one-fifth of the mis- cellaneous-interest group. Sales activity also varied with location of the owner, and was related to the types of owners that constituted each residence group. The least active sellers were non- residents living outside the region, a group which included mainly miscel- laneous interests. Less than one-third of these owners sold timber, compared to 45 per cent of the nonresidents living inside the region. The main reason for the greater sales activity of this latter group was that nearly one-fourth of the group were in the timber-holding individuals classification. Previous marketing experience and some familiarity with logging are important in developing timber-market- ing abilities. Through the experience of making regular timber sales the timber owner remains in contact with buyers and sources of information on market re- quirements and prices. He can also de- velop skills in product measurement, price determination, and administration of the sale. However, timber on most small-forest properties is only an occa- sional product, and not the main purpose of ownership. Usually sales are made at irregular, infrequent intervals; many owners, therefore, are slow in accumu- lating experience, and have no contact with the timber market for considerable periods of time. Among the owners studied who had sold timber, for ex- ample, only one-fifth had made more than one timber sale in the six-year period 1953 to 1958. One owner had sold timber annually. [32 Table 9. Distribution of timber sales A. By size of ownership Size of ownership Ownerships (number) Timber sales made Per cent of owners in (acres) Number Per cent each class selling timber 0- 179 95 40 25 160 19 20 29 68 28 30 42 100 19 180- 699 700-4,999 47 64 Totals B. By type of ownership Type of ownership Ownerships (number) Timber sales made Per cent of owners in Number Per cent each class selling timber Timber Agriculture Miscellaneous Totals 14 40 106 160 12 28 28 68 18 41 41 100 77 50 22 C. By residence Place of residence Ownerships (number) Timber sales made Per cent of owners in Number Per cent each class selling timber Resident, on the property 62 33 65 160 26 21 21 68 38 31 31 100 34 Nonresident, inside the region Nonresident, outside the region Totals 45 29 As the table below shows, more than one-third of the sales were made by own- ers with no previous sales experience. An additional one-fourth were made by owners with experience in one earlier sale. PREVIOUS NUMBER PER CENT SALES EXPERIENCE OF SALES OF SALES None 26 38 One previous sale 19 28 Two or more previous sales 23 34 Total 68 100 Logging experience was uncommon among sellers. Nearly three-fourths (72 per cent) of the sales were made by per- sons who neither had experience in nor were familiar with logging methods. Owners in one-tenth of the sales were familiar with logging but had no experi- ence with it. Logging experience usually accompanied sales experience. Of the sales made by owners without previous sales experience, only one-tenth were made by owners with some logging ex- perience. By contrast, in sales made by [33 owners with two or more previous sales, more than half of the sellers also had logging experience. This lack of timber-sale experience among small-forest owners often results from the fast rate at which these prop- erties change ownership. A study of own- ership changes in Mendocino County showed that two-thirds of the small own- ers had acquired their property between 1948 and 1953 (Casamajor, Teeguarden, and Zivnuska, 1960) . Evidence of similar changes in the Central Sierra Nevada Region was obtained in this study : it was found that 47 per cent of 147 sample owners had acquired their property in the eight-year period since 1950. These ownerships included 36 per cent of the land area and 25 per cent of the com- merical forest land in the sample. One- third of these owners had sold timber during the study period. Half of them lacked timber sale experience, whereas less than one-third of the owners who had held their property longer lacked such experience. Point of sale. Stumpage was the usual form of product in the sales. With few exceptions, owners were not in a position to harvest their own timber and transport it to a mill. Because harvests are infrequent and owner interests lie elsewhere, small-forest owners rarely have the type of equipment and the tech- nical skills to do their own logging. They usually have to sell timber on the stump. For much the same reasons, they may evaluate other uses of their equipment as more rewarding than logging, even if they own tractors and trucks large enough to handle heavy, large-size timber. Approximately 95 per cent of the 68 sales studied were made on the stump. There were no sales of logs on the road- side, and only 5 per cent of the sales (3 out of 68 sales) were made by owners handling their own logging and selling the logs at the mill. One of these owners was a timber operator engaged in the business of cutting timber; one was a farmer; and the third had the logging Logging in a mix-conifer forest. Small-forest owners in the Central Sierra Nevada Region generally sell stumpage and rely on logging operators to cut and remove their timber. [34 done by relatives who were in the logging business. These marketing and logging practices emphasize the important position of the buyer as an agent in the management of small-forest properties. Buyers, through their logging methods, exercise consider- able effect on forest stands. Sometimes they also advise owners on when to cut timber and which trees to remove. It is apparent, then, that both the marketing and the logging practices of timber buy- ers in the region have a major influence on the private, small-forest resources. Size of sales. Sales of small volumes were typical ; this characteristic of small- forest ownerships weighs heavily on the kind of marketing arrangements the owner can make. An indication of how small sale volumes may determine the owner's approach to timber marketing was illustrated by the comment of several owners who had turned down offers for their timber because "there just wasn't enough timber to bother messing with." Here is the distribution by size class of 47 small-forest timber sales: PER CENT OF SALES SIZE OF SALE MBd.ft. 100 or less 36 200-500 37 600-900 9 1,000 or more 18 Total 100 As can be seen, nearly three-quarters of the sales were of volumes of 500,000 board feet or less. Harvested volumes ranged from as little of 40,000 board feet up to 5 million board feet. The average volume sold was 570,000 board feet. However, even though most owners marketed small volumes, gross receipts from the timber sale were often compara- tively large. For some owners income from the timber sold amounted to a sub- stantial portion of total annual income. As table 10 indicates, over half of 38 sales for which both volume and price data were available brought in cash pay- ments of $2,000 or more. A third were Table 10. Distribution of small forest timber sales by total value of sale, Central Sierra Nevada Region, 1953-1958 Total value of sale Sales (dollars) Number Per cent Less than 999 1,000- 1,999 2,000- 2,999 3,000- 4,999 5,000- 9,999 10,000-14,999 15,000-19,999 20,000 or more Total 8 10 6 2 6 3 1 2 38 21 26 16 5 16 8 3 5 100 for total payments of $5,000 or more. These 38 sales averaged $6,749 per sale, and ranged from $150 to $83,430. This indicates that even though small sales are characteristic of small-forest properties, receipts are often sufficiently large to justify the seller in spending considerable time on timber marketing and possibly employing outside technical assistance. Proximity to sawmills. The dis- tance of 133 small-forest ownerships to the nearest mill is shown below : DISTANCE IN MILES TO NEAREST SAWMILL PER CENT 0-5 55 6-10 29 11-15 8 16-20 8 Total 100 Also shown is the distance of 130 small- forest ownerships to the second nearest sawmill: DISTANCE IN MILES TO SECOND-NEAREST SAWMILL 0-5 PER CENT 26 6-10 38 11-15 17 16-20 10 21 and more 9 Total 100 [35 These two tables show that 55 per cent of the properties for which data were obtained had at least one sawmill within five miles; more than four-fifths were located within 10 miles of a mill; and two-thirds were located within 10 miles of at least two sawmills. Such nearness to sawmill-log markets and easy accessibil- ity afforded by an established road sys- tem add to small-forest timber values. In many cases the forest owner or tim- ber buyer chose to bypass the nearest mill or mills to sell the logs elsewhere. The extent of this in the small-forest tim- ber market is given here for 56 small- forest timber sales : LOCATION OF MILL RECEIVING LOGS PER CENT Nearest mill 59 Second-nearest mill 18 Mill further away 23 Total 100 The 41 per cent of the sales in which logs were transported to mills beyond the nearest mill, totaled one-fourth of the volume sold. The distribution of 56 sales by length of haul is shown : LENGTH OF HAUL IN MILES PER CENT 0-5 27 6-10 27 11-15 9 16-20 20 21-25 3 26-30 5 31 and over 9 Total 100 Cross-hauling may result from mill- price differences, preference of the tim- ber buyer to deal with a particular mill, existing financial arrangements between the buyer and mill, or special require- ments of particular mills. Since forest owners are seldom directly concerned with the question of where logs are taken, cross-hauling results mainly from the de- cisions of timber buyers. Under certain conditions of market price and transfer costs, cross-hauling reflects inefficient [36 choice of markets. Its extra costs result in lower prices to forest owners or in smaller profits to timber buyers. Both may share the loss, but it is more likely that the forest owner, as the weaker bar- gaining agent of the two, would realize the larger loss. However, some degree of cross-hauling is probably unavoidable and reflects the existence of competition among buyers. Reasons for marketing timber. The factors motivating an owner to sell timber may influence his attitude toward the sale, and hence affect his marketing practices and arrangements. An owner who makes an unplanned sale simply be- cause of an opportunity to sell, for ex- ample, will tend to accept whatever price the buyer offers rather than establish price by inviting offers from several buyers. Here are the main reasons given for making sales in 67 small-forest timber sales : PRIMARY REASONS PER CENT FOR MAKING SALE OF SALES Opportunity to sell 23 Clear land for other uses 20 Timber mature 18 Addition to regular income 16 Needed cash for home expenditures 5 Improvement cutting 5 Regular periodic cut 3 High current prices 3 Emergency cash needs 1 Relieve tax burden Other reasons 6 Total 100 Taken together, financial considera- tions were the principal reasons owners gave for deciding to sell timber. Includ- ing opportunity to sell, desire for addi- tional income, need of cash for home expenditures, emergency cash need, and high prices, financial factors accounted for nearly half of all reasons given for marketing timber. None of the owners in- dicated the property tax on timber was a factor governing their decision to sell. Another fourth of the sales were Market organization. Buyers of prompted by silvicultural considerations stumpage and logs in the region include of the forest itself, pointing to a limited independent timber operators and opera- but still recognizable interest among tors of sawmills. Timber operators pur- owners in forest management, mainly as chased standing timber from land owners it concerns the cutting of the timber near and in turn sold logs to mill operators, stand maturity. One-fifth of the sales Some mill operators did not conduct log- cleared the land for other uses, indicating ging activities themselves but instead that some owners are choosing to substi- relied entirely on buying logs from in- tute other forms of land use for timber dependent loggers or contracting with growing. them for logging purchased stumpage The most frequently mentioned reason and hauling the logs to the mill. The for selling was that the owner had re- transporting of logs was often per- ceived an offer from a buyer. Hence, in formed, however, by an independent many sales the decision to sell was hauler who also operated under contract prompted largely by accidental oppor- with the mill owner. Some buyers con- tunity rather than by some previously ducted both mill and logging operations; determined factor. In some cases, owners often mill and independent timber oper- did not know their timber was merchant- ators worked together under verbal or able until an operator made an offer to written agreements whereby the logger buy it. Attitudes of a few owners were undertook to locate and purchase stump- represented by statements to the effect age and to deliver the logs to the mill, that they thought, "I might as well get while the mill owner scaled the logs and the money out of it while there is a paid both the land owner and logger for buyer around who wants it." Some own- delivered material. In some cases the mill ers were unaware of or simply uninter- advanced credit to the timber operator to ested in the possibilities of growing finance his operations. Other loggers timber as a cash crop. The high percent- were strictly independent operators, age of sales in response to an opportunity financing stumpage purchases themselves to sell also indicates that the marketing and selling logs at various mills depend- contacts of many owners are limited. ing on prices and the product. Although clearing forest land for alter- In selling timber, the owners in the native land uses was the second-highest study made 52 per cent of the sales to reason for cutting and selling timber, independent timber operators and 48 such sales did not actually result in the per cent to mill operators who either removal of all timber. Usually the buyer logged themselves or else contracted to cut all timber that could be removed at nave tne logging done by an independent a profit. Most of the sales were made by operator. Over half the sales made to mill ranchers who wanted to convert from operators were made to small mills pro- forest to grazing uses. In two instances, during from 1.0 to 9.9 million board feet forest land was being cleared for a high- annually; nearly two-fifths were to way right-of-way, while in another the — — owner was planning to establish a size class of per cent Christmas-tree plantation. Whatever the mill purchasing timber of sales underlying reason, the fact that one-fifth Million Bd. ft. of the sales in the study were made to Less than L0 _ 4 clear land suggests that withdrawal of 1Q Q _ 24 Q forest land from timber production is a More than 250*' 32 significant factor affecting the future status of the forest resource. Total 100 [37] medium and large size mills, principally the latter, producing 10.0 million feet or more. The distribution is shown on page 37 for 28 small-forest timber sales. To sum up, the timber market in the region is composed of relatively many forest owners, few buyers, and still fewer mills. Because of topography and other factors which naturally allocate produc- ing areas to particular plant locations, the region is actually divided into a series of timbersheds supporting from one to eight or more sawmills. Thus on the timber side of the market there are many primary producers and sellers, while on the log-buying side the number of buyers active in any given area is limited. Marketing practices The structure of timber market- ing on small forests in the Central Sierra Nevada Region must be described as dis- organized. A number of factors work against the establishment of common sales methods and meaningful, well- known market prices. Tracts of timber vary in value, depending on location, character, and ease of logging. Since standing timber is fixed in place, and most sales occur at the stump, market transactions take place at scattered loca- tions under dissimilar circumstances. Sellers are unspecialized producers whose varying attitudes and interests result in a wide range of sales practices. Products vary in both quantity and qual- ity, and are often measured by different methods. With so variable a commodity as standing timber, grading would serve a useful purpose: it would define prod- ucts on the basis of physical characteris- tics which determine their value in end uses. This would in turn help establish more accurate prices and reduce risks attached to present uncertainties. Yet, in sales between stumpage owners and tim- ber buyers logs are not graded, and quality is left to judgement when the sell- ing price is determined. Small-forest owners generally are not familiar with their product nor with marketing methods; they also lack con- stant, close contact with the market and with timber buyers. In many cases, lack of market contact, small volume, and the effect of transportation costs on defining market area make it difficult to attract more than one or two potential buyers at a particular time. As a consequence, timber is frequently sold after negoti- ating with only one buyer, who often treats the purchase as an isolated case with the objective of negotiating the sale for the lowest price, and who usually has a much clearer picture of current market 1 conditions and timber values than the seller. Although most sellers professed general knowledge of prices, the prices < they actually received varied widely, thus refuting the general usefulness of such information as "the going price." A In this situation the buyer assumes the dominant position in the market through initiating sales and conducting harvest- ing operations. The buyer-seller relation- ship is characterized by a striking degree of informality in arrangements. It is through the buyer, as a market agent, that the forces of supply and demand are transmitted to forest owners. The owner, as a seller, is commonly a passive mar- keting agent whose fortunes depend on the opportunities offered him by occa- sional contacts with a buyer. This situation often causes marketing problems for the owners of small forests. Many of these problems can be overcome by more informed marketing methods. The following analysis of alternative 4 marketing practices shows the basis for developing more effective marketing methods. The discussion emphasizes the marketing of stumpage, as this was the main form of product. The three sales of logs at the mill are omitted. Finding and selecting the buyer probably are the two most important pre- sale activities of small-forest owners. Be- cause of the manner in which timber is 38] sold, both are closely related and in many cases combined. How sellers found and selected a buyer was principally deter- mined by the extent and nature of their market contacts, their own efforts to make the sale, and a number of interper- sonal relationships. The passive role of owners in finding a buyer is indicated here: METHOD OF FINDING PER CENT THE BUYER OF SALES Buyer contacted seller 61 Previous business relationship 13 Seller contacted known buyer 10 Through third party 10 Seller inquired at local mills 3 Seller contacted buyer working nearby 3 Total 100 In nearly two-thirds of the 61 cases in- vestigated, the sale was initiated by the buyer. Rather than the owner seeking a buyer for his products, the buyer came to the owner with an offer to purchase timber. The second most frequently men- tioned method of finding a buyer was that the two principals were already known to each other through a previous or existing business relationship. In most such cases earlier sales had been made and the arrangement continued. Less than one-fifth of the sales were initiated by the seller, usually with a buyer already known. In a few cases the seller inquired at local mills or offered timber to a buyer operating nearby. The reason for selecting the buyer is given here for 62 stumpage sales : REASON FOR SELECTING PER CENT THE BUYER OF SALES Only buyer known 22 Best offer 20 Personal friendship 15 Previous business relationship 15 Good reputation 10 Buyer was working nearby 6 Relative 3 Buyer would pay seller's price 3 Other reasons 6 Total 100 Lack of market knowledge and its in- fluence on buyer selection was shown in one-fifth of the sales where the buyer selected was the only one known. This was true either literally or it meant that the buyer was the only one known who was interested in buying the timber. Per- sonal friendship and previous business relationships resulted in buyer selection in one-third of the sales. Here confidence in the buyer was often an important, im- plicit consideration. "Good reputation" was the chief reason for selecting the buyer in one-tenth of the sales. Actually most sellers dealt with no more than one buyer. In only one-fifth of the sales did sellers select a buyer on the basis of the highest price from two or more offers. Taken together, nonmonetary factors (only buyer known, personal friendship, previous business relationship, good reputation, buyer working nearby, and buyer being a relative) were the reasons given for selecting the buyer in 71 per cent of the sales. Evaluation of and reliance on factors other than price are highly important in timber marketing, a fact well recog- nized by successful timber sellers. The sale of standing timber is much more than a simple exchange of a commodity. The buyer enters the property of the seller and carries out the logging opera- tions. The effect of the logging on the residual stand and balance of the prop- erty, the protection of physical improve- ments such as roads and fences, and the accuracy of scaling procedures can have a great impact on the net benefits of the sale to the land owner. Selection of a competent, cooperative, and reliable buyer is thus of the greatest importance. This does not mean that selection of a buyer on such a basis necessarily means a lower price. Findings of this study in- dicate that the opposite is true: sales in which the buyer was selected on the basis of good reputation, personal relation- ship, and previous business relationship tended to have higher selling prices than 39] sales where the buyer was the only one known. Furthermore, prices were equally as high as in those cases where the buyer selected had made the highest of two or more offers. Although competitive bidding would presumably raise the purchase price, such bidding was completely absent as the basis for buyer selection during the period of the study. The reason for this seems to lie in the difficulty of attracting several buyers, the attitudes of owners toward marketing, or both. Effective use of competitive bidding requires careful advance preparation of the sale. Obtain- ing bids from several buyers requires ex- penditure of time and some money. In- formation on the size of the sale area and on the volume, species, and condition of the timber to be sold must be collected and bids invited through advertising or personal contact. Prospective bidders must be shown the sale area, and bids must be received. Provision for adequate supervision of the sale becomes of great importance, since the buyer is selected solely on price considerations. All these activities may be carried out by a con- suling forester if the owner himself is unable to handle them effectively. How- ever, advance preparation of the sale even to the extent of first ascertaining the volume to be sold is very uncommon, and relatively few owners obtain assistance in these matters about which they often know little. Evidently, the requirements of competitive bidding are greater than the time and effort owners are willing to devote to marketing. The practice of selecting the buyer on the basis of "best offer" in a fifth of the sales may be considered a partial substi- tute for competitive bidding. In several sales of this type, the seller invited selected buyers to tender offers, finally accepting the highest offer. The buyers asked to make offers were usually chosen on the basis of their reliability. Com- monly two offers were received, but in one case six buyers made offers. Just as [40 frequently, however, the owner had re- ceived a number of unsolicited offers to buy over a period of time. The last of these was considered a "high offer" and accepted. One shortcoming of this method is that changing market condi- tions may invalidate comparing one price offer with another. Methods of determining price as- sume especial importance in a market characterized by lack of competitive bidding, wide variations in the condi- tions of the sales, and no generally appli- cable market price. The passiveness of the sellers, their lack of price knowl- edge, and the dominant market position of timber buyers tend to result in the buyers' determining the price in most sales, as indicated : METHOD OF PER CENT DETERMINING PRICE OF SALES Single buyer's offer 51 Highest offer 20 Negotiated price 16 Seller's asking price 8 Highest bid — Other 5 Total 100 In more than half the sales, price was de- termined by the offer of a single buyer. The next most important method, highest offer, meant that the seller selected the buyer and established the sales price on the basis of two or more offers. In about a sixth of the sales, the seller and buyer reached an agreement on price after bar- gaining. The seller's general knowledge of tim- ber prices is clearly important in such methods of setting prices. Findings of the study indicate such knowledge is ap- parently widespread; in some five-sixths of the sales the owners claimed knowl- edge of current prices (text table page 41). Where the sale price was negoti- ated, all sellers had knowledge of price; in cases where price was the highest of two or more offers, nine-tenths possessed price information. Those sales where price was determined by a single buyer showed the largest proportion of sellers without knowledge of price; in one-third of such cases, sellers indicated they were not familiar with current prices being paid for standing timber. Presumably the price offered by the buyer in the re- maining two-thirds of the sales was ac- ceptable to the seller on the basis of his own knowledge of price. There is no price-reporting agency in the region which publishes at frequent, regular intervals the results of transac- tions between private owners and timber buyers. Markets for Woodland Products in California has been published at ap- proximately two-year intervals by the University of California Agricultural Extension Service and the California Division of Forestry, in cooperation with the California Small Woodland Council. These reports contain average prices and range of prices for second-growth stump- age, sawlogs and peeler logs delivered at the mill, and other products, for the dif- ferent species and counties. Included also are lists of buyers of woodland products in the counties. These reports are prepared primarily for the use of farm advisors, state service foresters, and other technicians advising and work- ing with woodland owners on the mar- keting of forest products and are dis- tributed to owners only on specific re- quest. Generally the owners did not ap- pear to be familiar with these reports. How price information was obtained by forest owners in 61 sales is shown here: SOURCE OF PRICE PER CENT INFORMATION OF SALES No presale knowledge of price 18 General knowledge — no specific source 31 Local buyers or mill 31 Friend or neighbor 8 Industrial association, Forest Service, and private stumpage sales 7 Forester 3 Other sources 1 Total 100 [41 In two-fifths of the sales in which the seller had knowledge of price, the source was nebulously described as "general knowledge" obtained informally through other individuals and hearsay. This in- formation was usually described as "the going rate," "market price," or "what others were getting." Local buyers and mills were the sources of price informa- tion in an additional two-fifths of the sales. Though there is an indication that a "market price" exists, as noted before, actual prices received in the sales studied varied widely. Thus it is apparent that "the going rate" market price is at best a very rough approximation of timber values at a particular time. For this rea- son, determining price on the basis of competitive bidding, best offer, or bar- gaining, is important in adjusting these approximations to reflect individual sale conditions. The influence of the region's largest single seller of timber, the U.S. Forest Service, was apparent in price determi- nation to a limited extent. Owners in four sales (7 per cent of all sales) stated that prices paid for national forest stumpage were considered in forming price. Usually this information was com- bined with prices from private sales in working out the final selling price. In one case the agreed price was the Forest Service's regional average. There were a few additional sellers who had knowl- edge of federal stumpage prices and who were troubled over difficulties in recon- ciling them with what buyers were willing to pay. Once the buyer has been chosen and the price agreed upon, the seller and buyers must come to an understanding on the physical and legal aspects of the transaction. The sale contract should play an important role in clearly defining the arrangements of the sale and in assuring a satisfactory transaction. Timber-sale contracts, however, have been strikingly characterized by in- formality. Here is a distribution of the written contracts, these aspects are type of contract for 63 sales: evidently casually regarded or over- TYPE 0F SALE PER CENT looked by most owners. Few sellers were contract of sales familiar with timber-sale contracts or Verbal agreement 46 sought legal counsel or professional for- Buyer's written contract 32 egt advice. Usually agreements in- Seller's written contract 13 ^ . method of Jointly written contract o J r r ' Other 3 ment ( himp sum or scale ) , and the timber to be cut (for example, "all mer- Total 100 chantable trees" or "all trees 20 inches . ,. - c -,. i i in diameter and larger."). Important According to these findings, verbal j • u i , r .. sale aspects not covered in such sale contracts were used as often as were writ- r . , , , , „ rp, n . i . agreements included the following: ten contracts. Ihe reasons sellers tend to ° rely on verbal arrangements and con- Definition of timber to be cut and utiliza- tracts provided by buyers include the tion standards -. r if Scaling method to be used, casual approach of many owners to Time ^ for removal of purchased timber marketing; the preference lor timber. keeping the sale on a friendly, informal Liability for taxes between time of pur- basis; and the cost of having a contract chase and time of cutting, prepared. Time at which title to the timber passes A timber-sale contract is an important from seller t0 buyer- feature of a Stumpage sale. As a legal Assignability of the contract 4. i_v i_ 4.1, • I,*, v Liability for loss in event of fire or other instrument, it establishes the rights, ha- ». * t ' ~ catastrophe, bihties, and performance requirements Responsibility for slash disposal, of buyer and seller, and thereby acts to protect the interests of both parties. Such Loose verbal arrangements or poorly a contract can also be a useful tool in written contracts may result in financial forest management, as specific provi- loss and dissatisfaction with timber sions can cover method of logging, lire buyers and timber growing. In about prevention, selection of trees to be cut, one-fifth of the sales in which the con- and slash disposal. The case for a written tract was verbal or written by the buyer, sales contract is well stated in the Cali- the seller didn't feel the buyer had com- fornia Pine Region Handbook (Craig plied with their agreement and was dis- and Maguire, 1949) written for timber- satisfied with the sale. Sellers who pro- land owners: "A written sales contract vided a written contract were generally is necessary to protect the land owner satisfied with buyer performance. This from the occasional unscrupulous buyer, points up the advantages to the seller of . . . Perhaps more important is its service defining his terms of sale and securing in removing the possibility of honest the buyer's formal agreement. Some of misunderstanding, for the contract is a the problems sellers complained about record of agreed-to conditions of sale." included the following : This study showed that seller dissatisfac- Buyer failed to provide scale tickets in sup- tion with the sale was greater when port of payments. verbal arrangements were made than Buyer did not cut all timber contracted for, when the agreement was written. leaving timber difficult to log. Verbal agreements cannot adequately Tir ? ber marked as leave trees was cut in . j p * i i i violation of the agreement. provide lor the important legal and r, t .-, , „ ,. , , . , . ! r • i i . Buyer failed to dispose of slash as agreed. physical aspects of timber marketing. Buyer failed t0 make road improvements Considering the wide use of verbal con- as agreed. tracts and the points omitted from many Buyer did not pay for all timber removed. [42] In general, however, owners felt the buyer has complied with their agreement and considered the logging to be either good or satisfactory. A small number of owners — including 12 per cent of the sales — were perturbed chiefly over what they considered to be excessive damage to the residual stand and to the land. Some complained of damage to fences, others of the buyers' failure to dispose of the slash as they had agreed. Some problems sellers encountered in selling their timber arose out of their failure to administer the sale after the agreement had been made. In 34 per cent of the sales, owners had not checked on the logging nor seen their property either during or after the sale. In 32 per cent of the sales owners had checked the sale area from one to five times during the period of logging, and in 34 per cent, more than five times. Method of payment for standing timber was based on determination of the volume in harvested logs (scaling) in over four-fifths of the sales. Usually this was done by the buyer, by the mill to which the buyer in turn sold the logs, or by both (table 11 ) . Few sellers partici- pated in these activities. Scaling is well established throughout the logging and marketing system. In sales of standing timber, scaling is pre- ferred because of the belief that it pro- vides a definite measurement of the amount of timber actually sold. Local mills purchase logs from timber opera- tors on the basis of scaled volume, frequently providing the landowner with copies of the scale tickets covering logs harvested from his property. Logging crews are also commonly paid on the basis of output as determined by scaled volumes. In selling standing timber by log scale, payment is based on a stumpage price per thousand board feet and the scale of the logs as they are removed from the property. The buyer may make payments weekly, biweekly, or monthly as the timber is removed, using scale tickets from the mill receiving the logs or his own statement of the scaled volume as evidence of the amounts taken. Although mills buying logs generally recognize differences in log quality (grade), 7 and pay accordingly, grading is not commonly practiced in the stump- age market. In all the sales studied, a single price was paid for all logs regard- less of quality differences. However, when this price is established recogni- tion is presumably given to the grade of logs which the property will yield. Pay- ments usually differed according to timber species, but sometimes the price was the same for all species. 7 Logs are sometimes purchased on a "woods- run" basis, i.e., a single price is paid for all logs of a given species. Table 11. Distribution of 63 small forest stumpage sales, by basis for payment, Central Sierra Nevada Region, 1953-1958 Basis for payment Per cent of sales Lumpsum No volume determination Buyer's estimate 5 5 Seller's cruise 5 Buyer's cruise 3 Subtotal 18 On scale Buyer's scale 38 Mill's scale 21 Buyer's and mill's scale Buyer's and seller's scale Buyer's, mill's, and seller's scale 18 2 2 Third party hired by buyer and seller 2 Subtotal 82 Total 100 [43] The scaled volume of the logs is the basis for payment in most timber sales. In small sales scaling is usually done by the buyer or the mill where the buyer sells the logs. Evidently the payment for timber on the basis of scaling has proved satisfac- tory to most sellers, but in only half the sales (53 per cent) did owners know how the logs were scaled. For some sellers scaling and payment on scale in- volved certain problems. Several com- plained that the buyer failed to support payments with scale tickets establishing the volume of timber cut and removed. A few others alleged that the buyer hauled logs to two different mills, but submitted only the scale tickets and pay- ment for logs taken to one. Payment on a scale basis also encourages the high- grading of stands and the leaving of marginal and low quality logs on the ground unless the sales specifications are carefully drawn in the contract and adequate supervision of the sale is pro- vided. However, none of the sellers com- plained of high-grading, and only one of the leaving of too much material on the ground. Participation by the seller in the scal- ing is desirable to protect his interests, but with limited volumes and intermittent operations there are practical limitations on what can be done. This, combined with lack of knowledge of scaling methods and the generally inactive role of owners in marketing timber, would appear to explain the fact that the owner was represented in the measurement in less than 6 per cent of the sales on a scaled volume basis. In the majority of sales both the method of measurement and the quantity sold were determined by the buyer. The Scribner log rule is in general use throughout the region. It is the official rule of the U.S. Forest Service, and was used in all the sales studied. Thus there were no problems in log measurement because of different log rules. However, the practices under which the rule is applied are important and can become a difficult problem. Most buyers of stumpage cut long logs to reduce costs of logging and transportation to the mills. These long logs of 20, 24, 32, and even 40 feet in length may be scaled either on a "long log" basis, with scaling as a single log based on the diameter of the [44] small end and with no allowance for taper, or on a "short log" basis, with scaling of two or three sections of the log and recognition of the effect of taper on the scaling diameters of these sections. Figure 8 shows that, for 32-foot logs, "long log" scaling will give volumes at least 5 per cent less than "short log" scaling, while for logs in the smaller range of top diameters such as are cut from younger timber the differences range from 10 to 15 per cent or more. Moreover, although log lengths provide a particularly striking example of the ef- fects of scaling procedures, they are only one of a number of variables in scaling practice which can have an appreciable effect on the total log scale reported. Such matters as maximum log length scaled, utilization standards, and defect allowances were rarely covered in sale agreements, generally following the cus- tomary practices of buyers. Half of the 53 per cent of sellers who knew how the logs were scaled said maximum log length scaled exceeded 16 feet. If the ef- fects of these practices are recognized, appropriate adjustments can be made in the price per thousand feet, but generally the sellers did not appear to realize the importance of scaling procedures to the actual price received. Lump-sum payments based on some type of estimate of the total volume of standing timber were found in less than one-fifth of the sales studied (table 11, page 43). In half of these lump sum sales the volume on which payment was based was determined by a cruise involv- ing the tallying of timber volumes on sample areas, while in the remaining half payment was based on rough ocular estimates or similiar approximations. Payment was normally made as cash in advance. In most such sales the volume of timber actually removed is uncertain. Lump-sum sales based on inadequate knowledge of timber volumes are ob- viously subject to abuse, and the method has sometimes been held to be unsound. However, a lump-sum sale based on a careful tally or cruise of the timber to be sold and subject to adequate contract provisions and supervision can be an effective method of selling timber. This is especially the case for small or inter- mittent sales in which the volume han- dled does not warrant the cost of super- 30 p 20 10 12 16 20 24 28 32 36 40 Log Diameter — Inches Fig. 8. Per cent of 32 foot log scale lost if log is scaled as a single log instead of as two 16-foot logs (taper 1" per 8'). 45 vision of scaling by the seller. Reasons for selling on a lump-sum basis that were noted in the study included lack of knowledge of alternative methods, the preference for cash in advance, and the wish to save the time required to super- vise scaling. One land owner felt scaling practices were so dishonest that it was financially more desirable to sell for a lump sum in advance on the cruised volume. Timber-cutting practices in the re- gion are broadly governed by the State Forest Practice Rules, which set up mini- mum acceptable practices for the pur- pose of keeping timber land in produc- tive condition. The northern part of the region, including most of Nevada County, comes under the North Sierra Pine Forest District rules (California Division of Forestry, 1954), while the southern area is in the South Sierra Pine Forest District (California Division of Forestry, 1954). The forest practice rules were developed by a committee of forest land owners and operators in each district following public hearings, and were given force of law by action of the California State Board of Forestry in 1947. The rules for the northern district were revised and strengthened in 1953, those for the southern district in 1954. Rules for the North Sierra Pine For- est District specify that all thrifty, im- mature ponderosa pine, sugar pine, Jef- frey pine, incense-cedar, white fir, Douglas-fir, red fir, and western white pine trees that are not at least 20 inches d.b.h. shall be left uncut in sawlog and veneer-log operations. If products other than these are being cut, a well-distrib- uted stand of sound and thrifty trees is to be left in accordance with one of sev- eral requirements given in the rules. Separate provisions apply to lodgepole pine stands. Rules for the South Sierra Pine Forest District establish different requirements for old-growth and young-growth tim- ber. In the case of old-growth areas, all sound immature trees 22 inches d.b.h. or less are to be reserved and left uncut for , future crops ; an average of not less than three satisfactorily located seed trees 18 inches d.b.h. or larger are to be left per acre. In addition, no area is to be more than one-eighth of a mile from seed source, unless it is adequately stocked. Provisions applying to areas of young- growth or prior-cut timber harvested for sawlogs or veneer logs state that all sound, immature trees of 18 inches d.b.h. 4 or less shall be left uncut. Seed-trees and seed-source requirements are the same as for old growth. If products other than sawlogs or veneer logs are cut, an adequately stocked stand is to be left. In addition, rules for both districts establish minimum logging practice standards, hazard-reduction practices, fire-prevention and fire-suppression prac- tices, and practices for protection against { forest insects and diseases. Under the customary marketing ar- rangements between buyers and sellers, details of cutting practices were not ordinarily defined in sale agreements, except in general terms. Therefore in most sales the forest practice rules con- stituted the only written provisions gov- 4 erning cutting practices that had legal stature. The rules seemed to be gen- erally well known by timberland owners, and many sellers relied on them as guides governing the buyer's harvesting of timber on the sale area, especially in such matters as minimum-cutting diameters * and slash disposal. To some extent, at least, it appears that the rules have been taken by many land owners as represent- ** BASIS FOR CUTTING PER CENT OF SALES J Diameter limit 62 Buyer's choice 12 All merchantable timber 12 Marked timber 10 ^ Clear cut required 2 Other 2 Total 100 | 46 ing good forest practices, rather than as minimum standards beyond which there may be better alternatives. The basis for cutting in 60 sales is given in the text table on page 46. About two-thirds of the sales were based on cutting diameter limit; in three- fourths of these sales, the diameter speci- fied was that established by the district forest practice rules, while in the remain- ing sales a larger minimum diameter was >■ set. "Buyer's choice" and "all merchant- able timber" were the basis for one- fourth of the sales, while timber was s marked for cutting according to manage- ment objectives or silvicultural needs in only one-tenth of the sales. Heavy cutting was the prevailing re- sult of harvesting arrangements, as can be seen from the following table : TYPE OF CUTTING PER CENT OF SALES Heavy partial cut (more than 40 per cent of volume) 50 Light partial cut (less than 40 per cent) 34 All merchantable trees 13 Clear cut 3 Total 100 > In two-thirds of the sales from 40 per cent to all the merchantable volume was removed. Although the reason for selling in a fifth of the sales was stated to be land clearing, a clear cut actually re- sulted in only 3 per cent. In the remain- ing cases, only currently merchantable timber was removed. The practice of heavy cutting appar- ently meets the preferences of both buyers and sellers. Timber operators favor heavy cutting so that fixed operat- ing costs can be spread over as large a volume as possible. This preference is often shared by timber owners who de- sire the maximum sale income, some- times regardless of the impact of heavy f cutting which reduces returns over longer periods of time. Many owners, unfamiliar with timber growing and sell- ing, are unaware that cutting alternatives other than those usually offered are pos sible and perhaps even more desirable Custom, as modified by the forest prac tice rules, is a strong factor in determin ing timber-cutting practices. Undoubt edly the rules have protected the interests of many timber owners who through lack of knowledge would be unable to devise and enforce cutting methods that would keep their land in a productive condition, but such reliance on the rules has some- times gone beyond the intent of the standards established. Technical assistance in forest man- agement and marketing is available to small-forest owners in the region from several public and private sources. Public sources include county farm ad- visors at Placerville, Auburn, and Grass Valley who provide, upon request, gen- eral information and advice for farmers and other rural land owners, and have various publications concerning forestry and timber marketing. Soil Conservation Service advisors are also available in the region for dealing with problems of soil classification and land use. On land best adapted to growing timber crops, the ad- visor can provide assistance and advice covering a variety of forest-management tasks. Throughout the period of study a California Division of Forestry service forester headquartered at Camino in El Dorado County was available to timber owners in the three counties, and since 1957 a second service forester with head- quarters in Sacramento has been as- signed to Placer and Nevada counties. The service forester provides on the ground advice or assistance concerning forest management, including timber marketing. This marketing assistance covers such matters as volume determi- nation, marking timber for cutting, find- ing and selecting a buyer, price informa- tion, contractual arrangements, and administering the sale. The function of the service forester is to develop the owner's interest in forest management, [47 advise and assist him in initiating man- agement practices, supply needed infor- mation, and to encourage him to follow good forest practice. The direct conduct of these activities is carried out by the owner, not by the service forester. Private consulting foresters may be retained on a fee basis, usually 5-15 per cent of gross sale receipts depending on services and size of sale, to handle forest management activities for the timber owner. Consultants offer a full range of technical services, including forest in- ventory, management planning, and sale administration. Many such consulting foresters have had wide experience in timber marketing and are highly quali- fied to carry out the entire sales opera- tion for the owner. The value of advice and assistance to the forest owner marketing timber was demonstrated in several sales studied. Yet owners in 67 per cent of the sales obtained no marketing assistance. The third of the owners who had technical assistance in making the sale received help from the following : private cruisers — 8 per cent; lawyers — 8 per cent; friends — 6 per cent; consulting foresters — 5 per cent; service forestry program — 3 per cent; others — 3 per cent. The kind of assistance owners re- ceived was established for a sample of 20 small-forest stumpage sales, and is shown here : KIND OF ASSISTANCE NUMBER PER CENT OF SALES OF SALES Volume determination 8 33 Price information or advice 4 17 Aid with contract 4 17 Deciding if cut should be made 3 13 Locating the buyer 2 8 Marking timber 2 8 Sale administration 1 4 Total 24* 100 * Totals more than 20 because of multiple answers. Why was assistance in marketing not sought to a greater extent? The most obvious explanation lies in the fact that in 51 per cent of the sales made without assistance the owner did not know such services were available. These sales in- cluded a third of those studied. Several of these owners stated they would have asked for assistance had they known it was available. Forty-nine per cent of the sales made without assistance were made by owners who knew such help could be obtained, but who had not requested it. In several instances such owners were bluntly skeptical that assistance would be of value to them while in others the most apparent reason seemed to be a lack of awareness that such services might be of value. To these several ex- planations may be added the reluctance of sellers to pay for such services (al- though the sale income was often large enough to justify such a cost) and a lack of interest in marketing timber. Variations in sales practices Attitudes and interests regarding for- est land vary according to type, size, and purpose of ownership. The marketing practices of particular groups are sum- marized here in terms of their differences from the general pattern of small-forest timber marketing. Emphasis is placed on type of ownership (see definitions, page 13) because this classification is easily recognizable and shows more pro- nounced variations in marketing prac- tices than groupings by size. Among types of owners. Timber interests as a special ownership group includes mainly individuals and compa- nies whose major interest in the land was holding timber for sale to others (no timber-operating companies were in- cluded in the study) . In several cases the land was used for other purposes as well, particularly grazing. This group was more active in marketing timber than other interest-groups but the proportion [48] Compared to the general pattern, timber interests more frequently: Provided their own written contract Knew the buyer Selected the buyer primarily on basis of price considerations Established price by accepting the high- est offer or asking for their own price Received outside technical assistance Made lump-sum sales Cut on basis of diameter limit Made heavy cuts Felt buyer had complied with the con- tract. of owners with previous experience in selling timber was no greater. Timber-interest owners tended to make more advantageous marketing ar- rangements than did other types. Their knowledge of timber and marketing methods distinguished their position in the market from other sellers. They gen- erally were familiar with existing mar- kets and potential buyers, and frequently relied on outside assistance in making timber sales. Associated with greater knowedge of the market was a tendency to rely more heavily on price considera- tions in selecting the buyer. As a result of these various factors, timber interests were usually able to conclude sales with which they were satisfied. Agricultural interests as a group in- cludes livestock ranchers and other, primarily fruit, farmers. Livestock ranchers held the largest proportion of land area in the group, nearly two-fifths of which was commercial forest land suited to growing timber. Generally this land is grazed along with the rest of the property. Timber is, of course, a second- ary enterprise, although an important one when a sale is made. Agricultural-interest owners sold tim- ber on the basis of more informal ar- rangements than was the general case. Verbal agreements, for example, were Compared to the general pattern, agri- cultural interests more frequently-. Sold on the basis of verbal agreement Knew the buyer Selected the buyer on basis of nonprice considerations Negotiated with the buyer on selling price Had previous sales experience Sold on scale Did not have outside assistance Cut all merchantable timber Were satisfied with the logging Felt buyer had complied with the agree- ment. more common. Personal factors figured prominently in market contacts and in the selection of buyers. A larger propor- tion of the owners had previous experi- ence in marketing timber than was true of other owners, and there was greater reliance on scaling in determining volumes sold. Greater informality in sell- ing timber was apparently related to the comparatively more intimate relation- ship agricultural interests had with the market and to some extent to lack of interest in timber activities. Half the sales made by the group were made with the intent of clearing the forest in favor of range-use purposes. In this general context of behavior and attitudes, the agricultural interests seemed highly satisfied with their timber sales; none expressed dissatisfaction with the logging or with the buyer's performance. Miscellaneous interests as a group in- cludes persons holding land for recrea- tion, residence, business, or for various other purposes that cannot be properly classified as timber or agricultural. Sev- eral mining interests with substantial timber holdings were included in this group. But in general these ownerships were very small, over four-fifths being less than 180 acres in size. Nearly two- thirds of the owners lived away from their property, and two-fifths outside the [49] Compared to the general pattern, mis- cellaneous interests more frequently: Sold on the basis of verbal arrange- ments Sold to a buyer who contacted them and initiated the sale Accepted the offer of a single buyer Did not have previous sales experience Sold with knowledge of price Made lump-sum sales Marked timber for cutting, and made light cuts Were dissatisfied with the logging Felt buyer hadn't complied with their agreement. region. Only a fifth of the group sold timber during the study period, and of these slightly more than half had pre- vious marketing experience. Because of the fairly diverse makeup of this group, marketing practices tended to consist of both desirable and undesir- able elements. For example, contact with the market was very limited and most sales were initiated by the buyer. Price was established by the offer of a single buyer twice as often as was true of tim- ber interests. However, a large propor- tion of the sellers had knowledge of cur- rent prices, and marking timber for cutting was more common. These two characteristics were due mainly to the presence of several larger properties which contained considerable timber holdings, and where interest in market- ing was evident. For the most part the owners were in an unfavorable position in the market, lacking the contact and knowledge required to make satisfactory sales. As a result, a larger proportion of sellers were unhappy with their sales than was the general case. Among resident and nonresident owners. Because of closer contact and greater familiarity with the market, resi- dent owners tended to sell timber under informal arrangements. Verbal agree- ments were common, and in a third of the sales the buyer was a personal friend. The latter practice may be related to the more frequent establishment of price based on a single buyer's offer. Nonresident owners tended to make more formal arrangements in marketing timber, probably because they were not as familiar with the market and because they are in a poorer position to super- vise the sale personally. Nonresident owners living inside the region had greater familiarity with the market than those living outside. However, the latter received assistance more frequently than others. These owners also lacked knowl- edge of current prices and often were un- happy with the results of their timber sales. A buyer's offer was the main factor prompting the sales made by nonresi- dents living outside the region. Compared to the general pattern, resi- dent owners more frequently: Made verbal agreements Knew the buyer Selected buyer on basis of personal friendship Accepted the offer of a single buyer Had knowledge of price Sold without outside assistance but knew it was available Sold on scale. Nonresident owners living in the region more frequently: Entered jointly written contracts or pro- vided their own Knew the buyer Made lump-sum sales Had previous marketing experience. Nonresident owners living outside the region more frequently-. Enter jointly written contracts or pro- vided their own Sold to a buyer who contacted them and initiated the sale Did not have knowledge of price Made lump-sum sales Received outside assistance Considered logging poor. [50] Purchasing procedures of timber buyers Several points on the buyer side of the market and timber-purchasing practices deserve further mention. Considering the manner in which small-forest timber is marketed, the func- tion of timber operators is clearly of major importance. Commonly the buyer seeks the seller rather than the reverse. Thus a chief function of timber buyers is the assembling of timber from numer- ous small holdings that might not other- wise reach the market. This means that the opportunities of forest owners to market timber are largely determined by the activity of timber buyers. In general, owners sit on the sidelines, passive parti- cipants in the events that finally bring their timber into the market. The activi- ties of buyers, in turn, respond to mar- ket-demand conditions for lumber and sawlogs, and their collective quest for timber expands and contracts as new buyers come, old ones drop out, and existing buyers expand or contract their purchases. Thus the sales activity on small forests is guided largely by enter- prising buyers rather than by direct ac- tions on the part of timber holders. Buyers' methods for locating available timber are determined by the character of the market. Since there is no organ- ized market through which to locate owners who have salable timber and who are willing to sell, the buyer essentially becomes a "prospector" searching out potential sellers through various "hit or miss" procedures. This was described by one mill operator and timber buyer as "an art in itself." Most commonly the buyer simply searches a given area for merchantable timber, identifies the owner or owners through local inquiry or examination of the tax rolls, and then makes an offer to buy the timber. Until the timber owner is contacted, the buyer has little way of knowing whether the owner is interested in selling. The suc- cess of the contact may hinge on the buyer's persuasiveness. Undoubtedly the efficiency of these activities depends on the buyer's general familiarity with the local timber-supply situation. Once a sale has been negotiated, the relationship thus established may con- tinue and result in subsequent sales. As has been noted, previous business rela- tionships accounted for one-sixth of the methods of finding the buyer. The buyer may also learn of an owner interested in selling timber through a mutual friend or neighbor. Once a sale in a particular locality is completed and the logging started, the operator frequently contacts the owners of adjacent or nearby forest properties with offers to purchase their timber "while he is operating in the area." In the same way, the owner may learn of the buyer in the neighborhood and make him an offer to sell. A few sellers gave this situation as both the reason for selling and for selecting the buyer. In these marketing activities the in- itial processors of sawlogs play a role not yet determined. With the measure- ment of products often being accom- plished by the mill, the effects of scaling practices of these processors bear on timber operators selling logs as well as on timberland owners. Also, mill opera- tors provide credit facilities to buyers who do not possess the capital required to buy stumpage, and through these ar- rangements may affect activities of tim- ber operators and influence buying poli- cies and practices. Prices and price-determining factors Price Levels and Trends. The aver- age prices paid forest owners over the period 1953 to 1958 for young-growth ponderosa pine stumpage are shown in table 12. Not included are data on old- growth sales, and sales of Douglas-fir, white fir, and incense-cedar, because too few data were obtained to permit pres- entation. In most, but not all, sales of 51 Table 12. Prices paid for private second-growth ponderosa pine stumpage, Central Sierra Nevada Region, 1953-1958 Year Number of sales Range in price Average price 6 4 Per MBM 1953 1954 $ 3-16 7-10 $10.00 8.00 1955 6 6-18 12.70 1956 4 8-14 13.40 1957 4 10-11 10.50 1958 8 10-22 12.50 stumpage these four species were differ- entiated for purposes of payment. Although average prices over the period have moved in the range of $8 to $13, for five of the six years they moved in the narrower range of $10 to $13. In four of the six years they averaged above $10. A moderate upward trend in aver- age price is evident, with upward and downward movements generally follow- ing movements in output (figure 2, page 17). The variability in stumpage prices, as indicated by the range of prices, is strik- ing; it is especially pronounced in 1953 when the highest price reported was five times the lowest. With reported prices varying so widely average prices, or "the going rate," become of doubtful mean- ing. Marketing practices affecting price. The price received by the owner of timberland is the result not only of the interaction of supply and demand but also of a whole complex of other factors. Often the price is related to the efficiency of the marketing practices used. The fol- lowing four case examples may help point out some of the factors that deter- mine prices. Case examples on pricing. The four sales, all of young-growth ponderosa pine, were made in 1953 on the basis of scaled volume, and stipulated that the timber be cut immediately; one or two sawmills were located at about the same distance from each of the four proper- ties. Despite these similarities the prices received from the sales varied greatly — $3, $4, $16, and $20 per thousand board feet. The seller receiving the lowest price was a rancher with 1,800 acres of land, 120 acres of which was medium-stocked pine forest. The ranch was located in the upper foothills on moderately sloping ground. Against the advice of a forester, the rancher wished to clear the timber from the 120 acres and convert it to grass, believing this would be the land's most economical use. He sold to a buyer who had contacted him and who was the only buyer available. The price was that offered by the buyer, who made a verbal agreement to clearcut the sale area. Tb price paid was of secondary interest i the land owner, whose chief objective was to clear the ground. Later, the opera- tor quit logging, and the owner agreed with a second buyer to exchange the timber for having the ground cleared. The recipient of the second-lowest price was a widowed housewife who owned 66 acres of lightly stocked pine forest on moderately sloping ground in the upper foothills. She was contacted by the buyer, who offered to purchase the timber and who was the only buyer known to her. Opportunity and the in- tent to "get the money out of it" were the primary reasons for selling. The price was that offered by the buyer, and the terms of sale were agreed to verbally; they included a promise by the buyer to "fix up the roads" and to pile and burn the slash. The seller had some knowledge of prices through a friend, who pro- fessed information on "what others were getting." The owner did not have any assistance in making the sale, nor did she know that assistance was available. Cut- ting was based on a 22-inch diamete limit. In the end the buyer neither di [52 the road work which had been agreed upon and which was considered in the price, nor did he dispose of the slash, and the seller was unhappy about the outcome of the sale. Strikingly different was the third case in which the owner received a price of $16. Here again the owner was a widowed housewife. The property in- cluded 100 acres of lightly stocked young-growth timber on moderately sloping ground, and some years before had been certified as a Western Pine Tree Farm although the owner con- sidered it primarily a recreational prop- erty. Since the property was to be sold, the owner wished to cut the timber as she believed this would not decrease the sale value of the property. An offer was re- ceived from a mill operator who had heard the timber was to be sold. While lis offer was being considered, a for- ster advised the owner to consider the proposed contract carefully since it would allow all trees over 18 inches d.b.h. to be cut. Later the owner was con- tacted by a second buyer, who learned of the potential sale through information provided by the forester. The second buyer offered the same price, agreed to cut only marked trees, and to use mules to remove the logs. Marking was done by a friend, also a forester. Under a written contract provided by the buyer, over 600,000 board feet were cut on the basis of an improvement marking, and the seller was very pleased with the sale. The highest price of $20 was received by a timber-holding individual who had just sold a sawmill business, and who at the time managed a small business and farm. The property was 710 acres of heavily stocked timber on steep ground. In selling, the owner's purposes was to harvest timber he considered ready for cutting. Two known buyers who were considered reliable were contacted and asked to make offers. There was no com- petitive bidding, but each knew the other vas making an offer, and the seller finally selected the buyer making the highest offer. Cutting was done on the basis of the diameter limit established by the district forest practice rules under a contract drawn up by the seller's at- torney. These four sales, in which the prices received varied considerably, illustrate the numerous factors that may influence price formation. These four case his- tories show the effects of varying inter- est in timber marketing, some of the alternative methods available to the owner, and the possibility of increasing income from timber through better mar- keting. They demonstrate that good marketing requires a whole set of prac- tices and procedures. The following analysis of the relationship between single marketing practices and price should be considered within this broader framework of the entire marketing pat- tern. Factors Affecting Price. Certain marketing practices and factors were found to be associated with higher prices: taken together, they suggest a pattern of efficient marketing that would tend to increase sale income. The factors shown in table 14 are only those in which price differences were found to be statis- tically significant. In interpreting the ta- ble it should be kept in mind that price is the result of many related factors ; it was not possible to "net out" the effects of other factors on the price associated with a single factor. The pattern of efficient marketing en- tails market knowledge of both buyers and price, technical assistance, use of written contracts, and inspection of the sale. Knowledge of the buyer where he was selected on the basis of personal friendship, previous business relation- ship, or good reputation was associated with higher average price than instances in which the buyer was the only one known. Obviously price factors must be important in these cases, although owners gave nonmonetary reasons for [53 Table 13. Price-determining factors in sales of ponderosa pine second- growth stumpage, Central Sierra Nevada Region, 1953-1958 Price determining factor or practice Number of sales Average price MBM* Reasons for selecting the buyer Personal or business relationship, and good reputation Only buyer known . 13 10 $ 11.90 7.70 Method of determining price Highest offer, seller's asking price, negotiated price Single buyer's offer 14 17 $ 12.80 8.30 Seller's knowledge of price Had knowledge 24 8 $ 10.80 No knowledge 9.00 Type of contract Written 18 15 $ 11.40 Verbal 9.10 Outside assistance Yes 9 27 $ 13.80 No 9.70 Sale inspection Yes 22 10 $ 11.20 No 8.40 Basis for cutting Diameter limit 17 10 $ 10.20 Buyer's choice or all merchantable trees 8.60 * Prices significantly different at 5 per cent level. selecting the buyer. These findings show that in selecting the buyer it is not wise to sell to the only buyer known. Simi- larly, accepting the offer of a single buyer resulted in a lower price than when the price was determined by other methods. Several factors associated with higher prices were probably related to the seller's interest in the sale rather than being price determining in themselves. Owners agreeing to verbal contracts may be less interested in the sale and there- fore inclined to use inefficient methods of marketing. This would also tend to be true in eases where the seller had not bothered to check on the logging, and in instances where the basis for cutting was the buyer's choice or included all mer- chantable trees. A number of factors usually thought to be related to prices did not show signifi- cant differences. The amount of timber sold, length of log haul, type of cutting, and experience of the seller were not sig- nificantly related to the price received. Why small-forest owners don't sell Two -thirds of the owners in the survey had not made any sales of timber during the period of study. Four-fifths of these were miscellaneous-interest owners, and two-thirds were such owners holding less than 180 acres. Thus those who had not 54] made sales were mainly very small, non- timber and nonagricultural owners, whose chief purposes in holding land included residential, recreational, min- ing, or business uses. About three-fifths of the owners indicated they had salable timber on their land. These were ques- tioned about their opportunity or efforts to market timber and about their rea- sons for not selling. Primarily because of the initiative of buyers, the majority of the owners had at least one opportunity to sell their tim- ber. Nearly two-thirds had been sought out by a buyer who had made an offer, and half of these had received two or more offers. Only two of the owners had made an independent effort to locate a buyer. These findings show that the majority of owners chose not to sell timber rather than lacked a chance to do so. The vari- ous reasons for withholding timber from sale are listed below for 53 small-forest ownerships. ATTITUDE TOWARD PER CENT TIMBER SALES OF OWNERS Believes cutting would conflict with other land uses 47 Management plans call for deferral of cutting 22 Salable volume too small to bother with 15 Holding for own use 4 Prices too low 2 Logging practice standards too low 2 Other 8 Total 100 In nearly half the cases the owner's attitude was that cutting timber would conflict with other land uses of greater value. This feeling was also widely held by owners who had not beeen contacted by buyers. Characteristically, their own- ership interests were residential or recre- ational. A basic attitude of owners was that cutting would result in damage and debris. For some the esthetic value of the trees on their property was greater than the return from their sale. One-fifth of the owners indicated they were holding timber for cutting later, primarily be- cause the timber was not considered ready to be harvested. In a few cases, however, the timber was held as "a bank account" in case of cash needs in the future. The third most frequently given rea- son for holding timber from sale was the belief that the amount that could be sold and the return from it would not justify either the effort required or the damage that would result. Some typical responses were "not enough to trouble with," "not enough to warrant tearing up the ground for," and "too much trouble to be worth it." Implicit in these responses, however, is the probability that the owners would have sold had there been a larger amount of timber available. These findings indicate that about half the nonsale owners with salable timber had in effect withdrawn their timber land from commercial timber production. If the belief is as widely held among own- ers who did not have salable timber, as is probably the case, then approximately one-third of all sample owners were not interested in forestry possibilities, pri- marily because such use was believed to be incompatible with other land values. [55] APPENDIX i Ownership Inventory Procedure The ownership survey made in 1957 used the line-intercept technique developed by Hasel and Poli (1949) and used by the California Forest and Range Experiment Station in its Forest Survey. The study area was sampled by superimposing a grid of parallel north-south lines on ownership plats in the offices of county assessors. A 2.2-mile spacing between intercepts was used in the western half of the area where a broken pattern of small private ownerships prevailed, and a. 3.3-mile spacing in the national forest areas of the eastern half. Each ownership touched by an intercept line was identified as to the name of the owner, address, size of ownership, and type of ownership. The total number of private ownerships was estimated from this sample by the use of expansion factors based on the probability of an ownership of a certain size being touched by the line intercept. Where 2.2-mile spacing was used, all properties 1,600 acres and larger were theoretically included in the sample, as properties this size could not escape being touched; where 3.3-mile spacing was applied, all properties 2,600 acres and larger were theoretically included. In 1952 the California Forest and Range Experiment Station delineated and classified land and cover types in Eldorado, Placer, and Nevada counties along the same intercept lines used in the 1957 ownership survey. Areas of these types were estimated by intercept measurements along each of the sample lines. The ratio of total line length to total area provided the factor to convert line segments in inches to area in acres. These data were contained in punch cards when the present study was undertaken, and with the cooperation of the Experiment Station, ownership survey data collected by the School of Forestry were combined with land and cover information for sample lines within the boundaries of the region. Each line segment delineated and classified by the Station was identified as to its ownership. Then the estimate of areas in the various ownership classes was obtained by summing with card-tabulating equipment the area of each land type identified with an ownership class. In effect, the proportion of line length through an ownership class to the total area was taken as an estimate of the area in the class. A comparison of the sample with the estimated population is provided, as follows : Number of ownerships 885 Land area 567,706 ESTIMATED TOTAL 6,080 908,121 PER CENT SAMPLE 14.6 62.5 Marketing Sampling Method In the ownership study each owner whose property was touched by a line inter- cept was designated as being either a commercial or noncommercial forest-land owner. On the basis of this sample, it was estimated that there were 5,023 private commercial forest-land owners with less than 5,000 acres. Financial and time considerations indicated that about 200 of these owners could be interviewed. The population was divided into strata on the basis of size of holdings, and a stratified random sample of 200 owners was drawn from an owner address list, with the num- ber of sample owners in each size class being determined as follows : Number of sample owners in size class 200 x per cent of estimated population in size class 200 x per cent of estimated total land area in size class [56] This method gave equal weight to the proportion of owners and the proportion of area in each size class. If weighting had been by proportion of owners alone, there would have been little representation of the larger holdings under 5,000 acres, since half of the sample would have been drawn from owners with less than 40 acres. Weighting by proportion of area would have drawn only 5.5 per cent of the sample from holdings under 40 acres, a class which included one-half of the popula- tion. Because of difficulties in locating owners and other delays, the final sample con- sisted of 160 owners instead of the 200 originally planned. These owners were dis- tributed among the size classes approximately as in the planned sample. Adequacy of Sample Size Marketing schedules were obtained on 65 stumpage sales. The adequacy of these questionnaires for purposes of providing reliable marketing information was tested with The Cumulative Frequency Method (Brown, 1955). This was done by selecting two high frequency answers and two low frequency answers, dividing the question- naires into three groups of 16 and one group of 17 questionnaires, and tabulating the 80 70 60 50 40 30 20 10 Felt buyer complied with sales agreement Seller contacted by buyer (Method of finding buyer) Price determined by highest offer Only buyer known 10 20 30 40 50 Cumulative Number of Questionnaires 60 70 Fig. 9. Chart of cumulative frequencies used in testing marketing sample for statistical reliability. 57 occurrence of each answer in each of the four groups. The reliability of the sample is measured by the stability of the percentage of occurrence as it accumulates with the addition of each group, and is shown graphically on page 57 for the four test questions. Additional schedules did not change the cumulative frequency of occur- rence of high frequency questions appreciably after 32 questionnaires were tabu- lated. Low frequency answers show less stability, but the sample of 66 questionnaires is sufficient to provide reasonably reliable statistical information. Appendix Table 1. Persons gainfully employed, total Nevada, and Placer counties, 1930, 1940, and for El Dorado, 1950 1930 1940 1950 Number Per cent Number Per cent Number Per cent Basic Industries Agriculture 4,892 457 2,008 405 134 242 2,516 26 3 11 2 1 1 14 3,211 130 4,139 1,105 170 117 498 16 1 20 5 1 1 2 46 14 16 7 12 1 3 3,441 180 1,141 2,119 178 165 754 13 Forestry and fisheries Mining Manufacturing Lumber, wood products, and furniture 1 4 8 Food processing 1 Printing and publishing . . . All other manufactures . . . 1 3 Subtotal 10,654 1,819 2,424 302 2,458 221 238 58 10 13 2 13 1 1 9,370 2,853 3,292 1,349 2,438 299 653 7,978 4,583 5,479 1,867 3,985 559 1,492 31 Service Industries Wholesale, retail trade Business, personal, pro- fessional 18 20 Construction Transporation, utilities Finance, insurance, real estate Public administration Other services 7 15 2 6 Subtotal 7,462 394 18,510 43,389 40 2 100 10,884 301 20,555 60,620 53 1 100 17,965 386 26,329 77,744 68 Industries not reported Total employed 1 100 Total population Source: U. S. Department of Commerce, Population Census, 1930, 1940, 1950. [58 Appendix Table 2. Commodity production of forest products in the Central Sierra Nevada Region, 1947-1957 Year Number of registrants Total commodity production Sawlogs and veneer logs Pulpwood Split products Piling and poles million bd. ft. million bd. ft. million bd. ft. thousand bd. ft. thousand pieces 1947 348.8 347.9 8 1948 148 325.7 325.5 30 1949 121 280.3 280.0 1950 143 388.3 386.8 14 1951 185 188 474.5 461.2 452.6 451.3 17.1 9.5 2,212 24 25 1952 3 1953 259 312 475.1 393.3 467.3 384.2 6.2 4.1 694 92 9 1954 48 1955 336 453.4 446.9 3.6 352 22 1956 316 444.5 437.1 1.0 137 48 1957 276 306.8 301.6 2.1 10 20 1958 217 Based on reports of timber operators at time of registration as compiled by the California Division of Forestry. Appendix Table 3. Lumber production by species, Central Sierra Nevada Region, 1 946, 1 95 1 , and 1 956 Year Ponderosa pine Sugar pine True firs* Douglas fir Cedar Other species f Total Thousand board feet 1946 1951 1956 183,516 155,848 134,886 35,281 37,920 39,031 55,019 92,058 124,248 38,115 52,098 63,061 14,808 6,146 11,049 20 2,046 3,824 326,759 346,116 376,099 * White fir and California red fir. t Lodgepole, digger, and western white pines; alder, black and white oaks, walnut, cottonwood, eucalyptus, and Philippine mahogany (imported). Sources: May, R., et al. California Forest & Range Experiment Station Forest Research Note No. 55, Table 5 ; Forest Survey Release No. 17, Table 5; Forest Survey Release No. 30. Table 6. [59 o Q. c s o K "ft °> > a s a> £Z 3 8 C Q w — .S- o x £ 2 c o o i* o S2 o c E o Z © -q s c a. a < 0) ®^ cq cx) * t» • oi ifl • cN CN CN * CO o fe CO |3 CD u 1 . 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Commercial forest land by type of ownership and by timber type, 1957, Central Sierra Nevada Region Type of ownership Federalf State County and municipal Utilities Timber-operating company Timber-holding company Timber-operating individual Timber- holding individual Range-livestock-farming company Range-livestock-farming individual Other farmers Recreational property owners Other classified owners All ownerships Total Thousand acres 583 5 11 32 152 58 3 124 95 15 15 155 1,248 Per cent 46.8 0.4 0.9 2.6 12.2 4.6 0.2 9.9 7.6 1.2 1.2 12.4 100.0 Pine 109 * 8 6 26 5 1 48 76 12 7 111 409 Timber type Fir Pine; Douglas fir; fir Thousand acres Lodgepole pine 50 404 5 1 2 4 22 7 119 9 38 2 2 68 1 15 3 2 4 * 44 76 726 20 37 * Less than 500 acres. t Principally national forest. Sources: Timber type areas from unpublished 1952 vegetation survey by California Forest & Range Experi- ment Station ; ownership areas from 1957 survey by the School of Forestry. Appendix Table 12. Privately owned commercial forest land by size of ownership and timber type, Central Sierra Nevada Region, 1957 Size of ownership — acres 1- 179 . . 180- 379 . . 380- 699 . . 700- 1,299 . . 1,300- 2,599. . 2,600- 4,999 . . 5,000- 9,999 . . 10,000-19,999. . 20,000-29,999 . . 30,000-49,999 . . 50,000 and over. All ownerships 617 Total acreage Thousand acres 135 68 81 48 43 42 8 26 40 126 Per cent 21.9 11.0 13.1 7.8 7.0 6.8 1.3 4.2 6.5 20.4 100.0 Pine 100 51 51 27 14 13 3 9 8 10 286 Timber type Fir Pine; Douglas fir; fir Thousand acres Lodgepole pine 2 32 * 17 1 26 2 19 1 25 2 25 * 5 15 3 29 10 100 21 293 17 * Less than 500 acres. Sources: Timber type areas from unpublished 1952 vegetation survey by California Forest & Range Experi- ment Station ; ownership areas from 1957 survey by the School of Forestry. -« bog ■o C 8 i§ o-g > 0) o 4- 8 >s£: -° .£ ■8 In c — .2 s 4_ 4- o o s ^ E 1 U 4- • M- CO o » s .S 8 "8 C O a a < t- * CO h h d Id rH O M lO H N 00 rH CO to N 00 M ^ w 10 CO W W lO lO 05 H H lO ■3 CD -i_> fa w c3 a, o "3 S .2 a a o 3 U Ph a o a 1 1 5-1 M CD CD Xi Xi § § s 1 IS bo ^ .a » ts.s a, o O ^! a> CD Xi Xi 1 i Eh H o o o « >> CD > > E I I «*-! ® ® Jh bo bo £ 5 S .3 tf P4 O A CD to I °° I ^ 13 a £ •£3 r3 CD P3 O [68] JQ c u & C o s wi .o 8 I — &. S »- .- O — H © u c o o £ > g CL » • o <* TO ■- O J£ 15 o c o a a < w^a 5||| Is lO ^ (O N CO CO ^IOOOWM^NiHH rtO00MN^T)(0505 HMntfl>HTliHC)^ Tj< rH IO t-1 Tj< t- TJ1 T* rl rl W tN iH rH t-* t»* CO tA t# CO IQOOiHOOCOCNOOCO co co oo ■* ■«# Tji cn HCO r 1 (N W O O •l-H CO o fee 81 [69 Appendix Table 15. Distribution of 160 sample owners A. By size of ownership Size of ownership Ownerships Total land area Commercial forest land acres 0- 39 number 43 52 19 21 14 8 3 160 acres 692 5,174 5,061 10,402 12,093 14,053 9,635 acres 373 40- 179 2,710 180- 379 2,248 380- 699 4,106 700-1,299 6,050 1,300-2,599 6,275 2,600-4,999 7,156 Totals 57,110 28,918 B. By type of ownership C. By residence Type of ownership Ownerships Total land area Commercial forest land Timber-holding company number 2 1 11 31 9 9 97 160 acres 1,458 10 9,435 25,926 2,681 1,671 15,929 acres 1,458 Timber-operating individual 10 Timber-holding individual 7,456 Range-livestock-farming company Range-livestock-farming individual Other farmers 9,793 952 Recreational property owners 854 Other classified owners 8,395 Totals 57,110 28,918 Place of residence Ownerships Total land area Commercial forest land On the property number 62 33 65 160 acres 15,876 17,362 23,872 acres 4,933 10,617 13,368 Nonresident, inside region Nonresident, outside region Totals 57,110 28,918 70] Appendix Table 15 (continued) D. By date of acquisition Date of acquisition Ownerships Total land area Commercial forest land Number Per cent Acres Per cent Acres Per cent Since 1950 70 20 57 47.6 13.6 38.8 20,194 7,437 27,452 36.4 12.7 50.9 7,323 3,861 17,334 25.7 1945 to 1949 13.5 Before 1945 60.8 Totals * 147 100.0 55,083 100.0 28,518 100.0 * Excludes 13 ownerships for which data were not obtained. ACKNOWLEDGMENTS This report was prepared as part of a three-year study conducted under a Western Regional Marketing Project (WM-31) . In the collection and analysis of a large amount of information, the study was aided by many individuals and agencies. Specifically, the authors wish to acknowledge the valuable assistance of: The Division of Forest Economics, Pacific Southwest (formerly California) Forest and Range Experiment Station, for use of vegetation data from the 1952 Forest Survey; County Assessors Thomas J. Swigart, Jr. (El Dorado), Lloyd Geraldson (Placer), and Charles R. Kitts (Nevada), for providing tax-roll information and assisting in the classification of some 1,100 individual properties, which provided the basis for the analysis of private-land ownership; Richard H. May, Pacific Southwest Forest and Range Experiment Station, for making available unpublished data on the forest industries and giving freely of his time in consultation; Vaughn Manley, for collecting basic ownership information from the county tax rolls; The forest owners, for providing information on timber marketing. [71] LITERATURE CITED Brown, Lyndon 0. 1955. Marketing and distribution research. Ronald Press Company, New York. Third edition. 561 pp. Burks, George F., Henry J. Vaux, Richard H. May, A. Simontacchi 1948. Commodity production from commercial forest land in California. California Forest and Range Experiment Station, Berkeley, California. Forest Survey Release 6:1-38. California Chamber of Commerce 1958. Economic survey of California and its counties. California Blue Book. 1,136 pp. California Division of Forestry 1953. Forest practice rules for North Sierra Pine Forest District. Revised 1953. California State Printing office. 37 pp. 1954. Forest practice rules for South Sierra Pine Forest District. Revised 1954. California State Printing office. 34 pp. California Forest and Range Experiment Station 1954. Forest statistics for California. California Forest and Range Experiment Station. Berke- ley, California. Forest Survey Release 25:1-66. Casamajor, Paul, Dennis E. Teeguarden and John A. Zivnuska 1960. Timber marketing and land ownership in Mendocino County. University of California, Berkeley, California. Agricultural Experiment Station Bulletin 772:1-56. Craig, George, and William P. Maguire 1949. The California Pine Region Forest Handbook. California Division of Forestry. California State Printing Office. 193 pp. Duerr, William A. 1949. The economic problems of forestry in the Appalachian Region. Harvard University Press, Cambridge, Mass. 317 pp. Hasel, A. A., and Adon Poli 1949. A new approach to forest ownership surveys. Land Economics 25:1-10. James, Lee M., William P. Hoffman and Monty A. Payne 1951. Private forest landownership and management in Central Mississippi. Mississippi State College Agricultural Experiment Station, Technical Bulletin 33:1-38. May, Richard H. 1952. Lumber production in California and Nevada — 1951. California Forest and Range Ex- periment Station, Berkeley, California. Forest Survey Release 17:1-14. May, Richard H. 1953. A century of lumber production in California and Nevada. Calfornia Forest and Range Experiment Station, Berkeley, California. Forest Survey Release 20 : 1-33. May, Richard H., and Harold L. Baker 1957. Lumber production in California — 1956. California Forest and Range Experiment Sta- tion, Berkeley, California. Forest Survey Release 30:1-15. 1958. Output of timber products in California, 1956. California Forest and Range Experiment Station, Berkeley, California. Forest Survey Release 35:1-35. May, Richard H., and Alexander Simontacchi 1947. Production of lumber and other sawed products in California and Nevada, 1946. Califor- nia Forest and Range Experiment Station, Berkeley, California. Forest Research Note 55:1-8. Standford, E. R. 1924. A short history of California lumbering. Unpublished Thesis. University of California, Berkeley, California. 140 pp. U. S. Forest Service 1958. Timber resources for America's future. U. S. Government Printing Office. Washington, D.C. Forest Resource Report 14:1-713. Yoho, James G., and Lee M. James 1958. Influence of some public assistance programs on forest landowners in Northern Michi- gan. Land Economics 34:357-364. 7Jm-10,'60(A8605)JF