324 JOURNAL OF FORESTRY 



use of the most economical system and the one which will allow the 

 maximum timber values for a logical assemblage of land. Such a 

 period of operation- is worked out as will secure low fixed charges, 

 a low rate of amortization of the initial investment in plant and trans- 

 portation, but one which will not overtax the capacity of the logging 

 system to supply the mill with timber. The cost of plants and the 

 transportation system are carefully computed. The elements of cost 

 of manufacture are determined in great detail and with as much 

 exactness as possible. These, together with the overhead charges 

 embracing amortization, salaries, and office expenses, interest and 

 other carrying charges, determine the cost of the production, less 

 profit and stumpage. 



It is necessary for the appraisers to keep in touch with labor prices, 

 with the cost of equipment, supplies, freight rates, and markets, as 

 well as with the fluctuation and prices of lumber, and with trade con- 

 ditions. Violent upward trends of prices and temporary prices of 

 special grades and products, especially those of local markets, are neg- 

 lected or are so combined as to secure averages for a year or longer 

 period. Since the Government purchases are on an extensive scale, 

 every efifort is made to prevent its operations from inflating prices. 

 When there is a sudden upward swing to the market for timber and 

 speculation seems active, its appraisals are more carefully, almost 

 cautiously, made. It can afiford to defer and wait. There is no method 

 of rectifying ill-considered acquisitions. Since it is expected that 

 timber which is acquired will later be removed, the sales must be. made 



- The longer the period of operation, the smaller is the annual charge for amortiza- 

 tion of the initial investment in the mill plant and in the transportation system. 

 The shorter this period the lower in the aggregate are the charges against the timber 

 and the plant investment and the larger should be the profits of the operation even 

 assuming no increase in the selling price of lumber. Many an unprofitable southern 

 hardwood operation would have succeeded had it been possible to log an overlarge 

 mill to its full capacity and thus by shortening the period of operation reduced 

 against the stumpage the per thousand charge of the enormovts overhead load due 

 to inflated values or arising from overestimate of the stand. The Appalachians are 

 dotted with derelicts due to lack of unification of these principles: Overcapitalization 

 of timber, too small a sj'stem of operation, and prolonged and consequently too high 

 amortization charges. The Government has acquired many such properties, but 

 the difficulties encountered in securing them as a rule have been those of negotiation 

 rather than such as appertain to appraisal: the bringing of owners, often backed in 

 their position by skillful and diplomatic agents, to realize that values are determined 

 by market conditions and not by costs of reckless capitalization. Analogous to 

 this is the futile holding of lightly stocked properties for price increment after the 

 base has become too high for current appreciation in the value of timber to offset 

 the current rate of interest on the holding price of the property. 



