l68 FOREST VALUATION 



Cost of transportation 

 Cost of felling and skidding 

 Logging profits 



. , . ) = Income from timberlands, or 



Cost of stumpage { 



) btumpage value = 



f Cost of production, or carrying charges 

 { Profits 



It is evident that the gross income at any stage in this eco- 

 nomic series just equals the total costs plus profits incident to 

 the entire chain of processes underlying this income and pre- 

 ceding it in point of time, and that the profits, or losses, are 

 the factors which balance the successive equations. Stumpage 

 value is equivalent to cost of purchase, and tends to increase 

 by higher prices for lumber, and to decrease by higher costs or 

 by larger profits in retailing, manufacture or logging. 



There may be a great difference between what is paid for 

 stumpage and what should be paid. This difference is added 

 to the profit of the logger or lumberman ( 168). 



But actual values for stumpage, as established by sales of 

 merchantable timber, do not fluctuate with the annual changes 

 in lumber prices. Increased prices for lumber are not imme- 

 diately followed by similar increases in stumpage prices, nor 

 do the depressions in price, which are so characteristic of the 

 lumber trade, make themselves felt at once in a lowered price 

 for stumpage. Stumpage prices are sluggish rather than sen- 

 sitive. 



Three factors serve to explain this apparent failure of stump- 

 age to behave as indicated by the economic relations set forth 

 above. The first is the human element in price making ( 5-7). 

 At best, it takes an expert thoroughly familiar with the costs and 

 reasonable profits of such technical and diversified industries as 

 logging and milling to determine the proper relations between 

 prices f.o.b. at mill for lumber and prices for stumpage. The 

 purchaser possesses this knowledge but the stumpage owner 

 may not have it. Since it is to the purchaser's interest to keep 

 the owner in ignorance, prices are allowed to remain as long as 

 possible at the level set by previous sales. This condition is 

 disturbed only when competition between two purchasers brings 



