170 FOREST VALUATION 



(a) Acceptance of a definite class of products or stage of 

 manufacture as furnishing a basis of prices from which to under- 

 take the appraisal. The further removed this basis is from 

 stumpage value, the greater will be the difficulty of correctly 

 appraising the intervening elements of cost and profit. But 

 the more stable and widely accepted are the prices which fur- 

 nish this basis, the more reliable will be the result. 



(&) Appraisal of expenses of the intervening operations as 

 logging, or logging and milling, including depreciation of capital 

 assets employed in these enterprises. 



(c) Determination of legitimate profits for logging and mill- 

 ing, and of the proper basis and method of computing what 

 such profits should be. 



(d) Residual or stumpage value after subtracting elements 

 b and c from a, and correcting for the error caused by 

 overrun, in order to express value of stumpage in terms of 

 log scale. 



172. The Price Basis in Appraisals. The acceptance of the 

 retailer's price as the starting point for appraising stumpage 

 values would interpose retail costs and profits as an element 

 in the appraisal. This would result in appraising the value 

 of lumber f.o.b. cars at mill, instead of accepting the current 

 prices already determined for this lumber by sales; such a course 

 is obviously undesirable. 



Were the prices of logs standardized, and determined in open 

 competitive market as are wholesale lumber prices, there would 

 be a similar argument for accepting log prices instead of sub- 

 stituting an appraisal of the value of logs. This method has 

 been used on Puget Sound where such a log market exists. 

 Whenever logging is conducted as a separate business, and not 

 merely by contract for the manufacturer, the price of logs does 

 determine what may be paid for stumpage, and must be taken 

 as the basis of appraisals. 



It is claimed that in markets established for logs, prices for 

 the logs are not as high as an equitable appraisal would indicate 

 owing to the ability of the mill owners to keep these prices 

 under control. Where the log market is the only outlet for the 



