FUTURE VALUE OF FOREST PRODUCTS 207 



profits, for the information of the owner, no objection can be 

 urged to any assumption which he can reasonably justify. 



196. Revision of Stumpage Values in Long-term Contracts. 

 In timber sale contracts, where timber is paid for at time of 

 purchase, the owner of the stumpage, in return for the risks 

 incidental to carrying this investment, is entitled to share in 

 the increased values which may materialize (176). For periods 

 of less than five years this factor is immaterial. If the contract 

 is for longer periods, at a fixed price, the purchaser is usually 

 willing to operate at a loss during the earlier portion of the term, 

 in expectation of realizing increasing profits later on. In this 

 way the increase may be shared with the owner even on the basis 

 of a fixed contract price. Contractors desire certainty in the 

 element of cost of raw materials, even at some sacrifice of possible 

 profits. 



The ideal arrangement is some form of revision at stated 

 intervals, by which the value of stumpage is readjusted to 

 changing conditions. Such a revision may be based on a reap- 

 praisal. This would take into account the element of closer 

 utilization, as well as advancing prices. The factor of growth 

 is accounted for by the scale, while changes in quality are usually 

 neglected, but can be considered in reappraisal. This method 

 is advocated in the Forest Service for regions where close compe- 

 tition exists for government timber. 



A second plan for revision confines the changes to the single 

 factor of prices for lumber, neglecting those of utilization and 

 quality. The point to be determined is the per cent of increase 

 in lumber prices which should be appropriated by stumpage. 

 On the basis that timber prices have advanced in the past 

 more rapidly than costs, the Forest Service has claimed as much 

 as 75 per cent of this increase for stumpage. Their present 

 basis is to appropriate 50 per cent of increased prices as stumpage 

 value. Revision, without reappraisal, is undertaken at intervals 

 of five years. The prices of lumber accepted as a basis (172) 

 are averaged for three years previous to revision. 



