It's a mystery to me too and I worked in logging. :D Maybe Paul H has a handle on it.
Quote from: timhsu87 on October 23, 2009, 10:41:45 PM... I am just trying to understand how it works.So am I! ;D
It's probably much the same as here in the Maritimes. Basically a long time ago (some of these companies are dinosaurs) the government wanted to make money off it's forests and also wanted to manage them sustainably. So companies were issued a license to harvest a set volume of timber from a defined area. They are responsible to manage it as well with the government's role to monitor. The government checks a sample of harvest blocks to monitor waste and see that they are following their plan. The license holder has to write a 25 year management plan that gets revised every 5 years or so. They are responsible for roads, insects and fire suppression and such as well. Silviculture is usually subsidized in form of seedlings, scarification, spraying, spacing and wages for the work. So they bundle this all up into a formula to come up with a stumpage value per unit of volume sold with an eye toward the markets at the time. This stumpage is usually fiddled around with on an annual basis or when there is a crisis in the market price of their end products. If the companies buys a large portion of private wood that gets factored into the stumpage formula. Here in NB 30 % is private woodlots, 20 % is industrial freehold, 50% is crown. Here in NB, if the company beats the woodlot owner on price it also lowers his stumpage price to the crown, since they control price of the raw material their stumpage is calculated on. It seems they always look at the areas where the mills pay the least. In western NB our mill prices are better than others because we have the US market next door, competition.With a system like that, you just gotta wonder why some of these outfits fail. But the global market of the end products and high union wages they have less control over. It's a real circus out there. ;D
Both the Interior and Coastal Appraiser's Manuals seem to have relevent information regarding setting of stumpage. Also, review the Market Pricing Systems parameters, which also affect stumpage. All these documents are available on the Ministry's Website.