NC State Extension Publications

Background

The Quality Index is a timber measure that dates to the 1940s. It is a single number that expresses the relative value of a log as determined by the value of different National Hardwood Lumber Association (NHLA) grades of 4/4 lumber that can be sawn from it. A great deal of research on Quality Indexes was conducted by the U.S. Forest Service in the 1960s and 1970s as part of its Hardwood Improvement Project (e.g. Mendel and Smith 1970).

The Quality Index has several applications in the valuation of timber products. One is its ability to place an objective value on a factory grade hardwood log based upon its predicted lumber grade yields (the factory grade designation means the log will be sawn into lumber). While it is not an exact depiction of many mills’ product mixes, the Quality Index can provide a benchmark against which to gauge a mill’s wood inputs and outputs. Secondly, when utilized in conjunction with Tree Value Conversion Standards, a conversion return for hardwood sawtimber can be realized. Ultimately, the Quality Index can applied as part of a financial maturity assessment of individual hardwood trees or stands.

The Quality Index

Quality Index tables are based on NHLA lumber grade yields from hardwood logs of varying sizes. Previous work by the U.S. Forest Service used air-dry lumber grade yields from hardwood factory-grade logs. Logs were assessed based on scale and quality criteria, with a grade of F1, F2, and F3 applied [please see Rast et al. (1973) for hardwood log grading details].

The data needed to develop the index are species, log scaling diameter, lumber grade yield by log grade, and 4/4 hardwood lumber prices by grade. The equation below describes the calculations.

QI*= (% FAS * PRFAS) + (% #1C * PR#1C) + (% #2C * PR#2C) + (% #3C * PR#3C)

QI is the quality index measure for a log of particular size and grade. The percent of each lumber grade (e.g. “% FAS”) is the volume of lumber that would meet that grade relative to the total volume of lumber that could be sawn from the log. The price relative (e.g. PRFAS) is the ratio of each lumber grade’s price relative to the price of #1 Common lumber. Prices are collected over a 5 year period to account for a production cycle. The PR#1C always equals 1.00, the PRFAS is always greater than 1.00, while PR#2C and PR#3C are always less than 1.00.

*Here, F1F was combined with FAS; Selects was combined with #1C; #2 & #3 A and B were combined to #2C and #3C (per USFS and NHLA).

Development of a Northern Red Oak Quality Index

A Quality Index for Northern Red Oak (Quercus rubra) was created by simulating green lumber board foot yields from a range of logs, which varied by diameter, length, and scaling defects. One thousand logs were simulated, with the assumption that all were sawn entirely into 4/4 lumber. By considering green 4/4 lumber as the finished product, the drying process (and any subsequent changes in product value) was isolated from the simulation. Grading criteria followed the U.S. Forest Service’s log grading rules. The model used to predict green lumber yields was originally developed by Yaussy and Brisbin (1983) of the U.S. Forest Service.

Table 1. Summary percent yields by NHLA lumber grade for northern red oak logs, averaged across diameters.

Log Grade

FAS

#1C

#2C

#3C

F1

47.2%

30.8%

14.0%

8.0%

F2

21.6%

39.8%

22.2%

16.4%

F3

4.4%

21.6%

33.4%

40.6%

Red oak lumber prices were obtained from Hardwood Review (Charlotte, NC) for the period of January, 2011 to December, 2015. The 5-year averages were then indexed to the average price of #1 Common.

Table 2. Red oak lumber prices and price relatives from January, 2011 to December, 2015.

Red Oak Lumber

FAS

#1C

#2C

#3C

5-year Average Price

$1,012

$672

$561

$492

Price Relative

1.51

1.00

0.83

0.73

The Quality Index equation described previously was then applied for each log grade – log diameter combination.

Table 3. Northern Red Oak Quality Index, southern Appalachian region.

Red Oak

Quality Index

Scaling Diameter, in.

F1

F2

F3

8

(----)

(----)

0.79

9

(----)

(----)

0.80

10

(----)

(----)

0.82

11

(----)

0.91

0.83

12

(----)

0.94

0.85

13

1.11

0.95

0.86

14

1.13

0.97

0.87

15

1.14

0.99

0.89

16

1.16

1.00

0.90

17

1.18

1.01

(----)

18

1.18

1.03

(----)

19

1.19

1.03

(----)

20

1.20

1.05

(----)

21

1.22

1.06

(----)

22

1.22

1.07

(----)

23

1.22

1.08

(----)

24

1.23

(----)

(----)

Average

1.19

1.03

0.86

Using the Quality Index

Two means of evaluating log value can be accomplished using the Quality Index. One is to predict lumber product value on a thousand board foot basis (MBF) using Table 3 and the current price for #1 Common red oak lumber. Table 4 illustrates an example. The lumber price given in Table 4 was from January, 2016. Multiplication of the Quality Index times the #1C price provides the lumber product value per MBF for each log grade by scaling diameter.

For example, the predicted value of one MBF of lumber obtained from F1 northern red oak logs with a scaling diameter of 16 inches is $694. Or, the predicted value of one MBF of lumber obtained from F1 logs across all diameters is $717.

Table 4. Northern Red Oak Quality Index applied to the price of #1 Common for January, 2016.

Red Oak

Quality Index

#1C LUMBER PRICE, $/MBF

Lumber Product Value, $/MBF

Scaling Diameter

F1

F2

F3

F1

F2

F3

8

(----)

(----)

0.79

$600

(----)

(----)

$472

9

(----)

(----)

0.80

$600

(----)

(----)

$481

10

(----)

(----)

0.82

$600

(----)

(----)

$489

11

(----)

0.91

0.83

$600

(----)

$549

$499

12

(----)

0.94

0.85

$600

(----)

$566

$508

13

1.11

0.95

0.86

$600

$668

$571

$516

14

1.13

0.97

0.87

$600

$675

$585

$524

15

1.14

0.99

0.89

$600

$684

$595

$531

16

1.16

1.00

0.90

$600

$694

$602

$538

17

1.18

1.01

(----)

$600

$706

$608

(----)

18

1.18

1.03

(----)

$600

$710

$620

(----)

19

1.19

1.03

(----)

$600

$714

$620

(----)

20

1.20

1.05

(----)

$600

$717

$630

(----)

21

1.22

1.06

(----)

$600

$730

$636

(----)

22

1.22

1.07

(----)

$600

$730

$641

(----)

23

1.22

1.08

(----)

$600

$730

$645

(----)

24

1.23

(----)

(----)

$600

$740

(----)

(----)

Average

1.19

1.03

0.86

$600

$717

$617

$515

A second way to apply the Quality Index is to estimate the lumber product value within a single log. Once the log’s grade is determined and the lumber yield predicted, the Quality Index can be applied knowing the current price of #1 Common lumber. Lumber yield can be predicted using local log rules or proprietary information.

Assume a northern red oak log is harvested in western North Carolina and delivered to a local mill. Its scaling diameter is 16 inches. Its length is 12 feet, excluding trim. Five percent defect is present. Applying the U.S. Forest Service’s factory log grading specifications, the log grades out as an F1. According to Yaussy’s and Brisbin’s (1983) predictive model, this log contains 135 board feet of lumber. Two commonly used log rules in the eastern U.S., the International ¼” and Doyle log rules, predict this log contains 130 board feet and 108 board feet respectively.

The lumber product value of the log can now be determined. Either of the two calculations below will provide the same answer. Summary information is provided in Table 5. Note option (2) was used to calculate lumber product value in Table 5. Given the parameters above for our red oak log, the value of the lumber, #3 Common and better, obtainable from this F1 log was predicted to be $94. Were a log of similar scale to grade as an F2, the lumber contained within it would have an estimated value of $81; an F3 log, $73. Again, this is the value of the lumber in the log, not the value of the log.

(1) Lumber Product Value = (Log volume / 1,000) * (QI) * (Current price of 4/4 #1C)

Or

(2) Lumber Product Value = (Log volume) * (QI) * (Current price 4/4 #1C / 1,000)

Table 5. Predicted lumber product value obtainable from a 16 inch, 12 foot northern red oak log across three log grades.

Log Grade

Log Volume, Board Feet

Quality Index

Lumber Price, #1C, per Board Foot

Lumber Product Value

F1

135

1.16

$0.60

$94

F2

135

1.00

$0.60

$81

F3

135

0.90

$0.60

$73

Summary

The Quality Index is a practical and easy to use tool to evaluate the lumber product value of northern red oak logs. All of the data needed to make business-specific Quality Indexes are often contained in a mill’s records- log scale and quality data, lumber grade yield for each log grade, and the selling prices for the lumber. Based on final product value, and allowing for individual costs and profit, one can determine a fair price to pay for a log.

Use of the Quality Index should consider a couple of factors. Lumber price relatives are 5 year averages, indexed to #1 Common. As grades’ prices change, so will the price relatives, and subsequently the Quality Index. Also, as price spreads between grades change, so will the price relatives, and subsequently the Quality Index.

References

Hardwood Review. 2011 to 2015. Hardwood Review Weekly. Charlotte, NC.

Mendel, J.J. and W.H. Smith. 1970. Quality index tables for some eastern hardwood species. Res. Pap. NE-167. Upper Darby, PA: U.S. Department of Agriculture, Forest Service, Northeastern Forest Experiment Station. 24 p.

Rast, E.D., D.L. Sonderman, and G.L. Gammon. 1973. A guide to hardwood log grading (revised). Gen. Tech. Rep. NE-1. Broomall, PA: U.S. Department of Agriculture, Forest Service, Northeastern Forest Experiment Station. 31 p.

Yaussy, D.A. and R.L. Brisbin. 1983. Multivariate regression model for predicting lumber grade volumes of northern red oak sawlogs. Res. Pap. NE-536. Broomall, PA: U.S. Department of Agriculture, Forest Service, Northeastern Forest Experiment Station. 11 p.

Author:

Assistant Professor and Extension Specialist
Forest Biomaterials

Publication date: March 16, 2016

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