The cost of converting standing timber into a salable product, such as firewood, pulpwood, logs, lumber, or railroad ties. In the case of producing lumber, the conversion cost includes the cost incurred to cut down (fell) the trees, remove the limbs (limb), cut the tree stems into logs (buck), move the logs to a point where they can be loaded onto a truck (skid), transport the logs to a sawmill, and saw them into lumber. Also see “Section 631 (a) transaction.