Controlling seedbed density is a practical and dependable method to regulate seedling morphology but low densities significantly affect nursery stock production costs. How production costs are affected by seedbed density with particular reference to the grading operation is examined. After the spring lift 3 + 0 black spruce which were raised at three seedbed densities were graded to achieve medium size stock with cull trees being further classified according to defect. Lowest cull was recorded for medium density seedlings at 31% followed by the high and low density treatment at 34.2% and 39.5% respectively. Total variable costs of production associated with the low, medium and high densities were $83.83, $47.10 and $31.19 per M. respectively. It is concluded that the greater costs of growing seedlings at low seedbed densities must be balanced against plant performance, otherwise there is little incentive for low density production.