Lumber farming is the act of setting up 2 or more cities (1 account or multiple accounts) around a forest. One city will smack the forest and kill the troops and collect the prize (lumber/medals), another city will then cap and abandon this same forest right after to refresh the troops inside. Rinse and repeat endlessly. For purposes of this guide, the city that hits for the goodies is the farming city. The city that caps and releases is the ping city.
You can just as easily do stone farming, iron farming, or food farming if you wish.. using a desert, hill, or lake respectively. Forests are most commonly used because they have a better quantity of wood in them than you'd get in iron from hills.. and wood/iron are generally the highest value and most needed. If you wish to farm for iron instead, just pretend I'm saying "hill" instead of "forest" in this guide 
Farming City
Must have full valley slots, you don't want to cap the forest when you hit it. I highly recommend Sericom's Valley Slot Filler script: http://forum.neatportal.com/viewtopic.php?f=37&t=1955
Should turn off config valleymin, config valley, config acquireflats, config abandonflats, and config buildnpc. Anything that might open up a valley slot is bad, even if it's temporary.
Should limit npc farming to 1 or 2 waves, you're gonna want the heroes and rally spots for hitting the forest. I use rallypolicy n:1 on mine.
Should get enough attack heroes in the city to hit the forest. I personally keep 9 heroes in the cities I LF from: 1 politics as mayor, 1 leveled up attack hero (or intel hero) for npc farming, and 7 attack heroes I don't level for lumber farming on my alt accounts. I add into my goals nolevelheroes any:attack>=100. This will allow them to go up to 100 attack and then stop. That's plenty to hit the valleys, and I can steal them from my alts to my main account later after they're XP'd up nicely for me without medals to persuade. The 10th slot is open for the traininghero to move in and out.
For level 10 forest farming, you'll want around 300k archers, 1-5k layers, 3k+ ballista, enough transports to move all the zillions of lumber out you'll be getting. You can keep less if level 9 farming. If your account's hero can't keep up with replacing these troops, make sure you have requesttroops goals setup to grab archers from other cities, or have sendtroops in those other cities setup to send archers here.
- You'll want to setup this city at 1 mile from the forest ideally, but it can work from further. You just won't get as many hits in.
Ping City
Must have at least 1 open valley slot, you need to cap the forest when you hit it.
Should turn off config valleymin and config valley. You can leave on buildnpc, acquireflats, and abandonflats but be wary of large npc wipes. If your bot grabs 10 flats to hold them till they level up, then you can't cap and release the forest.
Should limit npc farming to 4 or 5 waves. You'll need a few open slots and heroes to hit the forest, more if the ping city is further away. I've found that rallypolicy n:4 works great for me at 1 or 2 miles.
Should have mostly junk or disposable heroes in the city. You can let the decent heroes npc farm and the disposable ones lumber farm. Smacking a valley over and over and over with 1 scout 24/7 is gonna make you lose heroes eventually. Don't use good ones.
- You'll want to setup this city as close as you can get to the forest, within 2 miles ideally but it can work from further. If the scouts have to march too long, you increase your chances of not capping and releasing it in between the farming waves, and thus bringing back empty loot on them.
Scripts
There are many scripts to chose from for lumber farming. I personally use a very very old copy of Jay777's "Set and Forget Lumber Farmer".
You can find a less old and a new version of that here: http://forum.neatportal.com/viewtopic.php?f=9&t=959 (requires VIP access).
Popular scripts that don't require VIP status:
TECH's Simple Lumber Farming Setup - http://forum.neatportal.com/viewtopic.php?f=40&t=1069
Sericom's 2 City Lumber Farmer - http://forum.neatportal.com/viewtopic.php?f=37&t=1115
BigWill's Quick and Dirty Lumber Farmer - http://forum.neatportal.com/viewtopic.php?f=33&t=983
Setup for whichever script you use will depend on your preferences and the script itself. For the most part they're similar setups..
You'll want to set the coordinates of the valley to hit. This needs to be the same for both the farming city/cities and the ping city.
You'll want to set the troops to use to hit the valley. I personally farm level 10 forests and I use ballista in my waves. Many people prefer to farm level 9 forests and skip the ballista so they get more hits in. I don't like the losses without ballista, and I don't like the lower loot amounts on level 9s with ballista, so I do 10s instead. The magic number for ballista is 400 if you're gonna use them. Anything lower doesn't mitigate the losses quite as well.
You'll want to set the heroes it's allowed to use. I highly recommend you don't send any main attack, politics, or intel heroes out on the farming side or ping city. You never know when a red will cap your valley and reinforce it so they can sit all day collecting heroes off you.
Some scripts will have a minimum/maximum valley level for farming, and other settings. Just read the post you get it from and read the instructions on the script itself. I'm sure you'll figure it out
Enjoy the res!