I found it! It's in chapter two: The Shadow of the Past. About three pages into the chapter.
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"All right," said Sam,"But what about those Tree-men, these giants, as you might call them? They do say that one bigger than a tree was seen up away beyond the North Moors not long back."
"Who's they?"
"My cousin Hal for one. He works for Mr. Boffin at Overhill and goes up to the Northfarthing for the hunting. He saw one."
"Says he did, perhaps. Your Hal's always saying he's seen things; and maybe he sees things that ain't there."
"But this one was as big as an elm tree, and walking - walking seven yards to a stride, if it was an inch."
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