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Return of Forestry?

Started by Woodhog, June 24, 2008, 04:31:19 PM

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Woodhog

Would anyone care to comment on when they think this Industry will return to a viable way to make an average income from logging.

At the moment around here it would seem lower than low.

Just when I thought it could never get any worse the price of softwood studwood (8') went from 107.00 dollars  CDN per cord to $98.00.

This is down from a high at one time of 175.00 per cord.  This at a time when Diesel is around $7.25 per gallon, an all time high.

The sawmills cannot pay anymore and at that those wood prices I cannot see how anyone could supply them with any wood. Even the poorest of businessman in the woods will eventually realize he cannot pay his bills.

The mills tell the woods operators to increase efficiency, the wood comes out faster and the price continues to go down.

Then along comes biomass, they will pay 48.00 per cord, the logger pays 15.00 of that
to the trucker and is left with $33.00 for cutting and forwarding something that takes the same effort as logs, studwood etc.

I think a lot of pulpmills and sawmills will close down, not from lack of markets for lumber etc .but from no fiber being supplied to the gate due the fact all their suppliers have gone broke.


Ron Wenrich

I'll take a poke at a couple of different angles. 

For one thing, mills aren't setting the markets or the market price.  Apparently, there is insufficient demand to meet the supply.  So, market prices slip.  Mills could pay you more, then go bankrupt, and you won't have any market for your material.  They're just passing on their lower prices.

Another angle is that we have just tuckered out the woods.  In many areas, the harvests continue to produce smaller and smaller trees.  Small trees and logs are expensive to harvest and mill.  And quality in small logs is not near that of the larger logs.  Maybe we need to let some of the trees actually grow to a better size for more efficient utilization.

I spent Saturday with a colleague from Idaho.  It was amazing that we have both come up with the same conclusion about forestry and rates of return.  Which would you rather have:  5% of $100 or 2% of $1000.  Much of the current thinking is that the 2% rate of return should be eliminated so that the 5% wood would be left to grow.  However, the 2% will give you the greater income, but not the greatest return.  Again, which would you want?

I was also amazed that the same problems we have in the East are the same ones they have in the West.  The species are different, but the mindset seems to be the same.  Maybe we have to change the mindset before we can change the industry.  Long term thinking would go a lot further than the current short term thinking.

We've been told that we need to borrow all types of money to keep our production high.  The only ones making out on that deal are the bankers and equipment salesmen.  When markets hit the skids, you're still stuck with payments and no way out but to work even harder and that suppresses markets with too much fiber.  Multiply that by all the loggers and mills in an area that have swallowed that bitter pill.   

So, I can't be very optimistic for the short term.  Solvent mills, loggers and landowners will weather the markets.  Those that keep on trying to move material into a falling market only makes it worse. 
Never under estimate the power of stupid people in large groups.

Splinter

No housing starts no studs.
If you figure out how to make that graph go up a little at the end you have your answer.
It was all fun and games while they were writing bogus mortgages, now it will have to work itself out. Saw somewhere that housing starts today are roughly the same as in 1968.

http://www.census.gov/briefrm/esbr/www/esbr020.html





Maineloggerkid

ITs still good up here. Studwood is going about $130 cord locally. My cutter and I can cut a load a day, and that comes to about $800-900 on average. My tractor only uses about 3-4 gallons of deisel a day.  I find that here in Maine, it is the small scale operations that are making the money, because of less people to pay, and less overhead in equipment.
JD 540D cable skidder, and 2 huskies- just right.   

Loggers- Saving the world from the wrath of trees!

Rick Alger

The industry is not strong in my corner of NH. I've had some luck doing pre-commercial thinnings and selective cutting firewood for homeowners, but overall  things are tight.  A lot of machines are parked.

Rob

Down here in Southern NH things are tight as well ..Lots of equipment parked and more for sale . I was running Timbco and got laid off 3 months ago and still sitting around searching for work . I have dedicated the past 12 yrs of my life to logging and dont want to have to make a career change now .

Anyone know of any loggers around NH or Northern MA who may be looking for a Timbco operator or grappe skidder operator ?? Im dying to get back in the woods

                                         later Rob

John Mc

A sobering article on just this subject in the front of the most recent Northern Woodlands magazine. The author was concerned that it's going to be a lot tougher for the industry to "bounce back" this time. He feels we're going to lose a lot of our logging/forest products infrastructure this time around.
If the only tool you have is a hammer, you tend to see every problem as a nail.   - Abraham Maslow


Ron Wenrich

If I remember correctly, the same was said about 5 years ago.  That was before the housing bubble.  The concern was that not enough people were getting into logging and that portion of the industry might cause a real concern in years to come.  I see its cropping up again.

At the mill level, I'm seeing that there is not much interest in lumber as in years past.  Many of the wholesalers and users have shut down deliveries early from their normal July 4th periods.  We even had a casket company go into layoffs.  That should be a fairly consistent market. 

Flexibility would be a key asset to any logging crew.  We cover a wide range of products and can quickly go from one market to another.  The biggest complaint I hear is the cost of stumpage.  It seems that the consultants keep on pushing sales and expect high prices when there is no market support. 
Never under estimate the power of stupid people in large groups.

Kansas

In the past several weeks, I have talked to a couple of mill owners that are either throwing in the towel, or on the verge of it. The biggest reason is lack of logs, combined with slippage of markets, including walnut. These are guys that have been in the business for a long time, and have taught me a lot. Either they cant log because of weather conditions, or loggers that supplied them have quit, or a combination of both. Throw in rising prices to log and get logs to the mill, and it just doesnt work.  In the meantime, we have turned down a lot of business from brokers wanting loads of pallet material. We are fortunate to have plenty to do of better margin work, and the brokers and their customers are still resisting higher prices to cover the higher costs it takes to get logs to the mill. Market forces will change this, but it will take time, and for many, they dont have the capital, or other markets, to make it until it does.

The longer this goes on, when demand does pick up,  the more violently the industry will go back to profitability. One of the things that happened to the oil industry back in the 90s is that when oil got cheap again, they lost their infrastructure-not just well drilling rigs, and experienced people to run them, but also the companies that supplied the parts and the rigs. The same thing will happen with the logging and sawmill industry. Loggers who quit now will find other jobs, and wont go back when times do get good again. Its the same with mills-workers will drift off and find jobs in industries that pay better, and wont go back. To run mills, or logging operations, you need experienced people, and many wont ever return.
Lumber is a commodity, like grain or oil. A few percent change in demand results in much larger price swings. The imploding dollar also makes our products look cheap to the rest of the world. The real question is not if, but when it turns around.

zackman1801

at this point here in maine you either have to have a super big company, with harvesters and forwarders going all day long with a few cutters, or you have to be a small 1-2 man operation working fast to make money. the mill down the road from my house is still paying good for longs select is going for $575, no1 for 425 and no2 for 350. thats pretty good if you have to nice white pine to harvest. as far a pulp is concerned if you cant cut it fast and yard alot of it at a time your better off cutting firewood.
"Improvise, Adapt, OVERCOME!"
Husky 365sp 20" bar

Ed_K

 Here in western Ma. pallet & firewood are doing great. Hard wood sawlogs are a different game, if you can find a market its to far to ship with fuel cost. So i'm dumping the sawlogs on the pallet pile as I get the same price. Pine is stopped with hopes of the market opening in the 3rd Q.
Ed K

Frickman

I'm not too concerned about the health of our industry, at least the hardwood side of it that I work in. Yes, times are tough right now, but I've seen it before. Maybe some loggers and mills go out of business, but that's OK. Tough times help to separate out the less efficient operations. Surplus equipment from these companies hasn't just disappeared, it's just parked on a lot waiting for someone else to put it back to work.

Some people worry about logging capacity, I don't. Anyone who has some experience logging can put together an outfit as fast as they can find employees. The equipment is out there, ready to go. We can respond to market conditions quickly, in  a few weeks if necessary. Other industries, like electricity generation or steel making can't. They may take years to increase production.

Even the sawmill side of the industry can respond to market demands fairly quickly. A mothballed hardwood mill, of which there a few, could be put back into production in a week or two.
If you're not broke down once in a while, you're not working hard enough

I'm not a hillbilly. I'm an "Appalachian American"

Retired  Conventional hand-felling logging operation with cable skidder and forwarder, Frick 01 handset sawmill

Pretend farmer when I have the time

nyforester

We are feeling the same pain in Upstate NY in the foorhills of the Adirondacks. Markets are poor, fuel is up and a lot of machinery is parked. I've been wondering the same question !

SwampDonkey

Quote from: Ron Wenrich on June 25, 2008, 05:53:15 AM

The biggest complaint I hear is the cost of stumpage.  It seems that the consultants keep on pushing sales and expect high prices when there is no market support. 

Yeah but Ron, that is being driven by the woodland owners. The consultant is trying to keep his fridge stocked while the land owner does not want to give on price of his timber. It's happening here to, and there wouldn't be 5% of wood coming off woodlots with a consultant involved. Maybe finally the woodlot owner can dictate the prices like the furniture store owner.
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

Ron Wenrich

No they can't.  If there is no one to cut the wood, the market value for the trees is $0.  The more guys that park equipment, the lower the value of the timber, and the longer it takes to recover value.
Never under estimate the power of stupid people in large groups.

SwampDonkey

Oh, come on now. I have a resource. You need it to make a product. Others want to buy this product at your set price to build from. Bring the cash and chainsaws, but follow my prescription. ;D

I guess I'm just a cars salesman. It's listed for this price here and at all other dealers of this brand and modal car.

Are we all walking?
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

Ron Wenrich

You're right, you have a resource.  Its not worth one red cent until someone down the line agrees to put in their resources to make a product, and you have other customers that will absorb the costs.  Their willingness has gone down, which sets prices down.  If resource prices remain high, then those in between will either go bankrupt or seek other avenues of revenue or resource.  Proctor & Gamble did that a good many years ago by freezing everyone out of the pulp market and they now buy pulp from South America.

When markets return to some form of normalcy, there will be fewer loggers out there willing to cut timber.  You know, as well as I do, that it takes more than a chainsaw and a skidder to make a logger.  It also takes some form of financing, which doesn't look to promising at this time.  It also takes some form of training or else insurance goes through the roof.

When markets slow down, landowners should be doing cultural work.  It would keep loggers busy, but not as profitable.  Right now, the low grade market is doing quite nicely in my area.  I can sell ties and pallet stock as well as 1 & 2 Com lumber.  Prices are down, but if I don't have to pay high stumpage and have reasonable areas to work, then you can still make a living.  Firewood is a bristling business, if a logger wants to address that area. 

Consultants in my area have led themselves into business practices that are sometimes counterproductive to the landowner's needs.  Around here, everything is marked on commission.  That means some often will not mark pulpwood, or any low quality wood since it won't pay their bills.  But, if they marked by the cord or Mbf, then they would make their pay through how much they did, and not how nice of wood they selected for a sale.  In my opinion, commission only sales means that those landowners with good quality timber pay higher prices for their forestry work than landowners with low quality timber.
Never under estimate the power of stupid people in large groups.

SwampDonkey

Trouble is, the woodland owners, particularly those where timber harvesting is not necessarily a significant part of their annual income, don't want to give up the gold when the price drops. Around here, that is a high percentage of small woodlot owners. It's only easing up here some since the pulp price is beginning to creep up some in the US market. This is causing some mills to cry foul at the exporting of wood when they need wood, but uh cheap wood. Some contractors are paying the high stumpage, but the cutters are taking the hit. Meanwhile the truckers need to adjust their rates almost monthly as the price to haul wood is almost the price of half a load of pulp. I don't see a speedy recovery this time. People here will not sell out to timber companies with large tracks of free hold in reserve while they cut subsidized wood off public lands and offer a price below production cost for private wood, they have already voiced that. Only the desperate give in, when it comes to eating or loosing the farm.
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

John Mc

Quote from: Ron Wenrich on July 14, 2008, 05:05:30 PM
In my opinion, commission only sales means that those landowners with good quality timber pay higher prices for their forestry work than landowners with low quality timber.

Not to mention that it creates an incentive to high-grade or to take more wood than may be ideal for the long-term. Especially a problem with some of the fly-by-night operators who know they won't be back to that particular landowner.
If the only tool you have is a hammer, you tend to see every problem as a nail.   - Abraham Maslow

SwampDonkey

Yes agreed. The way the marketing board does it is there is a check off on any wood harvested at 2.2%. Then it's $3 per cord no matter what product. No consultant could operate on the $3 a cord. It works for the marketing board because of the 2.2 % levy that is collected from all private wood moved through the board. This pays the wages and partly funds other projects. It's bad in a way, because it disadvantages the consultant. But in reality, there wouldn't be  5% of volumes coming off marketing board managed harvesting. If there was, they wouldn't have the staff enough to cover it all. In our particular area, consultants are viewed as middle men and the majority of land owners like to deal direct with the loggers who come with cash in hand. Some consultants are also harvest contractors, some legitimate and above board, some not. But, that arrangement is like sleeping with the lions in my opinion.
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

Meadows Miller

GDAY
Things sound tough overthere at the moment .Just remember there has allways been a BOOM AND BUST CYCLE in buisness. because JOE BLOW getts into to mutch dept keeping up with the Jonses and buggers it up for the rest of Us . Its A Story As Old As Time . I lost My first  Buisness in the 2001 insurance sqeeze mine went from
$6000 to $100000 overnite and my contract needed insurance cover to continue .
But Im back on top now so Just remember to tighten that belt and keep that chin up.
It Will All Come Good In The End

To the timbaco operator from maine I have three Mates with 12 harvesters between  them genrally 3 to 4 sitting in there yards because of no good operators over here
Are You intrested in a working holiday Down Under summer season starts in 2 to 3 months time lasts 9 months  pays $25 $35 ph If you want to give it a go drop me a line

Thanks Chris McMahon
4TH Generation Timbergetter

Cedarman

If you think prices are low for stumpage, we are paid 50 to 100 per acre to take the cedars off land in Ok.  There are some really good saw logs among the trees that are made into mulch.  Wish there was a good sized cedar mill in Ok to take all these logs.  Market is good in cedar, just the opposite of what most of you folks are feeling.  Landowner was paying also to have these trees pushed up and burnt, but we take down and brown for free, so the cost to landowner went down.  Lots of biomass, but mulch pays so much better at least for now.  With a lessening of hardwood and pine sales there will be less hardwood mulch and pine bark on the market.  Also less clearing for homes means less  grinding being done on cleared material.  Our mulch sales are up 50%.

Landowners should be managing their timber for quality and good growth of that quality.  They should be in a forestry owners association getting all the info they can on managing timber, marketing etc.

Loggers need plan B and plan C when times are good, so that when plan A goes kaput, they are prepared.  What's wrong with firewood?  With oil prices going up, makes sense that firewood prices would go up unless there is a glut of firewood.

Just my 2 cents from a different perspective.
I am in the pink when sawing cedar.

Ron Wenrich

A couple of weeks ago, I talked to a guy who's been logging since we were in college together, back in the late '60s.  He said its the worst he's seen it, as far as prices are concerned.

He also said a couple of years ago, he made really large amounts of money when the hard maple and cherry markets hit a big bubble.  He dumped more money into his business by putting on feller bunchers with a high price tag.  He also brought his sons into the business.  Now the markets don't quite support that type of a price tag.

He could go into firewood, except he would have to do quite a bit of trucking.  He is a good 100 mile from the major metropolitan areas.  He could also pump out quite a bit of volume.  Multiply that by 100 loggers and you could flood the firewood market fairly quickly. 

I'm not saying that they couldn't or shouldn't cut firewood.  We do it all the time, but only at a wholesale level.  You have to do whatever you can to keep the bankers satisfied.

I also remember talking to someone doing landclearing in our area.  5+ years ago they were getting $2,000/acre and they kept the timber.  I believe they had to take out the stumps at that price, since they were converting to housing developments.  The stumps, tops and anything else is ground into mulch. 

We haven't hauled anything from landclearers for about a year.  Maybe their business is down due to the housing slump. 
Never under estimate the power of stupid people in large groups.

SwampDonkey

I know a couple of the diversified loggers and when wood markets are low they go right into land clearing. They are generally large land owners. We don't have the house lot clearing to any significant degree, but clearing for farm fields. Most have to pay stumpage for the wood and the land clearing of woody debris seems to cost around $1600/acre, may be up to $2000 now with fuel costs. Some have done this work on their own land and rent the farm fields. There are a few into farm land terracing and they might even be into repairing streets or clearing road right of way. What ever comes up. In my local area there is not much terracing, but they did terrace the field by the house which was farmed for at least 100 years before. Most of the terracing is in the next county where the land is more like working on an upside down plate.
"No amount of belief makes something a fact." James Randi

1 Thessalonians 5:21

2020 Polaris Ranger 570 to forward firewood, Husqvarna 555 XT Pro, Stihl FS560 clearing saw and continuously thinning my ground, on the side. Grow them trees. (((o)))

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