Cost of Air Drying versus Green Lumber

[WDH]

I would like to hear the perspective of this group on the value lift from sawing and selling green lumber to a customer (from your own logs, not the customer's logs) versus sawing, stickering, and air drying down to 12-15% moisture content? 

For discussion purposes, if you were selling lumber green off the sawmill at $1.00 per BF, what would you charge to sticker, take the space to air dry, and air dry the lumber to 12 - 15%? 

Some thoughts:
It takes time to sticker the lumber.
You have to prepare a level and solid foundation for stacking.
You have to have covered storage with good air flow for air drying.
You have to hold the lumber in the stack for 4 to 9 months for it to air dry.
You have to unsticker the air dried lumber.
You have to store the air dried lumber and protect it from the elements.
There will be degrade and loss of BF from drying defects.

[tule peak timber]

Some observations from my end... There is zero market here for green lumber and limited for air dried. Everyone wants KD which means looking ahead one , two or three years from the day a log hits the mill. Storage costs are minimal if you have the space , but the costs of just moving around lifts of lumber to get at sellable wood is staggering and adds to the cost of production. I even started buying stickers trying to save time and focus on cutting wood . How I  run the yard is becoming more and more important if I want to have any profit at all.  Rob

[Joe Hillmann]

Some observations from my end... There is zero market here for green lumber and limited for air dried. Everyone wants KD which means looking ahead one , two or three years from the day a log hits the mill. Storage costs are minimal if you have the space , but the costs of just moving around lifts of lumber to get at sellable wood is staggering and adds to the cost of production. I even started buying stickers trying to save time and focus on cutting wood . How I  run the yard is becoming more and more important if I want to have any profit at all.  Rob

Why does kiln dried take two or three years to dry?  Shouldn't it be faster than air drying. 

You said that storage costs are minimal and they probably are but in order to store it for any length of time you have to make a pretty large investment (in logs, blades, fuel, oil, and help) when or even before you mill the lumber and you don't see a return on it until you sell the lumber a year or years later.  Even a small sized mill/lumberyard could have $30,000-$80,000 worth of lumber sitting around waiting for it to dry if it takes a year to dry.  So in order to dry the lumber you are tying up a lot of money.

[tule peak timber]

I have one kiln... My EMC here is 6% so lots of naturally drying wood in storage....Money tied up ?Yes -mucho............

[drobertson]

I hope I read this right, I believe that there will be no value advantage selling green.  It does create cash flow, but the end product is what is sought after around here.  Now, barn siding ect... is a different story, so there is value in air dried stock, I have a few that only use air dried lumber, then acclimate it to their conditions.  It does appear that there is a large range of value of lumber in regards to where it's being sold. 

[red oaks lumber]

for us air dried is the same as green so, we don't mess with air dry only green of kiln dried.
when you start talking of having several thousands of b.f. of alot of diffreant species of lumber on sticks, thats to much money tied up.
kiln drying speeds the cash turn over immensily and your added value will double just by having k.d. lumber.
with the ability you offer kiln dried lumber you now have put your self into a smaller group of competion(which is good). your able to sell clean and bright r.sawn lumber, little bug damage or degrade issues.
did i mention if you sell green for a $1 b.f. and sell kiln dry for min. $2 b.f.  :)it doesn't cost even close to that for drying costs.
now if i can convince you guys to offer finished products wow, you'll need a bigger truck to haul your money to the bank :D

[Cedarman]

A good planer is a cash cow.

[scsmith42]

Danny, here is one way to price it based upon a typical business model.

For this discussion, I will assume that you have $1000.00 worth of 5/4 white oak that will need to air dry for one year.  At a buck a board foot that equals 1000 board feet of lumber, or a stack that measures 48" x 12' (40 bd ft/layer), 21 layers tall (42" with 1" stickers).

First, look at your lumber as an investment in the bank.  How much is a reasonable return on your money?  Let's say 15% return.  So, $1000 of green lumber, plus a 15% return for letting it air dry for 12 months, means that your first number is 1,150.00 (1K investment plus $150.00 return on investment).

Next, you need to factor in the value of the storage space (after all you are paying property tax on it so you need to get a return).  What's a reasonable rate for warehouse space rental for a year?  5 bucks a square foot per year?  A 1K bd ft stack of lumber will probably take up around 50 square feet, but you can stack it 2 - 3 layers tall, so figure 1/2 of 50 square feet.  25 square feet x 5 bucks a square foot is $125.00

So now you are at 1,275.00 of initial product cost, ROI plus warehouse cost.

Next, since you are in business what type of profit margin do you want to make?  Typically you need to make at least 35% to keep the doors open (and that is bare minimum.  FYI many businesses fail that only try to make a bare minimum profit because they don't have any excess cash available for the lean times).  So 35% profit (which is calculated based upon the sales price) means that you need to sell your lumber for $1,960.00 ($1,960 - 35% = $1,274).

So, if you charge $1.00 per board foot for green 5/4 oak, based upon these factors you should be selling one year air dried oak for $1.96 per board foot.

[Dave Shepard]

Where is the labor in that equation? It would take my 20 minutes to sticker that pile and two days to get my back moving again. :D

[WDH]

Assume the sawyer down the street is sawing 1"pine boards, and he is selling that wood green off the saw for $.60/BF.

If I cut the same pine boards and air dry them for 6 months, those pine boards should be worth more I would think.

Using Scott's logic, that is a $600 investment held for 6 months.  At 15%, that is $45 for half a year.  The 25 square feet of stacking space would be $62.50 for 6 months.  That would be a total of $600 green lumber value plus $45 ROI plus $62.50 stacking cost = $707.50.  Adding the 35% profit would bring the sales price to $1088, or $1.09/BF.  That is a $.49/BF lift for the air drying.

This would be the same as if I bought 1000 BF from the other sawyer, air dried it, and offered it for sale at $1.09/BF.  That seems to be a reasonable answer to the question.   

No question that the kiln puts you in another league and gives you a big advantage when selling lumber.   It has sure helped me get more customers.  But there has to be a value lift for air drying, too. 

So, $.50/BF seems reasonable for having the capability and property and to spend the time to properly air dry lumber.  I have been selling air dried pine from pine trees on my property for $1.00/BF.  I am going to raise that price. 

[POSTON WIDEHEAD]

WDH, do you have competition close by selling Pine boards....green, AIR DRIED OR KILN?

[WDH]

Not real close.  And, not really a competitor as far as I am concerned given the amount of respect that I have for the sawyer.  He saws a lot of pine, has a kiln, and makes and sells T&G pine for paneling, flooring, etc.  He is way more efficient than I am. 

I focus mostly on hardwood, and as far as I know, I am the only one in the area that kiln dries hardwood, although in small quantities, outside of the big commercial hardwood mills.  But, they don't sell 3 boards to the Honda Civic guy that needs them cut in half  :D. 

I do cut pine off the tree farm for various reasons, and I do sell some pine "barn boards".  I am planning to offer some kiln dried "furnitue grade" pine, probably priced in the $1.50 to $2.00 per BF range.  Has to be older growth, clear, stuff though.  That means it will have to be natural timber, not my plantation pine. 

[tule peak timber]

I love this site !!! 8) 8) 8) 8) 8) 8) 8) 8) 8) 8) 8) 8)

[Peter Drouin]

I don't know, I sell green ,air dried, [If it sets a week,] as fast as I can cut it.
I know I sell the short stuff cheap, and make it up on the 10' +.
Sometimes I have ½ the lumber sticked and a customer will come and buy it all off the forks. :D
Now I have to go cut more. But that's ok, My customer base is growing.
WDH a .49 lift for air drying is a lot. For me to keep lumber for months . It would have to be real nice lumber and hardwood.
I find If you try to hold lumber to get a big price for it. You will have it so long It will degrade, be in the way, trip over it, move it the 10 th time, I just sell it and get what I can and move on. There's so much to a sawmill business, Money comes in from all sides.
The other thing If you're cutting logs from your land you wait till you need a log and go cut it. When Logs come here like this.


  

  

  

  

  
I can't just look at them I have to cut or lose them to degrade.
Like tomorrow most of this will be gone.


  

  

  

[POSTON WIDEHEAD]

I'm about like you Peter......I absolutely cannot keep up with the demand for green Pine barn boards for having to custom saw logs coming in from customers.
I steady saw 5-6 hours a day. I really believe I could run another LT40 and hire someone to run it.

[WDH]

You guys have a different business plan with the pine.  My focus is on furniture grade kiln dried hardwood.  You have to keep an inventory, and it has to be stored inside. 

If your customer needs the lumber to be dry, at least air dry, then if they buy it green from you, they have to have the land/space/foundations/stickers/cover/time to sticker it and let it dry.  That has to cost them something.  If they use it green, then it does not matter.   

[scsmith42]

You guys have a different business plan with the pine.  My focus is on furniture grade kiln dried hardwood.  You have to keep an inventory, and it has to be stored inside. 

If your customer needs the lumber to be dry, at least air dry, then if they buy it green from you, they have to have the land/space/foundations/stickers/cover/time to sticker it and let it dry.  That has to cost them something.  If they use it green, then it does not matter.   

I'm in the same biz as Danny - furniture grade lumber.  Some of it, not only does it have to be kept dry but it has to be kept in climate controlled space also.  This adds to the cost.

Peter - NICE operation!

[Dave Shepard]

I don't know how much to add for air drying, but I do know that as soon as it's stickered, that charge is implemented, regardless of how long it's been stickered. ;)

[tule peak timber]

We also charge for storage of customers lumber at different rates depending on level of protection.

[Alligator]

I have been reading the forum for 6 or 8 months. I was born into the sawmill business. I thought I knew a lots about sawmilling, but I have discovered that I was born on an island. My island was isolated from all the other islands. My point is every part of the country have different market circumstances and models. The one absolute that runs through all of them is.

A good planer is a cash cow.

We were a completely air dry 74% pine, 15% Cypress, 10% mixed hardwoods. We rarely dressed a piece of cypress. It all sold off the sticks. Hardwoods were graded and sold to customers specs, some dressed some rough, but all air dry. Pine was sold retail rough dry and green from the saw at about 70% of wholesale. The rest of the pine (3/4 to 1 1/4 million BdFt a year) was sold air dried, wholesale. November to April we were not able to dress very much. April through October the planer ran about half the time. Air dried lumber is just as good as kiln dried as long as it is processed properly and the moisture is monitored right. I have barns on my farm 50 and 40 years old from air dried pine.

In south Alabama pine drys to 15% in 45 to 60 days from May 1 to October 1, considerably slower the rest of the year. In Perry Ga. the drying should be very much same. Drying much lower than 15% is hard without a kiln or a long dry spell, which are common July - September.

Thanks guys I really enjoy learning about the business in other parts of the country.