What factors influence how much product sawmills choose to produce?

[forestfan]

What do you think are the main factors that affect decision making around how much lumber gets processed at sawmills?

How predictable or seasonal are their production quantities?

[moodnacreek]

What they sold last year. 2nd question answer is very predictable.

[forestfan]

What they sold last year. 2nd question answer is very predictable.

Hah, surely the larger companies are a little more sophisticated than that in their planning...

[SawyerTed]

Depends on the mills and the region.

Softwood mills generally are producing building materials.  So the housing and construction market will determine what and how much gets produced.

Hardwood mills also are somewhat tied to the housing and construction industry - cabinets, flooring, trim and moldings.  The economy also impacts furniture production as do styles. 

Foreign markets tend to impact domestic hardwood production more than softwood. 

[barbender]

 You can make it more sophisticated, but it's really as simple as Moodna suggested. And predictions are just that, mills are continually having to adjust output according to markets, available raw material etc.

[longtime lurker]

I don't know about other mills but the only factor that determines how much I produce is the size of my chequebook. Give me more chequebook and I'll just buy more logs, more equipment, hire more people and produce more.

Ive run my gear above its capacity limit since day (ie well over a single shift week): as the business has grown we've upgraded but my new saw is 6 months old and we've already outgrown it again.
When I have no orders I start cutting stock. Stock is what enables me to fill common orders on limited notice. Once I'm at an acceptable stock level I start on cutting feedstock. Feedstock is what enables me to compete with far larger competitors on the jobs with real money involved. We're a small mill... I can't just fit in an order for 4000 yards of commercial grade decking plus associated framing and get it all sawn, dry and machined in 12 weeks. But when I have the feedstock sitting there air drying on spec I can.

Someone here - Tom, or maybe bibbyman - used to have KSIW carved in a beam above the mill. KSIW =Keep Saw In Wood. It really is that simple, keep making sawdust and the gear can pay its way.

The secret is knowing what to cut when nobody is buying, and Moodna Creek answered that well: when you've got years of sales history you learn what you want available for when they start buying again. Job after job I see the same size×length combinations because they are set out in span tables for construction to building codes.

[Ron Wenrich]

A lot depends on the size of the operation.  The larger the size, the larger the market.  A small operation might be more in tune to the retail market.  They need to air dry, kiln dry, and surface lumber, which tends to smaller amounts of lumber produced.  Most times the small producer is a cash operation.  It puts them on a stable foundation and they can ride most market conditions.

A larger operation would be more dependent on other commercial operations.  When times are good, its not hard to sell lumber.  A phone call will find a home for whatever you're sawing.  There are more opportunities for sales.  Tie prices would be up, which hurts the supply for pallet blocking.  When blocking prices go up, it can put a squeeze on lower grade lumber. 

When things turn bad, then the markets contract.  Those that produce poor quality lumber will be the first ones hit.  Others who borrowed a ton of money will also face hard times.  When markets like ties and pallet stock dry up, it affects the whole operation.  Those producing high quality material will be able to weather the storm as long as they can adjust their log costs.  Markets have a way of removing marginal mills.

Lots of factors go into the marketplace.  Interest rates have a big effect, since many construction projects use borrowed money.  It also affects cash flow, which is probably the biggest factor.  Back in the high interest '80s, the cash flow all but dried up since money was flowing into money markets instead of paying bills.  The interest earned was higher than the penalty of late payments.

For those in the export market, either through sales to brokers or veneer sales, the value of the dollar can affect demand.  If the price of lumber gets too high, people will turn to alternatives.  The value of the dollar is often attached to interest rates.