When most people think about value added, they usually think of adding kilns, planers and other equipment. In many cases, these are profitable. But, they include more marketing, more labor, and more equipment. Niche markets are very worthwhile, and every mill should have at least one market that offers good profit for limited capital input. But, from the green end, you are looking to maximize your value yield. One easy way is to cut heavier lumber. This often requires some pretty good logs. Veneer rejects are excellent candidates for high end, heavy thickness lumber. Heavier stock will yield an extra $20-100/Mbf and you will have an increased yield. Sawing costs go down, since fewer lines need to be cut to produce a comparable amount of lumber. Another method to increase value is to seperate grades. This also means more aggressive marketing. Premiums are added onto lumber prices for seperate grades.

A lumber grader, even in small operations, can quickly be an asset that can generate good returns. A lumber grader can upgrade your material. Poorly manufactured stock will quickly lose your customer base. Quite often the cost of the grading can be added onto the price of the lumber. It also lessens handling.

One area that a mill manager needs to consider is the size of blocking to be cut. Cutting too many pallet boards is wasted motion. It is more profitable to leave pallet stock in blocking and let someone else pay for the sawdust. When comparing board price to blocking price, you need to consider what it takes to break material down into smaller units. Some mills don't cut very many railroad ties. They feel that they can make more money chasing 2 Common lumber.

Consider the following: A 7x9 railroad tie is worth $18 delivered. Volume is 44 board feet, so that yields a value of $409/Mbf. That is below 2 Common oak prices. To cut a tie down to a 4x6 piece of blocking will yield 33 board feet of lumber. The balance is sawdust and wood left on a board to make grade lumber. If blocking prices are $300/Mbf, the blocking will yield $4.80. This means that the remaining 17 feet must yield $13.20 to breakeven with a tie price. That is $775/Mbf and does not include the extra sawing time. If 1 board is a 2 Common and the lumber price is $450/Mbf, it will yield a value of $1.80. This means that the breakeven for the remaining 13 feet is $11.40. Now the remaining 3 boards must yield $875/Mbf just to breakeven. If 1 board is a pallet board at $300/Mbf, the remaining 3 boards must yield $925/Mbf, which is above the 1 Common price. Given two low grade sides, and prices will approach $1200/Mbf. Dependent on market conditions, that is the price for F1F lumber, and may be higher. So, not all value to be added need to come from adding more equipment and manpower. It can come from good marketing and good managment.

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