Log Prices?

[Firewoodjoe]

Our pulp is cardboard for packaging and osb board. I dont see either one of those going away. And yeah I've always had the be your own bank idea but realistically you can't. By the time I save enough cash to buy a used $500,000 machine I'd be dead anyways. 

[cutterboy]

 I keep coming back to wanting to take the next steps. Now obviously isn't that time but if I can be one of the survivors I may jump in on the other side of all this.

Joe, I think your instincts are good. Self control is all important now. You are a young man with many years ahead of you. Probably good years if you stay smart, keep your wants under control, and make your moves when it seems to you to be the right time.
All the best to you.

[nativewolf]

Log/timber industry is no different than any other commodity producer market at the very high level.  Strategically ever region is going to be a bit different- subject to different whims and different economies of scale.  Global trends play a huge role, everything is connected.  As stavebuyer said- pulp markets continue to contract- that is a global trend from Finland to the USA.  Everywhere.  

Since you seem to mostly do contract cutting for others you'll be able to really focus on harvesting and not the acquisition of timber nor the disposal/sale of timber.  The risk to me ...from hundreds of miles away is that your region is a market of strength in a market that is contracting globally.  One small hiccup could shut down a pulp business and upend everything.  Eyes wide open that the global market is absolutely at play.  Will rising interest rates hurt your mill owners because you can bet they are leveraged up to their eyeballs.  

Many people have loans that float along with interest rate increases so payments can soar.  Our payments went up over $3000 a month so far.  Not great for us...not a killer but not great.  Historically these interest rates are actually pretty fair- just not great compared to post 2008.  Managing the interest rate risk will be helpful.  

Globally the tariff wars of the previous administration and then the pandemic crisis and now the russian invasion of Ukraine have disrupted things so there is a lot of overhang- the market is not back to normal.  The Pandemic crisis is over, the other two are not though.  Biden admin has kept the Trump policies on China mostly unchanged.  Less belicose but same and China seems to be in no hurry to change.  The situation in Ukraine is vastly different and the hot portions of this conflict will end this year (my somewhat informed opinion)- you can see that with Europes huge tilt this week to support Ukraine- everyone is rushing to be nice and give Ukraine more and more.  So following events winding up we will see Russia needing to massively increase the exports of oil products to pay for war damages and to rebuild the russian economy.  We should see Europe rebound strongly next year with European energy costs plummeting.  I'd count on that pretty strongly.  How much trade goes on between the upper midwest and Europe?  

I believe that the integration of Ukraine into the EU or at least the European zone will greatly increase the economic prospects for all of Europe.  Ukraine will spend 2-3 trillion on rebuilding and that's a going to heat up all of europe along with a big fall energy pricing.  Natural gas pricing is already far below what it was pre pandemic and that is before Gazprom has to start cutting pricing to regain marketshare when they are allowed to sell again.   Ukrainian rail is going to change to integrate with Europeans, rail lines are being setup to run from Poland to Black Sea ports, pipelines are bypassing Russia entirely, etc etc.  

That to me is the big positive world wide-huge spending in Europe to rebuild Ukraine plus low energy prices.   I don't see China really increasing trade too much and Chinese growth seems muted.

Domestically:

The economy looks ok in the USA.  We have been in a bit of recession but a mild one.  I would be careful re timing.  Is now the best time or August?  The lack of bank regulation is worrisome- did we learn nothing from the savings and loan crisis and then 2007/8?

The IRA is causing huge investments to be made in manufacturing in the USA.  That's going to keep pressure on but also create opportunities.

See if your bankers can tell you if any big producers are going to shut down.  Or mill managers.  The good news here on your own costs will be that diesel should stay pretty cheap.  If russian refineries start selling to Europe again they will be selling diesel, those refineries are tuned to over produce diesel at the costs of being less efficient overall.  That will dump diesel in the global market.  The US trade in sending diesel refined here to the EU could end=more down pressure on diesel.

Trends wise if hardmaple is really out of favor than does that hurt your local sawmills?  Just something to consider.  Here our wood basket is pretty diverse:  yellow poplar, hickory, red oaks and white oaks, walnuts, and a mix of other- cherry, maple, sycamore, etc.  It does help provide options in bad markets.   

So I guess my checkbox would be local and global markets for your sawmills.  Keep your buyers diverse- maintain relations with more than 1 mill and mills that do more than 1 product class.  Don't rely on pulpwood.  See if the Fed can get through the August meeting without raising rates.  See if you can qualify for a grant to help offset your spend.  See if your bank has a loan product that fix's interest rates for a year, they'll have sold your loan or most of it so they can give you some leeway.  See if any producer is going to stop (many here are retiring-more every year).  

Personally I think this year and early next year are all about a lack of supply and not so much booming demand.  I think in late spring/summer of 24 we'll start to see some global economic recovery and that will show up in the USA.  Another caveat..the IRA is going to roil things starting in about 3 years when the battery factories all start pumping out batteries.  Eyes wide open

[ehp]

Log buyer told me today walnut is dropping hard and fast . Even lower grade veneer here shortly is a no sale . They do not want it

[nativewolf]

Ours are all export logs.  They do t want anything domestic either.  

[Firewoodjoe]

Pulp and low grade logs keeps the ball rolling around here. Grade and veneer are just bonuses. 

[stavebuyer]

One of the larger sawmill auction houses had a full page ad in last weeks trade paper. 10 upcoming absolute sawmill auctions listed by one company. The market positives are caused by lack of supply from primary manufacturers going out of business. 

This time last year green 4/4 FAS Hard Maple was flirting with $3bd/ft. Today its $1.20 if you can get a PO.

China has been the salvation for hardwoods since 2005. The China-US trade is going to continue to contract as there is open antagonism on both sides of that equation. China won't buy a thing that they can source or substitute from somewhere else and neither will we. 

No need to worry about trying to save up a half million as in bad times there will be good deals on stuff the lenders took back and need to dump for pennies on the dollar. People with cash are always the ones who get those phone calls begging to make some kind of offer because the lenders are also over-extended.

You don't need the next newest and greatest. Go the sales and buy up all the parts, tires, hose making equipment bringing scrap prices. Buy your own stumpage, timberland etc. Being the biggest, fastest, highest leveraged supplier for the next legacy mill on the auction ad isn't a good place to be.

[Firewoodjoe]

You don't need the next newest and greatest. Go the sales and buy up all the parts, tires, hose making equipment bringing scrap prices. Buy your own stumpage, timberland etc. Being the biggest, fastest, highest leveraged supplier for the next legacy mill on the auction ad isn't a good place to be.

Half a million is a good deal or it's already getting worn out. They're $700-900,000 for one machine. You need two. And  I already have what you said except buying my own stumpage. Time will tell. This always comes around. And I still don't know why prices from last year are being compared. Wasn't that record highs? When was the last time it was that high? Like I said time will tell. I won't be doing anything until I see fit. 

[Firewoodjoe]

I just looked at the last few months of state sales. Guys are still bidding high. Mills and loggers. They don't seem to be to worried. All types of species. Pulp logs. One was 11,000 cord. Went over $700,000

[ehp]

A bigger hard maple sale just went here last week a couple hours north of me where hard maple is King and big bucks , Feb sales were going at $1700/1000 standing , last week $400/1000 for same type of maple , Lot of guys got caught paying big money and now cannot sell it 

[Firewoodjoe]

The most expensive sale I've cut was 800/1000. Otherwise it's always 250-600. 

The sales I was referring to were just bought. They have two years to cut them. A lot of wood gets bought around here so guys have 1-3 years of work. 

[Southside]

Same but different. In November 2007 my farm sold for $10K an acre to a high roller who was and had made deals all over the place, less than three weeks later the market was dead. Buyer went bankrupt. I paid $2K in 2012. First lesson is that high rollers only know how to high roll and will keep doing so right until they smash into the wall at Mach 2.2. The second lesson is that things stay low for a lot longer that they stayed high after a crash. 

Look at how fast the supply chain collapsed and how things still aren't back to normal.  Nothing is immune to gravity.  

[nativewolf]

You don't need the next newest and greatest. Go the sales and buy up all the parts, tires, hose making equipment bringing scrap prices. Buy your own stumpage, timberland etc. Being the biggest, fastest, highest leveraged supplier for the next legacy mill on the auction ad isn't a good place to be.

Half a million is a good deal or it's already getting worn out. They're $700-900,000 for one machine. You need two. And  I already have what you said except buying my own stumpage. Time will tell. This always comes around. And I still don't know why prices from last year are being compared. Wasn't that record highs? When was the last time it was that high? Like I said time will tell. I won't be doing anything until I see fit.

yep CTL sure is expensive.  You'll know a good deal when you see it and don't worry if timber prices correct back to a norm.  I don't have the HMR in front of me but I am sure HM was much lower at all points compared to last year which was not normal.  I can give you the 5 year average on HM sometime if you like.  
800/1000 for stumpage is quite high.  In YP we might be at high 3 or 4 something straight through.  I have paid $4000/1000 for walnut- that was fun.  
Things with China don't look great but Europe does so that's good news we haven't seen in a few years.  

[nativewolf]

A bigger hard maple sale just went here last week a couple hours north of me where hard maple is King and big bucks , Feb sales were going at $1700/1000 standing , last week $400/1000 for same type of maple , Lot of guys got caught paying big money and now cannot sell it

Weyerhauser buyers even got caught doing it and they are not younguns.  They have been around the block more than once and still overpaid.  It happens.  

[ehp]

an average for just run of the mill timber is $600 to $1000/1000 standing and with prices coming down the land owners want the same price or they will not sell , I have seen hard maple sell at $2500/1000 standing , walnut double that quite a few times but when they are all done they really did not make any more than the guy cutting average timber but they took a huge risk 

[ehp]

Your hard maple will not compare to ours so to compare prices it needs to be prices from here , You can say what you want but it's pretty easy to see it's not good out there and turning worse quite fast , We got mills closing down which has never happened like this before up here and with this govt running the show like they are there is no reason for this to turn around any time soon 

[stavebuyer]

I don't have an axe to grind and could care less what choices anyone makes. What I can offer is long term perspective about the loggers, sawmills, and paper mills I have dealt with the past 45 years. The market cycles and the number of players contracts. All the loggers here locally who grew large at the behest of the papermills are all long gone as are the mills they contracted for. Most were liquidations. Some were casualties of corporate raiders selling off the parts. More than a few suffered through divorces possibly from the stress. The common recurring theme is large debt coupled to the whims of a single major income stream. Unlike farmers who can hedge input costs, coupled with crop insurance and forward contracting loggers are at the mercy of the weather, global trade trends, and the corporate mill that may be sold or closed next week. The procurement manager needing wood this week will get the memo about the mill closing the same day as the press release.

I applaud anyone who doubles down and bets on themselves. The gambling kicks in when your house becomes collateral subject to the whims an activist shareholder at xyz paper company Inc or any of the pitfalls of being dependent upon a collapsing industry.

Cost and productivity of equipment that produces a product that has no value becomes irrelevant. Only thing the banker is concerned about is if the monthly note is paid on time.

[nativewolf]

Joe I think the takeaway here is that even though we may all have different perspective on timber values and log pricing, etc the one thing we all share is a belief that pulpwood as a product class is a very very high risk business.  It's high risk especially because the owners are not local...they have a myriad ways to skin profitability that have nothing to do with how well you do your job or even how well anyone at the mill does their job or everyone at the mill.  If the treasurer said 4 years ago..hey lets do a high yield junk bond indexed to the WSJ reported prime rate (which was then .025) to finance operations and we'll take all the profits and now that note will come due in Feb and a replacement note is 9.025% than the mill has to scramble to create a 9% greater profit and in a recession that extra 9% is not there.  In fact the opposite...they may need more cash than before.  Well the mill starts planning to shutdown and you know what they do in the meantime...run wide open.  You won't see it coming. 

This is happening all over the world, in Finland you'll hear the same complaints you hear in Maine.  In South Africa..the same.  In MN..the same.  

Stavebuyer and I don't always agree on everything and that is as it should be on a forum with many people from many backgrounds.  That's the value.  On this point that could be vital to your business plans...Stavebuyer and I agree.  Pulpmills as customers are high risk.  Eyes wide open.  That's all we are saying.  You seem like a great guy...all hustle and no bitching and whining.  We all want you to succeed.  All we have is a bit of perspective as we have seen the earth go around the sun a few more times.  

If I were in your shoes I'd be looking to de-risk by getting some USDA grants (value added producer grants, etc) to help back your endeavor and take some of the risk off.  

At the same time you have some advantages- Michigan has some furniture makers, its a state that might have turned the corner.  At least Michigan is landing it's fair share of big new factory builds.  You have some species diversity vs say Northern MN.  You have lots of sorts going on in your harvest and that means many buyers, I don't know who they are but man that is a good sign.  If all the pulp sorts go away what is left?

[Firewoodjoe]

Paper mills have been a loosing battle for many years. As we sit on an our electronic devices. We dont have a paper mill. Well brown paper for cardboard. If a divorce was going to happen in hard times then they shouldn't have been together in the first place. That was just bidding time. House as collateral!! No thanks. Yes markets are not good nobody is saying they are. 

Look up pull hard logging. Just seen him on YouTube. Don't know him and is way south of me. Baught two new tiger cats and sold two big log sales. Walnut and white oak. 100,000 feet on one sale. Guys are moving wood. Just not getting rich like they were last year. More like a bad normal. 🤷‍♂️ we'll all see soon. 

[stavebuyer]

A guy selling 100K ft of Walnut or White Oak is the guy that can afford new toys. He probably isn't doing much chip wood contracting by the cord. Be that guy.

[Firewoodjoe]

Joe I think the takeaway here is that even though we may all have different perspective on timber values and log pricing, etc the one thing we all share is a belief that pulpwood as a product class is a very very high risk business.  It's high risk especially because the owners are not local...they have a myriad ways to skin profitability that have nothing to do with how well you do your job or even how well anyone at the mill does their job or everyone at the mill.  If the treasurer said 4 years ago..hey lets do a high yield junk bond indexed to the WSJ reported prime rate (which was then .025) to finance operations and we'll take all the profits and now that note will come due in Feb and a replacement note is 9.025% than the mill has to scramble to create a 9% greater profit and in a recession that extra 9% is not there.  In fact the opposite...they may need more cash than before.  Well the mill starts planning to shutdown and you know what they do in the meantime...run wide open.  You won't see it coming.

This is happening all over the world, in Finland you'll hear the same complaints you hear in Maine.  In South Africa..the same.  In MN..the same.  

Stavebuyer and I don't always agree on everything and that is as it should be on a forum with many people from many backgrounds.  That's the value.  On this point that could be vital to your business plans...Stavebuyer and I agree.  Pulpmills as customers are high risk.  Eyes wide open.  That's all we are saying.  You seem like a great guy...all hustle and no bitching and whining.  We all want you to succeed.  All we have is a bit of perspective as we have seen the earth go around the sun a few more times.  

If I were in your shoes I'd be looking to de-risk by getting some USDA grants (value added producer grants, etc) to help back your endeavor and take some of the risk off.  

At the same time you have some advantages- Michigan has some furniture makers, its a state that might have turned the corner.  At least Michigan is landing it's fair share of big new factory builds.  You have some species diversity vs say Northern MN.  You have lots of sorts going on in your harvest and that means many buyers, I don't know who they are but man that is a good sign.  If all the pulp sorts go away what is left?

I didn't see this @nativewolf  must be I posted right when you did lol
Yes very diverse world wide. Many different situations and markets. One pulp mill has been here since 1948. They could definitely go out but with all the other states closing up pulp mills and the newest mill spending big money to start here, I'd say someone much more involved than us figures Michigan is worth it. If pulp went out we'd be down to all the log. Low grade and high grade. And all the pallet logs. 12" to 6". That is a more problematic market than any of them. They have shut down many times. Then pulp would have to go for firewood or chips. Yes they're still here. The price actually went way up at one facility last year. Some guys pulled their chippers back out. Will the world stop using OSB board? What about cardboard? The paper mill in the U.P could cause more problems. Wood would have to transition from there to down here or Wisconsin. That would constrict our markets but with the mac bridge weight limit and fuel cost that only works with back hauls. Mills here have went out. Currently three small ones. But they have a history. Fires 🤔 and suppling one weird market and not staying diverse. There's no guarantees that's for sure. But when I see pics or YouTube of other states logging, we market 5 times what everyone else does. Pulp and firewood that's saw log size? Logs.... Get so trimmed up and pampered! We cut it shorter and send it! By size and if it's straight and solid. The crooked or punky goes for firewood or pulp. Michigan markets are nothing like the south or East or west. Even lake states like Wisconsin or over to Minnesota. They don't sort like we do. I hate sorts but in times like this it keeps options open. Heck logs trucks in the UP don't even have enough stakes for us to run full loads of logs. They set them up for mostly 8s   I could go on forever. Michigan is not like the rest. And I hope it stays that way. 

[Firewoodjoe]

A guy selling 100K ft of Walnut or White Oak is the guy that can afford new toys. He probably isn't doing much chip wood contracting by the cord. Be that guy.

He's in a different region of the sate. No pulp mills down there and he has big oaks and walnuts. We have aspens oaks and maples. And pine stands. 

Besides how can he afford new toys when everyone says the grade/veneer market has collapsed so bad. 

[Southside]

Same way I see guys buying $1.3 million combines on $8 beans. Pray to pay. I take chances, plenty of them, but I can't sleep well that way. 

[mudfarmer]

Probably good to be skeptical of people on youtube with all the newest stuff that are doing something like farming or logging. Not a comment on who you are talking about because I didnt look, but a comment in general... You never know their situation, some inherited money, some worked hard for it but doing something else, some financed a $1.3M combine to harvest $8 beans did well in the stock market, slipped on peepee at the costco and got a settlement check, etc etc etc. If he sold 100k ft of walnut and oak --- did he buy the stumpage? If so that tells you where the new tigercats came from, he already had money and who knows where it came from. He could be buying 100k ft for $2/bf and selling for $2.01/bf for all we know.

[chevytaHOE5674]

This region we cut 60% pulp and I haven't seen anybody worried about anything. For the most part nobody has cut a stick of wood in 8 or so weeks because of load restrictions and spring melt and it's business as usual, equipment is getting repaired, new machines are arriving, new machines are getting ordered, etc. Sales being sold on 2 year contract are still bringing good money. 

Frankly I'm a little surprised that guys aren't getting at least a little concerned, expecially with thousands and thousands of cords of pulp yarded up all over that still needs to be hauled to the mill.