Marketing Timber

Marketing Timber

Current Conditions

Market conditions are currently quite good for white pine and red oak, but down slightly from the highs of this past winter.  In recent years prices have fluctuated considerably for those species mainly due to short-term oversupplies of logs resulting from good weather for logging (dry or frozen ground), or short-term shortages of logs resulting from bad weather for logging (wet ground). 

Demand for pine is currently driven by demand for post-and-beam timbers, as well as boards for furniture and outbuildings, plus cut-outs for window frames.  Our eastern white pine is now substituting for western white pine which is in short supply due to overcutting of that resource-- particularly the large, clear logs in old growth stands.  

The high prices that were being paid for northern hardwoods (sugar maple, white ash, yellow birch) a few years ago have dropped due in part to salvage cutting of trees damaged by the January 1998 ice storm in northern New England, northern New York, Quebec and Ontario.  This storm inflicted heavy damage on many northern hardwood stands.

The market for black cherry has been and continues to be exceptionally good.  We don't have much cherry in Massachusetts except at higher elevations in the Berkshires.  But even small amounts of cherry can increase the attractiveness mixed species timber sales.

Factors Driving Demand

The primary factor driving demand and prices is the strengh of the national economy.  An important secondary factor is the international economies, particularly in Europe and the Pacific Rim.  Demand from the Pacific Rim countries is currently soft due to the financial crises there.  Demand from European countries in increasing as their economies strengthen.

A third factor driving demand, and one which has become increasingly important in recent years, is the weather.  If conditions are too wet for operating heavy equipment for extended periods of time, supplies of logs to mills are reduced, and demand forces prices up.  Conversely, extended periods of good logging conditions during dry summers or cold winters increase supplies and lower demand and prices. 

Recent restrictions on cutting in national forests in the Pacific Northwest has increased demand for forest products from private land.  These restrictions are due to several decades of overcutting on national forests, plus the recognition of threats to endangered species such as spotted owls.  One result is increased demand for eastern softwoods, particularly white pine.

With cutting now restricted in other national forests throughout the country due to lawsuits by environmental groups, and with some big timber companies shifting their operations to third world countries, it's possible that there will be increased demand for timber from small private landowners in this country. 

Another factor that influences markets over longer time periods is consumer preference for different types of wood.  For example, from the late 1970s to the early 1990s the price of red oak kept going up in response to higher demand for this open-grained wood.  Then starting in the mid-1990s consumer preference began to switch to closed-grain woods such as sugar maple and yellow birch.  Demand for cherry also began to increase at this time.

Marketing Strategies

Timber is a unique commodity.  Unlike agricultural crops which must be harvested at the end of the growing season and are expensive to store after harvest, timber will keep on the stump.  And it will keep growing while owners wait for optimal conditions.

In order to take maximum advantage of market trends, a wise landowner will have good inventory data for his/her forest by species and grades.  He/she will be aware of current market trends and all the factors influencing supply and demand mentioned above.

If the landowner is not experienced in the harvesting and marketing of timber, he/she will wait until conditions are right, and then arrange for marketing the timber by an experienced consulting forester.  This will entail marking and tallying of trees to be cut, and putting them out to bid to competent local loggers and sawmills.  This is usually done in late summer or fall when prices rise in anticipation of cold weather and frozen ground conditions. 

Ground conditions are usually also good in summer and early fall, but prices are generally lower then because of the risk of logs and lumber staining during hot weather.  This is less of a problem now than it was in the past because many sawmills now have their own kiln drying facilities which enable them to quickly dry lumber before it can stain.      

Advertising the sale to a large number of potential buyers is wise because it's always possible that a particular sawmill will have an order for certain species and grades of lumber that must be filled, and will pay whatever it takes to get the timber needed for that order.  This is part of why competitive bidding to a large number of potential buyers will show large differences between the median and high bid.  The difference will usually pay for all the costs associated with marking, selling and supervising the sale.

Other Important Marketing Considerations

Marketing also involves careful planning of access to the sale area so that skid roads and landings are efficiently laid out.  Trees must be marked in a way that they can be efficiently removed, and all the conditions of sale must be clearly stated in advance, so that there are no surprises during the cutting operation.  Boundaries must be clearly marked and rights of way must be clearly defined.  Cutting plans must be filed and notices must be sent to abutters.

The forester removes uncertainty about all these factors.  Since any of  these factors can significantly increase the cost of a cutting operation, by dealing with them in advance, the forester significantly increases the value of the timber. 

Careful marketing also ensures that residual stands will be left to grow at maximum rates due to removal of low grade material and thinning around the better crop trees along with harvesting the mature timber.  A good contract plus careful supervision will minimize soil compaction which will reduce future growth, and will minimize damage to residual trees.

Special Considerations for Marketing Low-Grade Timber and Wood/Pulp

Loggers and lumber companies expect to get some low-grade material with all sales, but many will shy away from sales that are predominantly low-grade red maple, beech, and hemlock because their profit margins are slimmer with these species.  Nevertheless, some loggers and lumber companies in fact specialize in low-grade material, and manage to do well at marketing it.  If you have much low-grade material to sell, it's important to know who these loggers and lumber companies are.  

Foresters use different techniques to enhance the marketability of low-grade timber and wood/pulp.  Many foresters who work on commission tally only the grade logs in trees, which in effect gives away the low-grade tip logs in those trees, plus all the logs in trees with no grade logs.  Loggers and lumber companies will get big volume overruns on such sales, but the actual value of the overruns will be negligible. 

Foresters who work on tally tend to tally all logs in all trees, but they may tally some low-grade trees as cordwood or pulp.  Loggers and lumber companies may get log overruns on such sales, but here again the value of the overruns will be negligible.  Also, these foresters may tally some or all low-grade material on a prescription tally based on point samples rather than mark it.  This reduces the cost of marketing low-grade material.       

Potential Monkey Wrenches

Y2K will affect the whole economy to some extent in the year 2000 and perhaps later.  There's been all kinds of speculation about that.  If the economy does go into recession, there will be less demand for building materials and furniture.  But there could be increased demand for fuelwood if heating oil is not available. 

We'll have to wait and see how timber markets respond to the Y2K threat through the summer and fall.  If buyers appear to be hedging their bids and prices, it may be wise to wait until markets stabilize later in the year 2000.

We don't know about the future effects of hemlock adelgid, Asian longhorn beetle, nun moth and other exotic pests.  If there is increased mortality due to these pests and diseases, and if this is  exacerbated by climate change, we could see more salvage cutting which would bring down prices for the species affected by these insects and environmental stress.