The Word from the Woods: Experts Weigh in on 2018 Industry Trends
By Mike Monte
A lot happened in the forest products industry in 2017. A softwood tariff on Canadian lumber imports, lower prices for pulpwood, and the fear of more pulp mill closings have affected the logging and sawmill industries. Looking ahead to 2018, we spoke to experts across the region who told us their expectations for the coming year.
THE PULPWOOD PROBLEM
The pulpwood market presents a recurrent set of problems for Americans in the forest products industry. Over thirty years ago, I was in the logging business like many of you who are reading this article. Our best market for aspen pulpwood, by price, was Consolidated Papers, located in Wisconsin Rapids, Wisconsin. Consolidated operated a buying yard for aspen on a rail siding a few miles east of Argonne, Wisconsin, in the northeast corner of the state. We went there to beg for contracts for the aspen that showed up in great plentitude on just about every logging site around. You were never given enough market for all of the aspen produced, and lower paying markets were then called upon.
One day, you would be treated kindly, and the next day given the bum’s rush. The operator at the landing would say no — and that was final! You immediately knew that the value of the Canadian dollar against the American dollar had fallen to the point where spruce chips were cheaper to import than buying Lake States aspen. To add insult to injury, if your timber sale was located in the northern end of the county, and the schedule was right, you would wait for the Soo Line train to cross the road and watch gondola after gondola loaded with Canadian spruce chips pass by. As they passed, you’d realize that your household income was going to drop for a while.
Of course, you don’t have to be logging to be affected by Canadian imports. I have been publishing a weekly newspaper since my logging days, and the company that prints the paper every week informed us that the price was going up because newsprint has taken a sharp rise. According to our printer, there are is no U.S. manufacturers of newsprint left. The weak Canadian dollar eliminated domestic newsprint paper production. The price rise is due to the proposed U.S. tariff on Canadian newsprint. Of course, the Canadians don’t pay the tariff. Publishers of newspapers will pay that tariff. Supposedly, this will give the U.S. manufacturers incentive to get back into newsprint. Either way, weekly papers printed on newsprint are going to cost more in coming years. If you advertise in newspapers, the cost of your advertising will rise as newspapers pass on the costs to businesses, who in turn will pass this increase in costs to their customers. I’m not sure who the winner is in this scenario.
All of you veteran loggers and sawmillers out there are well aware of changing markets. If you are in the business, you are well aware of the many influences that can change your bottom line. It is part of doing business, and successful people in the industry have learned to adjust.
SOFTWOOD: AN IMPROVED BOTTOM LINE
Trends in the industry will, of course, change from one area of the country to another. In a conversation with Tracy Swan of Pleasant River Lumber, in Warren, Maine, I learned that since the tariff went in place on Canadian imports of softwood lumber, their bottom line has improved. They are a softwood lumber mill, and the market for spruce lumber is the best they have. Swan also added that natural disasters, such as the hurricanes in the south, have helped the softwood lumber market a great deal. When I asked about white pine lumber, I was told the market is never good or bad, but that it just chugs along, and is always okay. They are experiencing a shortage of spruce logs as the market has heated up, raising log prices, but the seasonal slowdown caused by winter (which curtails building) is also starting.
Moving west from Maine to Arbor Vitae, Wisconsin, I talked to Rick Wilson from Pukall Lumber. Pukall Lumber deals exclusively in softwood lumber, and sells a good amount through their retail lumberyard next to the mill. The new tariff on Canadian softwood lumber has helped the market at Pukall Lumber. According to Rick Wilson, the manager of Pukall, other factors have helped their market. Fires in the West have created a market for cedar lumber. Another factor that has helped Pukall is the improvement in the housing market. While the local market is important to Pukall, they do sell lumber as far away as Ohio, and, in a unique twist, they also export white pine lumber to Ontario, Canada. Wilson pointed out that the Canadian market they export to is in the Detroit/Windsor, Ontario area, which is a bit distant from the white pine stands common in eastern Canada, so transportation is a factor in the market.
Sean Barrows, with Mill River Lumber, in West Rutland, Vermont, said that his company is comfortable with the current market. While a little hesitant about the future, his said he is fairly confident that 2018 will be a good year. White pine is their main source of logs and market for lumber. Pulpwood is sold in Ticonderoga, New York, and a pellet plant in Jay, Maine provides the market for waste products that are turned into wood pellets. He said that the tariff has helped some with their markets and that it gives them “some breathing room.”
There is a niche market sawmill in Albany, Vermont that has been helped by the tariff imposed on Canadian softwoods. Colleen Goodridge, from Goodridge Lumber, specializes in cedar lumber and cedar products from that lumber. Raw material comes from about a 75-mile radius. The tariff has given them breathing room on some of their markets, which include lumber, log siding, decking, fencing and log homes. Goodridge said they sometimes sell to Canadian markets as well. The tariff, she said, will mean that more of her customers will look to domestic markets for their building material, which will help the business considerably. One of her worries when she looks into the future is the aging of the work force in the local logging industry, but she does hope for a better 2018.
You can run into the unexpected doing a survey. Robert Thurber, with Jerimoth Forestry, is located in Foster, Rhode Island. He actually sends pine logs to Canada. He loads trucks from Canada that haul his logs as a back haul to Quebec. Thurber has no pulpwood market, and his pulpwood is sold to a mulch manufacturer.
HARDWOOD AND THE IMPORTANCE OF ADAPTABILITY
Hardwood sawmills have different markets and problems than softwood mills. There are also more hardwood mills than softwood mills, especially in the Lake States.
Kersten Lumber is located in Birnamwood, Wisconsin, which is in the northeast corner of the state. The mill is on the rough dividing line between the northern forests, which are predominantly maple, and the oak-predominant southern end of the state.
Owner Butch Kersten said that the markets for hard maple, red oak, and white ash have improved. Kersten said he looks for a better year in 2018. He said the export market has improved on hardwood, and he thinks it will stay that way. The Canadian tariff has actually helped this mostly hardwood mill. Pine pallet lumber was extremely inexpensive from Canada, but now low-grade hardwood pallet lumber can compete.
The problems Kersten now faces are a low supply of hardwood logs and a shortage of employees. The problem with log supply is brought on by wet ground and lots of mud in the region. The low employee supply is likely brought on by an economy heating up, and the availability of more jobs throughout the economy.
Dick Krawze, of Laona, Wisconsin, has been one of the leading lumber brokers in the Midwest. While he claims he is retired, he is still brokering lumber, especially the higher grades of hardwoods.
Krawze said the market has improved, but he noted that the cost of raw material in the Midwest is a problem. According to Krawze, the prices for hardwood lumber and the stumpage costs are the highest in the nation. He is encouraged somewhat by the current marking of hardwood sawlogs on the Chequamegon-Nicolet National Forest, and hopes a better supply of standing timber will temper the bidding prices, allowing for more competitiveness in the marketplace.
Krawze noted that hard maple, red oak and white ash are the leading sellers in the hardwood lumber market at press time. He said that the Chinese market for ash has helped, and thinks that the lower price of ash makes the Chinese fond of this species of hardwood.
World markets for hardwood will strengthen in 2018, predicts Krawze. He said that some of the manufacturers that had moved their operations to Vietnam and China have moved back to North America. Granted, some of these manufacturers have opted to move their facility to northern Mexico and not the United States, but even a change in location to Mexico will be a help to hardwood lumber producers in the U.S. After all, you can’t cut red oak boards out of a cactus!
Krawze said he deals quite a bit with the basswood market, and said that there can be problems with selling basswood to manufacturers in the Far East when Russian basswood is much closer and cheaper. The movement of manufacturing, even to Mexico, helps the basswood market in the United States.
One of Dick Krawze’s big worries is the health of the pulp and paper industry in the Lake States. Throughout the years, there have been far too many closures of mills as foreign competition cuts into paper markets. We have all heard the stories of mill closures in Maine. Krawze, like all residents of logging country, fears that the same could happen in the Lake States.
Pulpwood is always a determining factor in a successful logging operation. Many logging sales are entirely pulpwood, but other sales with a mix of sawlogs and pulpwood can become less profitable if the pulpwood market is poor and the wood is sold cheaply, taking away from the profit on the sawtimber and veneer. Another factor is that the declining prices of pulpwood that can leave a logger in a bad financial situation if his stumpage was bid, but not logged, when the price was high. The profit margin can disappear, and that has been the situation with some of the Lake States loggers. Poor prices on a species or a limited market for a species can force a logger to cut a species of pulpwood he can sell, leaving the pulpwood and the logs on that sale to be cut another day. This can put a crimp in the log supply at the sawmills. Pulpwood may be the cheapest product that a logger harvests, but the volume of pulpwood and the markets for that wood can be a determining economic factor for a logger.
Dave Holli, a logger in Michigan’s Upper Peninsula, deals in healthy amounts of pulpwood and logs. Holli has seen an uptick in softwood lumber due to the rebuilding going on in the disaster areas in the nation’s southern states and Puerto Rico. He sees the market for hardwood lumber and logs picking up. The pulpwood market is solid, according to Holli, but transportation could be an issue because the pulpwood truckers that go to those disaster areas may be chasing bigger bucks. Holli also said that the pulpwood market keeps up the supply of logs to sawmills. On the downside, he worries about the reduced prices for pulpwood, and he noted that the ups and downs in that market are more severe.
Jim Carey, another Upper Peninsula logger, talked of more price reductions for aspen pulpwood and other species of pulpwood, like hardwood. He said that his hardwood pulpwood market is stable, but that too many loggers are bidding the stumpage up and narrowing profit margins on pulpwood.
Carey also said that the general market for biomass is also down. While Carey is generally upbeat about the logging and biomass business, he is also a realist and predicts some hard months in the first part of 2018, partly because of wet weather in the Lake States. He is consistent in what he always says: “Everybody pays too much for stumpage!”
Mark Huempfner, owner of Wild Rivers Logging in Wausaukee, Wisconsin, has similar viewpoints as other loggers talked to. He is not wildly enthusiastic about the pulpwood market in the coming year, but he isn’t totally downbeat either. He wasn’t happy with a dollar-a-ton decrease in hardwood pulpwood, as you would expect, but said he is still in the profitability range. Aspen, he said, is holding its own. The upside of the market is that he is able to sell all he produces.
Huempfner made no predictions for 2018. He has no high hopes, but he also doesn’t fear the months ahead. He did comment on the large amount of pulpwood that can be produced by the logging community in a short time, and that that amount does have, in a supply and demand market, a big effect on pricing.
THE LONG AND THE SHORT OF IT
In summing up the trends, along with the predictions of a variety of industry people over a wide area, it is safe to say that most are cautiously optimistic. The sawmill industry is more upbeat than those who handle large amounts of pulpwood. The tariff on Canadian softwood lumber seems to have made a positive difference for mills specializing in softwoods, especially in the Northeast. Experts hope that an expanding economy will bode well for all aspects of the forest products industry, and we can only hope that this comes true. Whatever does happen in the upcoming year, and whatever trends develop, people in this industry have the ability to cope and adapt.
The Northern Logger and Timber Processor – January 2018 Issue
In Time for the Holidays
By Mike Monte
The forest resource provides many products and not all of those products are in the form of paper or lumber. The Christmas season is also a big user of the forest resource, and not just in the form of Christmas trees. Many people like to decorate their homes and businesses with wreaths, and not those made from synthetic material. They want the real thing that smells like balsam. Northwoods Wreath fills that need.
The Northwoods Wreath plant I visited is just five miles west of where I live in Crandon, Wisconsin. The site used to be a mobile home sales lot with some outbuildings, a big shed with doors on either end and a usable home that was originally occupied by the mobile home seller.
This business gives an economic shot in the arm to working people just before the holiday season and the required Christmas shopping rolls around. It is inded a seasonal business. That big shed that used to be a place for working on mobile homes is just right for the wreath business. People delivering their boughs can drive through, unload their boughs and have them weighted, pick up their check and drive out the other end. This large part of the building also stores completed wreaths until they can be shipped.
A smaller area of the building is where the wreath makers are located. This is a place where busy hands are the rule. All of the pay is piece work, and wreath makers don’t lean against the table and tell stories. Their hands are always busy and moving fast. In addition to the wreath makers, a man is in the warehouse to handle the incoming balsam boughs, which are supplied by about 45 bough pickers.
The man in charge of this operation is Jeff Kovac. Jeff and his wife, Karen, surprisingly, are from Glacier View, Alaska. This seems strange until you talk to Jeff and he explains that he is in the business of supplying short-term, seasonal help. He is only in the area until the werath-making is done for the season, which is about mid-November. He may also spend time in other states supervising other short-term workers who are going to be employed only until the project is completed. Wife Karen also works in the werath factory as a decorator.
It was surprising to find wreath-makers from places as far away as Chicago, plus a contingent of local help. And the owner of the business, Andy Barrie, hails from the Chicago area. In addition to the Crandon wreath factory, there is another in Wabeno, Wisconsin, about a twenty-minute drive away. Andy operates another wreath installation in Washington state as well.
Marketing of most of the wreaths is done as fundraisers by organizations like church groups, Boy Scouts, and other youth groups. Other wreaths are sold as Fallen Hero Wreaths at VA cemeteries. Barrie said he got his start in the wreath business as a Boy Scout over 36 years ago in the Chicago area. Most of these wreaths will be sold in Wisconsin or northern Illinois.
Watching the people work on wreaths was interesting. One of the fellows working on the big wreaths took the metal framework the boughs are built on and supported on either side. He then inserted himself in the middle of the wreath frame and started tying on the boughs, turning the frame around his body until it was complete. Those making smaller round wreaths worked on the long table, but some wreath-makers were also working on cross-shaped wreaths while others worked on candy cane shaped wreaths. Watching the hands of the people making the wreaths is interesting. All are quick and deft while picking the boughs from the pile, arranging them on the wreath frame and tying them off. They never quit moving or slow down when talking to somebody. They never quit moving or slow down when talking to somebody. They get paid for what they accomplish, and they aren’t there to fool around!
When the wreath is tied of, it goes to a decorator, who will apply the finishing touches like ribbons or cones. The boughs may be balsam, but the cones come from out west and are huge. They weren’t sure whether the cones were collected from Dougals fir or another western species, but they do come from Washington state. Being a Midwesterner, I couldn’t tell either, but I do know I never cut a balsam with cones anything like that. But, this is a decoration, and it just has to be pretty, not species correct. Decorators are also on piece work.
Some people really get into their work, but this guy does it literally. By standing in the middle of the large wreath, he is able to rotate the wreath around his body while he ties on the boughs.
The long table accommodates the workers with plenty of elbow room. Some are making the traditional round wreath and others are making candy cane shape or crosses.
In the warehouse side of the building, finished wreaths are stacked prior to shipping. A pole with a hook helps make the job easier and doesn’t damage the wreaths.
David Wilson is one of the decorators, and can make the finishing touches quickly. After all, it is piece work.
The wreaths are weighed in at the drive-through side of the warehouse.
My wife picked boughs one season for extra cash and as an excuse to get out of the house. I don’t know what she was paid per pound way back then, but I do remember how mad she was when her second load, the biggest load, brought in less money than the first load. The difference was that the owner did the weighting on the second load. That type of behavior doesn’t happen at Northwoods Wreath. Each bundle is weighed while the picker watches. The price is 25 cents a pound, but can vary with the quality of the bough. The small pencil size boughs will bring the best price.
Bough pickers take to the balsam patches armed with a roll of twine. The boughs are broken by hand, laid in neat bundles on string that is wrapped around the bundle and tied off when the bundle is big enough. The size of the bundle will vary with the lifting power of the picker. I was at Northwoods Wreath on a rainy day, and they didn’t expect many pickers to show up, but there were a few stalwarts that donned rain gear and went into the woods. Kovac chuckled and mentioned that the boughs did weigh a big more when wet, but not enough to make any ssubstantial difference to their costs.
When that Boy Scout comes to the door selling Christmas wreaths, it never occurs to the buyer how much work went into making that pretty, traditional decoration. I am sure that nobody thinks about where the boughs come from, how much work it is to pick the boughs or how much effort is put into building that lovely addition to your home decorating. It is just another product that grows on trees that most of us never think about.
The Northern Logger and Timber Processor – December 2017 Issue