Vincent Corrao, Northwest Management, Inc.
Sell your logs now! No, hold off! OK, wait a while, see what happens. Selling forest products has never been as challenging as it is in today’s markets. The market peaks of 1993 and 1994 bring back fond memories of owning sawlogs that were worth a lot of money. We all long for the good old days, or do we? Let’s look back at 1986 through 1992, the average delivered log prices for the major species ranged from $150 to $293/mbf. We saw significant and steady increases in the log prices through these years, but they were a far cry from the peaks in 1993 of $445/mbf and in 1994 of $505/mbf. These years (93 and 94) were referred to as the owl premium, a time when the timber supply was dwindling and lumber prices soared. Random length composite lumber price rose to over $500/mbf in January 1994 and has not been back to that level since. Where are we today in relation to the past? In 1998 the average open market delivered log price was $436/mbf. This was for all species, but both lodgepole pine and western red cedar were at historical highs, especially the cedar with delivered log prices from $725 to $830/mbf.
When considering what has happened to log prices during the past 10 years and where the log market is today, the prices are not that low. So the question comes up, “Why am I not making very much money selling logs?” Let’s consider what is happening in the market place. Most logs are now purchased by diameter breaks as compared to the camp run offer that were commonly used in the past. Most mills have at least 2 diameter breaks, often 3 and sometimes 4, especially on pine. The smaller timber sells for considerably less than the middle or upper size classes. If your major species is grand fir, then there is an additional challenge since this market has been soft for the past two years, it is readily available, and most mills have plenty of it. Another factor is the availability of small sawlogs, which is affected by the pulp market. The pulp log market is so soft that most facilities are not purchasing. Many small sawlogs that once filtered into the pulp loads are now being utilized as small sawlogs. The pulp products that were once harvested at the same time as the sawlogs are left in the woods. Thus, harvest cost increase and silvicultural prescriptions change. Let’s look at a plan for success when dealing with the log market. Pulp is out, if you have a lot of pulp whether it is large or fiber size material, now is the time to fold. If your stand is small fiber and sawlogs, you may be able to use a cut-to-length mechanized harvesting operation to complete your commercial thinnings and process the majority of the small trees into sawlogs.
Evaluate the size and species of trees you want removed from your woodlot. This is your guide to whether it is a good time to sell or hold. The removal of the trees should be based on the biological and economic impact to your stand. You should grow a variety of species and sizes to maintain forest health and optimize marketing opportunities in the future. Knowing which ones to hold and when to move is dependent on: which species are in need of harvesting; where the market is at that point; impact on the forest; and whether it makes good economic sense. Grand fir is a good example of a tree that often needs removed due to overstocking and insect or disease problems, but it is never worth as much as we think it should be. Looking back at where the price has been for grand fir and where it is today will tell us if the removal is a sound business decision. In most cases, reducing the stocking of grand fir reduces tree competition, fire risk, and makes room for the shade intolerant species such as ponderosa pine, white pine and larch. Pine and larch are generally more resistant to insect and disease problems. Before selling, evaluate the species and log size, the forestry needs and the market for each product. The log market today is good for most species, but realize that the market is volatile and can swing 5 to 15% between quarters. Remember individual species can have better prices some years than others and timber supply issues in each area affect prices. For a better look at the market and the past prices look at the Log Market Report on this site and evaluate whether you want to bet, hold or fold.