Lumber prices soar during COVID-19

By Jennifer Whitlock

Effects of the COVID-19 pandemic continue to impact agriculture.

In 2020, home renovation projects and new home sales increased. But many sawmills across the nation were deemed “nonessential businesses” and forced to temporarily shut down for weeks or months.

Increased demand for lumber sent prices skyrocketing to 134 percent over the previous year.

At the same time, timber prices—what landowners and tree growers are paid for the raw product—fell drastically.

In Texas, the November-December 2020 statewide average on hardwood pulp was down 42 percent from 2019 while pine pulpwood prices decreased 7 percent. Pine sawtimber prices and mixed hardwood sawtimber prices were down 9 and 10 percent, respectively, for the same period.

Why aren’t landowners and timber growers harvesting the same rewards as lumber mills?

In Texas, two main factors are at play, according to Nacogdoches County Farm Bureau member Jim Dawson.

“A decade or so ago, there was competition. We had mills all over the place, but the economy and some changes to tax law shut a lot of them down,” Dawson, a longtime forestry management consultant, said.

Over the years, the construction industry shifted from using solid lumber to a variety of engineered wood products. Now, there’s only one mill within range of Nacogdoches that will accept larger logs to cut for high-quality lumber.

“We’ve transitioned over from big, beautiful logs to these little poles most of the mills now want. Basically they want fiber in tons instead of high-quality lumber. Now, it’s a lot of small-diameter sawmills that are very high-tech,” he said. “It doesn’t take a lot of people to run them. Logs are basically x-rayed from every direction you can think of, so when they hit the saw, they’ll be turned exactly the right way to get the greatest lumber recovery out of them.”

Oriented-strand board (OSB) replaced plywood, according to Dawson.

Pulpwood used to be turned into paper, but now it’s chipped and glued back together under heat and pressure to make a panel suitable for load-bearing construction. Dawson said it’s popular in flooring and walls for new houses and buildings.

The smaller-diameter logs used for OSB and other engineered wood can be grown much quicker than traditional lumber cuts.

The consolidation of the industry, increased efficiency through technology and shift in raw materials to cheaper, smaller, raw products created an imbalance in East Texas timber. It’s the opposite of what’s happening in the lumber market.

“We have a supply and demand problem here in East Texas. We have more timber than we have mills to process it,” he said. “Mills here are pretty much running at capacity. They couldn’t use any more logs if you gave them to them. They’re not going to pay any more for it than they have to, and as long as they have people standing outside wanting to get their truck across the scales, they don’t have to worry about that. And so that’s where we are.”

The trend first began in the early 2000s and was only exacerbated by the pandemic.

“In Texas, the timber industry was classified as essential industry from the start. So, we were able to keep working. But the fact that the pandemic shut down so much construction and the market for the wood, that hurt,” Dawson said. “So, we have this big supply but no place to sell it.”

Hauling timber to mills in other areas doesn’t make sense, because higher labor and fuel costs would take more out of already-thin profit margins. The only solution is more mill capacity or more mill locations, Dawson said.

“There are so few mills left here, but we did have a new mill that we can reach come in last summer. They’re talking about building some more,” he said. “We just haven’t had the manufacturing capacity here in East Texas in quite some time. The mills, I don’t know what their profit margin is. But somebody between the lumber and the load is making a pretty good profit somewhere, because it’s certainly not down here with the landowners.”

Timber assistance

Although commercial timber harvesting and hauling were not initially eligible for the Coronavirus Food Assistance Program (CFAP), U.S. Secretary of Agriculture Tom Vilsack recently announced a new program that would include assistance for timber harvesting and hauling.

Sen. John Cornyn of Texas, along with eight other U.S. senators, advocated for timber assistance to the U.S. Department of Agriculture.

“Among the hardest hit, and unfortunately overlooked, agricultural sectors has been timber harvesting and hauling,” the senators wrote in a Feb. 3 letter. “Given the severity of the situation, many loggers and haulers are facing hard decisions about whether they can afford to keep on in the industry.”

The American Loggers Council estimated in 2020, domestic paper mills reduced output or shut down operations altogether resulting in a $1.83 billion loss in the value of logger-delivered wood, showing that as with other commodities, a dire need existed for federal support.

“Like farmers, our loggers and haulers are an essential part of a much larger economy built around manufacturing the commodity product into value-added goods,” the senators said. “In order to keep the broader forest products sector, we must ensure our loggers and haulers make it through this enormously challenging time.”

Post a Comment

Previous Post Next Post