Story by David Knight,
Co-Publisher/Executive Editor
The traditional wood fiber supply system in the South, where about 60% of the nation’s total annual timber harvest occurs, is in serious trouble. If it continues on its course the results could be catastrophic for the region’s forest industry, putting at risk consuming mills, landowners, forest managers, equipment interests, timber brokers and loggers.
In recent years many developments have combined to alter the industry dynamic. The industry is no longer vertically integrated and the forest landscape has changed. Timberland Investment Management Organizations (TIMOs) and Real Estate Investment Trusts (REITs) now own most of the forestland once owned by major wood consuming companies. They typically have supply agreements with large mills and this, along with the need for cash flow, is causing accelerated cutting in some locales, making it difficult for small private landowners to get a decent price for their stumpage.
Given today’s high farm commodity prices, all types of forestland owners are converting limited forestland to ag use or selling it to ag interests who are. Also, smaller private landowners are increasingly blending recreational income opportunities with commercial timber growing. Since 2008 many have held back on cutting timber, particularly older stands, awaiting the return of higher prices and thus adding to a swelling volume of small class sawtimber. This has led to a reduction in regeneration cuts and a sharp falloff in tree planting, even as new biomass markets, hungry for pulpwood, emerge here and there. The price gap between pulpwood and small class sawtimber (chip-n-saw) has diminished greatly, leading landowners to perhaps question the economic viability of tree farming.
As a result, loggers generally are not merchandising a stand as intensely. Untold volumes of smaller sawtimber are going to pulp-paper mills and OSB plants—some even to pellet operations. Loggers are clear-cutting less and encountering smaller tracts. Further, timber buyers often struggle to find landowners willing to sell at today’s prices. Instead of six months to a year’s supply ahead, they’re often working with three months or less.
Logging capacity across the region is at a modern day low; the pressure of running a logging business at an all time high. Logging capacity continues to gradually decline as the “treecession” drags on. Loggers are struggling with market contraction, high operating costs, long distance hauls, increasing transportation regulations, and in some places delivery quotas. They’re nursing and patching old equipment (15,000 hours-plus of use), consuming equity as they go. Many are operating at a loss or at best break-even. Some are only one serious breakdown away from going out of business.
One logging association leader sums it up: “Logger attitudes are generally very negative. We are gradually losing crews, particularly those of older men who have been in the business a long time. I don’t think they will be coming back. I do know of a few new crews (started up) by young men who grew up around the business. They’re buying worn out equipment, so there is not much hope that they will succeed.”
I’ve heard reports of timber brokers adding in-house crews because they can’t find independent loggers. In some instances these brokers are said to be subcontracting felling-bunching and/or skidding, much like some loggers do with trucking.
To compound the situation, one major consuming company with mills in several states has embraced e-wood as a tool designed to lower its wood fiber costs. This system tends to add more frustration for loggers and brokers who have to first bid on open market timber and then bid on weekly prices and quotas on the consuming end, with no certainty that they’ll get what they need from the consumer to cover their timber, logging and transportation costs.
All this has pushed the logging community, as a whole, into a corner, and when cornered desperate men are tempted to do things they might not otherwise do. Consider the weight issue and timber fraud/theft. I’ll wager that a majority of southern loggers nowadays either presses the limit or willfully loads heavy. Evidently this practice is encouraged at some mills, perhaps on the premise that they will be forced to increase rates per ton if they do not accept overweight loads. Most mills in Texas reportedly will accommodate 90,000 lb. rigs. Some mills in Mississippi reportedly will accommodate rigs weighing up to 96,000 lbs. The weight limit in both states is 84,000 lbs. At the same time, reports of various types of timber fraud/theft seem to be increasing. Both types of behavior taint an industry that already has enough negative perceptions with the public. Bad actors and crooks aside, a responsible, accountable logger should not be put in a position that tempts him to break the law to make ends meet.
These conditions continue to beset much of the region’s logging corps, as documented in a recent supplier-consumer relationship study commissioned by the Wood Supply Research Institute. Many procurement people on the ground sense that dark days are ahead and some have warned their upper level superiors, but to no avail. Their superiors point to full wood yards and lines of incoming trucks and wave off concerns of subordinates. How true the old axiom rings: “There are none so blind as those who will not see, none so deaf as those who will not hear.”