North Carolina Wood Markets:

What You Grow Matters

Eric McConnell, Ph.D.
North Carolina State University
Wood Products Extension
Moore County Farmers Studying Timber Management, 1929
Photo: North Carolina State University

North Carolina Tree Farmers Program Annual Meeting

Cleveland, NC
October 17, 2015

Softwood Market Report- Big Picture

Lumber markets shaky in recent months
#2&BTR SYP Prices down ~$130/MBF from 12 mos. prior

Softwood lumber markets forcing mill curtailments

Creating issues across wood supply system
Sawmills, loggers, chip buyers, Wood dealers, to Landowners

While 2015 not great, what looms for 2016?

Strong US dollar makes foreign imports cheaper
US-Canada softwood lumber agreement
Sources: RISI North American Wood Fiber & Biomass Markets; Hardwood Leader

Hardwood Market Report- Big Picture

What in the world is up with oak prices??
Oversupply pushed #1C Red Oak down 43%, White Oak 37%

Hardwood lumber exports down 10% from 2014 record

Chinese stock market, yuan uncertainty, housing bubble?
Strong US dollar effect here too, will China pay?

U.S. residential construction and remodeling up recently

Generating additional sales for U.S. flooring, cabinet and
furniture manufacturersBut also competing imports

Sources: RISI North American Wood Fiber & Biomass Markets; Hardwood Leader

Pine Market Report- Big Picture

160%
140%

120%
100%
80%

Autumn sales can benefit landowners

as mills build winter inventories

60%
40%

Trucking capacity major concern

Longer haullower timber prices

20%
0%
1/1/2010

5/16/2011
#2&Btr SYP Lumber

9/27/2012

2/9/2014

Pine Sawtimber

6/24/2015

Pine Pulpwood

Sources: RISI; NC State Extension Forestry (courtesy of Forest 2 Market and Timber Mart South)

Hardwood Market Report- Big Picture

180%
160%
140%
120%
100%
80%

Autumn sales can benefit landowners

as mills build winter inventories

60%
40%
20%
0%
1/1/2010

Trucking capacity major concern

Longer haullower timber prices
5/16/2011

9/27/2012

2/9/2014

#1C Lumber

Pallet Lumber

Hardwood Sawtimber

Hardwood Pulpwood

6/24/2015

RR Ties

Sources: Hardwood Review, US Forest Service, NC State Extension Forestry (courtesy Forest 2 Market and Timber Mart South)

Timber Market Report- Big Picture

Potential Domino Effects
Loggers shifting from sawlog tracts to pulpwood
Where pellet mills present, competition holding prices firm

Pulp mill buyers losing key mill residual chip volumes (which
provide about 10% of fiber furnish for pulp and paper)
Timber suppliers (read Landowners) face depressed sawtimber
prices (especially in the South)

Flooring, industrial products keeping hardwood demand up

In NC, crane mats (gas exploration), RR ties, pallets
Sources: RISI North American Wood Fiber & Biomass Markets; Hardwood Leader

North Carolina
Timber Price Report

Source: NC State Extension Forestry (courtesy Timber Mart South)

North Carolina Timber Price Report

Published quarterly by NCSU Extension
Price data gathered from Timber Mart South
All prices reported in dollars per ton
Prices paid for two regions, West/East NC
Conversions available for converting to board
feet (sawtimber, CNS) or cords (PW)
Note: Prices for sawtimber vary when based on
volume
Hardwood: Doyle; Pine: Scribner
Log Rule Matters!!!
www.forestry.ces.ncsu.edu/forestry-price-data

NC Timber Price Report

As an indicator of market activity
Market activity evaluated by
trends*
NEVER used for the direct valuation
of timber or logs
Considering a sale? 5 year trends
Considering an investment?
30+ year trends

Why Use a Grading System?

Timber owners and managers need to estimate present and future
value of trees in a stand
Timber buyers must determine value of stand for purchase
Loggers use grades to decide where to buck logs for maximum
profits
Mills need quality standards to estimate volume of products
produced

Grade is Important Because Price Varies at the Mill

Dramatically by Grade Prices for Appalachian Red Oak
Log Grade

Log Price ($/mbf)

Prime
#1 Sawlog
#2 Sawlog
#3 Sawlog

$887
$601
$342
$213

Premium Over Next Grade

$286/mbf, or 48%
$259/mbf, or 76%
$129/mbf, or 61%

The Quality and Quantity of High Lumber Contained

Within the Log Dictates Its Value
50.0%
45.0%
40.0%
35.0%

30.0%
25.0%

20.0%
15.0%
10.0%
5.0%
0.0%
FAS

#1C
Grade 1

Grade 2

#2C

#3C

Grade 3

Green Lumber Yields from Red Oak Logs From Yaussy and Brisbin (1983)

Grade is Important Because a Trees Value Varies

Dramatically by Grade Prices for Appalachian Red Oak
Lumber
16, 2 Log Red Oak
Product Value
Tree Grade 1
$109
Tree Grade 2
$90
Tree Grade 3
$82

Premium Over
Next Grade
$19, or 21%
$8, or 9.75%

Because prices can vary so dramatically by grade at the mill, it is

very beneficial to maximize the grade of trees grown on your land

For pine, Plylogs can bring 15% premium over sawtimber

Grading Trees and Logs: Part Art and Part Science

3 THINGS TO KNOW
Rules
Markets
Relationships

Part Art and Part Science

Different customers often use somewhat
different grading rules
Even the same rules can be applied differently

Know your markets

There is no replacement for working with the
buyer to see what they want and/or require
Since larger logs allow wider boards, buyers may
sometimes be more forgiving when grading large
logs and trees, thus

Part Art and Part Science

Relationships matter- work with a professional
forester
Whose work with buyers over time has helped
him/her learn what the market requires
And helps them appreciate your situation

What is the Value of My Trees?

Landowners sell timber 1 (maybe 2)
time in a lifetime
Question: How much knowledge can
someone have when they do something
once in a lifetime?
Invest in gaining assistance from those
who work in this area daily!
They can tailor a stewardship plan to
maximize the economic, environmental,
and social aspects of your property

<$100 per acre

> $1,000 per acre

No Easy Answers
Influenced by:
Species
Volume
Size
Quality
Acreage
Timing
Distance from Mill

Site and Logging

Conditions
Local, Regional,
National and
International Markets
Number of Bidders

Knowledge of Landowner

Reality:
Timber is worth whatever the
highest bidder is willing to pay.
Ever been to an auction with only one
bidder?

Inventory
Determine Species and Quality to be harvested

Mark Trees to be Harvested

Estimate Volume
Approximate Value

Mark Trees to Harvest

Example Timber Sale
SPECIES

NUMBER

Black Cherry

18

Red Oaks
Hickory
White Oak
Yellow-Poplar
Miscellaneous

44
81
38
44
10

TOTALS

AVERAGE
DBH
19
19
16
18
21
20

BF VOLUME
DOYLE FC 78
3,684
7,786
7,013
6,166
14,354
1,924
40,927

Contents Of Timber Sale Announcement

Name and Address of
Seller
Location of Sale
Description of Trees to
be Sold
Type of Sale
Times Available for
inspection
Date, Time and Place of
Bid Opening

Statement That Seller

May Reject Any or All
Bids
Requirement of Deposit

How Payment is Made

Seller Conditions or
Limitations
Requirement of
Performance Bond

Types of Sales

The Bidding Process

Lump-Sum Sale

Single Offer

Selling on Shares

Oral Bid or Negotiation

Sale by Unit

Written Sealed Bid

The Contract:
Your Only Protection

Some things to include in a

Timber Sale Contract
Buyer and Seller
Information
Items for Sale
Dollar amount and
Method of Payment
Duration of Contract
Provision for or
against assignment of
contract.

Arbitration Provisions
Utilization Standards
Loss of Timber
Liability & Financial
Responsibility
(Performance Bond)
Accounting for use of
BMPs

How Do You Insure You Get What Your

Timber Is Worth?
Get Professional Assistance
Advertise
Develop a Timber Sale Notice
Try to get at least 3 competitive bids

Set A Minimum Bid

Be Patient, Markets Change

Whats Left: Depends on Planning

Is the Harvest Prescribed by a Forest Management Plan?

Was the Residual Stand Considered?

What about Regeneration for the Future?
Were BMPs Followed?

BEWARE OF :
Select Cutting & Diameter Limit Cutting
Often leads High-Grading
Take the Best and Leave the Rest
Not Much Left for the Future, Inferior Stock
Actually can take longer to produce future
timber than with a clear-cut

Final Recommendation
Cant Say This Enough!

Slide: Dr. Randall Heiligmann

Utilize a Public or Private Forester

To Develop a Woodland
Management Plan
To Assist With Your
Timber Harvest
www.ncforestservice.gov/Managing_your_forest/managing_your_forest.htm

Types of Professional Foresters

County Rangers NC Forest Service
Consulting Foresters Self employed
Directory found at NC Forest Service

Industrial Foresters Employed by the forest Industry

Certified Forester- meets requirements set forth by SAF, State of North
Carolina

Benefits of Working With a Professional Forester

Often Generates More Money with Fewer Cut Trees
More Higher Quality Trees Left for the Future
Harvest is Compatible with Landowner Objectives
Forest, Soil, Water, Wildlife and Other Resources Protected and
Enhanced
Visual Impact of Harvest Lessened
Landowner Usually More Satisfied With the Whole Experience

THANKS FOR YOUR TIME TODAY!

Questions, Comments?

Feel free to contact me,

Eric McConnell, PhD
Wood Products Extension
(919) 515-5582
eric_mcconnell@ncsu.edu
Planting Longleaf Pine on Former Cropland, 1934
Photo: North Carolina State University