Modern Wood Markets Diversity, Volatility and Realizing Value Tree School March 22, 2014 Matt Fehrenbacher Mike Messier
Scope of Course Forces that impact local markets Perspective on how to be responsive to good markets Understanding where markets exist Share our collective experience Will not attempt to explain all forces that affect markets or how to predict prices
Primary Discussion Topics Factors to consider in accessing markets Conventional log markets Niche markets Realizing other values
Trout Mountain Forestry: What we do Five foresters, offices in Corvallis and Portland Manage 45,000 acres of forest in Western OR Clients include family forests, municipal, camps, NGOs Involved in every aspect planning, inventory, harvesting, restoration, monitoring Focus on long term management Annual harvest ~6 MMBF Market logs from NW OR and SW WA to Douglas County 65 mills/buyers Forest Stewardship Council (FSC) certified since 1998
Existence of the market Capacity Timing Location Operational Feasibility Product Mix Management Objectives Relationships Factors to Consider
Questions?
Conventional Markets Primary destination for most logs Domestic Sawlog Export Chips Chip and Saw
Conventional Markets: Current Status Bottomed out in 09 Market really did not exist for DF 2S Rebounded with economic recovery Currently strong Extremely volatile Seasonal trends plus short term variances Supply and Demand Reduced tolerance for risk insulates demand Short term market responses to supply
Conventional Markets: Local Factors Global forces affecting markets domestically and internationally Local markets subject to these forces Local conditions that affect prices can be observed Interactions between markets Location and timing Supply impacts Seasonal and Weather Economy
Anticipating Markets Economy Housing Market reports Predictable seasonal fluctuations Weather Talk with buyers, neighbors, loggers
Responding to Markets Prepare for weather Seasonal premiums ½ mile of rocking ~$10,800 $200/load, 2 loads/station 144 MBF @$75/mbf premium covers cost of road Management planning Establishes expectations Knowing what you have and how much Reminder of longer term values
Responding to Markets Secure a logger Critical Existing relationship important Right fit for the job Know your log buyers Existing relationship is key Mutual trust The human element
Questions?
A diversified portfolio for the small woodland owner NICHE MARKETS
Large Logs: White elephant or valuable asset?
Large logs Niche Markets Export: Reliable market with no max butt size for Douglas-fir and white woods. China market great for large, domestic-quality logs. Pacific Lumber & Shipping, Longview, WA March 2014 DF Oversize China: 20 + scaling end: $700/Mbf
Niche Markets Large logs Domestic: Mostly mid-valley and south DR Johnson (Salem, Riddle): 60 max Seneca (Eugene): 36 max Swanson Bros. (Noti): no max Starfire (Cottage Grove): no max Zip-O (Eugene): no max Freres (Mill City): 50 max Hull-Oakes (Monroe): no max Custom sawmill operators (various)
Niche Markets Growing older trees makes sense for small woodland owners There is always a market for big, quality logs Much of the industry is not growing them. Multiple thinning entries required to grow older trees deliver more frequent income while maintaining forest cover and enhancing other values. High values per acre are great for small ownerships.
Utility Poles Niche Markets High value, specialty product with highly specific standards Higher risk market More difficult, expensive to harvest May be incompatible with landowner objectives May be good alternative during poor sawlog market
Niche Markets Specialty markets/products Develop relationship with specialty buyers Alternative species Oak, maple Custom milling for individual logs Sell a value-added product
Niche Markets
FSC Certification Niche Markets Form of marketing/branding, separate your product from standard commodity International standards, most rigorous of any certification Access to green building markets Premium often paid for certified wood by specialty buyers
Niche Markets QUESTIONS?
Property improvements, habitat restoration, cost-share OTHER OPPORTUNITIES FOR ADDING VALUE
Opportunities for adding value Landowners may value aesthetics, habitat, recreation etc. May seek to realize these values through restoration treatments or property improvements Getting from current conditions to goals (ie management objectives) may require investment in management approach that can t generate enough revenue to cover costs Funding may exist to tip the scale on economics of a project
Opportunities for adding value Sources of Funding Assistance Natural Resource Conservation Service (NRCS) Oregon Watershed Enhancement Board (OWEB) Oregon Weed Board Oregon Department of Forestry (ODF) US Fish and Wildlife Service Partners Program Willamette Wildlife Mitigation Program (WWMP)
Opportunities for adding value
Opportunities for adding value
Closing Your forest is valuable; Remember to consider these factors when you want to realize that value Existence of market Capacity (yours, forester, loggers, truckers, mills) Timing Location Logging Feasibility Product Mix Management Objectives Relationships
QUESTIONS?