Timber Marketing Strategies Dennis Hazel 1 Clay Altizer 2 1 North Carolina Cooperative Extension Service AND College of Natural Resources NORTH CAROLINA STATE UNIVERSITY 2 North Carolina Forest Service
Do You Really Need a Strategy? You would not put your life savings into the first investment you found You would not sell your house to the first offerer Maximizing your profit/income requires some knowledge/work and a strategy But, markets are complex and different place to place and change over time Seek professional advice!
Factors That Used to Influence Stumpage Local demand for lumber vs. local supply, especially for hardwoods Local mill capacity relative to demand (especially influenced local stumpage prices) Changes to tastes for paneling, flooring, etc.
Today s Factors are Much More Complex Health of the global economy Global supply Global demand Value of the U.S. dollar relative to other currencies Despite national and global factors, local supply vs. local demand still a big factor
Let s Start With the Old Timber Value Model for Plantations Lowest value pulpwood (1X value at 12 to 18 years first thinning) Then, chip n saw for thinnings (3X value at 15 to 18 years) Highest value Pine sawtimber (6X at 30 to 40 years)
The Old Model for Hardwoods Lowest value pulpwood (1X value at maybe 25 to 50 years for TSI or OSB or pallet wood) Highest value Sawtimber (4X to 7X depending on species, size, & local markets at 40 to 60+ years)
The Great Economic Downturn Nationally 2008 to Date Housing starts down 75% Lumber production down 40% Much softwood stumpage down 50%
Forest Sector Reeling During Economic Downturn Society of American Foresters - The Forestry Source: January 2012
What Has Happened in NC? Source: David Ashcraft. Presented at Wood to Energy: Fueling Economic Growth in North Carolina Workshop 9/8/11
350 Traditional Industry Decline Sawmills 300 250 Number of Facilities 200 150 100 50 0 1990 1992 1994 1995 1997 1999 2001 2003 2005 2007 2009 Year
Traditional Industry Decline 35 30 25 Number of Facilities 20 15 Veneer Mills Pulpmills Composite Panel Mills 10 5 0 1990 1992 1994 1995 1997 1999 2001 2003 2005 2007 2009
Price Impact for NC
The Push for Renewable Energy is Creating New Markets Most of the important development policy driven
Examples of Policies That Encourage Biomass for North Carolina Long-standing ethanol subsidies (U.S.) Renewable Fuels Standard of 2007 (U.S.) Interests of the US Military Senate Bill 3 from 2007(the REPS) (North Carolina) The Biofuels Center of NC 20-20-20* (EU) *http://ec.europa.eu/clima/policies/package/index_en.htm
In Response, Biomass Energy in North Carolina is Rapidly Developing Three private electricity (power) plants have converted to woody biomass New biomass power plants planned Various-scale CHP conversions completed or underway using woody biomass and agricultural residues Wood pellet plants being constructed or planned for EU power markets Cellulosic ethanol plant
What Will This Mean in Terms of Market Strategies?
Electricity, Process Steam, Will mostly be done using dirty chips (or fuel chips) harvested from logging residues during otherwise conventional harvesting Heat, and CHP 3/1/2013 22
How are Most Wood Chips for Fuel Produced? (1) Mostly during otherwise conventional harvesting Chipper added Logging slash & cull trees normally left are chipped (called logging residues ) (2) Use of low-value trees in absence of pulp markets which can be chipped or delivered as logs?
Biomass Markets May Help the Logging Industry
We Start by Felling Trees with Cutting Machines Today s Chainsaw The Felling in Our Tree-length Harvesting Systems Machine 3/1/2013 25
The Rubber Tired Skidder 3/1/2013 28
What We Did Not See Coming Large Scale Wood Pellet Production Biomass Plant in Italy Bulk Carrier from U.S. Pellet Stoves Overseas or Domestic
What Will the Pellet Companies Be Purchasing? Mostly low-value logs In NC, mostly hardwood May use some logging residues
Biomass Transportation Fuels Feedstock purchased will depend on the technology May be logging residues or lowvalue trees or energy crop trees (slide borrowed from Alex Hobbs)
What Will All of This Mean to You? Stumpage for logging residues will be $0 to maybe $2 or $3 per ton, but you may not have to do site prep before planting Low-value trees for energy will probably pay about pulpwood prices, but it will improve your ability to manage your stands
There Are Some Cautions for Energy Wood The value of logging residues will increase, thus payment to landowners will be appropriate Pulpwood often gets chipped for energy (you get $0 per ton instead of $4 to $8) Quotas Sometimes it s just logistics
Other Cautions in a Changing Market Pulpwood prices for Chip n Saw Super Pulpwood New term for large straight pulpwood trees
Final Thoughts Main value will always be on sawtimber and high-quality tree products It may be 5-10 years of recovery Always get professional advise before selling timber
For more information Dennis Hazel, 919 515-5573. dennis_hazel@ncsu.edu For woody biomass see: http://www.ces.ncsu.edu/forestry/biomass. html