AgEBB-MU CAFNR Extension
Green Horizons
Volume 24, Number 2
Spring 2020
Timber Price Speculations amid COVID-19
Lynn Barnickol
We live in unprecedented times; local and global economies are reacting to the COVID-19 pandemic, with many folks out of work and investment revenues down. This serves as a reminder that China is not the dominant buyer of US wood as in the past. Demand for US wood is now primarily from other countries whose demand is not otherwise strong or whose infrastructure is lacking. Notably, demand for other products has eroded the grade lumber portion of the hardwood market for flooring and cabinetry, and this year's wet winter and spring has limited logging.
Missouri forests are dominated by white and red oaks, with other species in far lower volumes. Oaks account for approximately 56% of the hardwood species sawtimber volume in our timberland. Missouri's wood industry, at least in the Ozarks, primarily depends on oaks.
These circumstances combined with an erratic fuel market means speculation about ongoing and future timber purchases is to be expected. This is a good time to ask your forester and potential timber buyers about trends and predictions they see in the market. In an attempt to describe current timber and lumber markets in Missouri, the following reports from consulting foresters located throughout the state are shared here. Reports and recommendations range from "hold on to your trees" to "yes, timber is still being marked, purchased, and harvested." White oak for barrel staves and walnut lumber and veneer appear to remain promising.
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Photo credit: Hank Stelzer |
Foresters may see no bids on some timber sales but still receive good bids on another sale. Walnut seems to be a species in sustained high demand, but in the spring when the bark slips, we may see the predictable seasonal dip in bid prices. White oak stave quality timber continues to be strong. One forester reported, "Timber sales having a high percentage, say 75 percent or more in white oak, will likely sell for a good price." A second forester reported, "A timber sale in Crawford County, on 79 acres, with 75 percent in good quality red oak may not sell." Generally, timber sales may attract bidders, but few are placing bids, or they may bid lower than anticipated.
Why the instability? The price a mill can afford to pay for logs is not stable. When dealing in timber of red oak species where various grades of lumber are sawed, the flooring grades, typically 1 common, 2 common and 3A common are difficult for mills to sell. Domestic demand is weak as consumers consider a variety of do-it-your-self flooring products such as tile, stone, or vinyl. Cabinetry makers are using different finishes that require a less obvious figure, resulting in less demand for red oak. Foresters reported that more than one hardwood flooring plant has suspended operations. Meanwhile, pallet lumber is becoming difficult to sell. Railroad ties are in demand but there is speculation about price stability. One forester shared "The tie buyers may source from their most loyal mills while others are put on a quota system, where limited ties are purchased. However, upper grades of red oak lumber such as FAS, FAS - 1 Face, and some 1 Common are being sold." Success in getting stable prices for their lumber appears to depend on the availability of high-grade lumber sawed, and on the marketing ability of sales staff or the sawmill owner to reach domestic and foreign clients in a sluggish supply chain.
Some loggers have been put on quota, meaning they are only allowed to deliver a limited number of loads of logs to mills. When you or your forester request bids, there may be interest but not many bids received. Several foresters reported, "Red oak volume kills the price, but there is decent demand for white oak stave quality logs." Another commented that "my logger wants a two-year contract in hopes prices may come back or stabilize." Others shared that "even my loggers are saying it's not the best time to sell timber." Still, markets and timber sale conditions are constantly in flux. While a timber sale in Crawford County with 75 percent of quality red oak was reported to be tentative, the forester recently reported, "Eight folks looked atthe sale. When bids were opened there were six bids, the two close bids at the top were both mill owners. The difference between the top bid and bottom bid was $33,000." The two mill owners likely had an order in hand, contradicting the declining red oak market observation.
Not unlike other times, timber bidding is fluid and dynamic. As a rule of thumb, if you do not need the revenue or there is no definite need to salvage timber, wait for better economic conditions. While there have been previous times of uncertainty, wood is used in many applications worldwide, giving the resource an important economic staying power.
Thank you to the consulting foresters who contributed information.