By Jim Griffith
Registered Forester #1616
The rains continue to come, and loggers continue to be hampered from getting into the woods and getting logs out. This is not a good thing for the mill that is using up inventory faster than it is being replaced. This is a very good thing for the timber owner wanting to sell harvestable timber for a high price.
Timber prices tend to be inversely related to the amount of inventory on the mill yard; or they are directly related to the amount of bare space on that yard. In other words, if there is a lot of bare space on the mill yard, there is little or no inventory to run the mill, and the price of stumpage to the timber owner goes up!
The mill does not want to run out of inventory. They have fixed costs that have to be met whether the mill is running or not, not to mention all the people that would be layed off in the event the mill inadvertantly shuts down from the lack of inventory; so it benefits the mill to keep operating even under a temporarily lower profit of margin.
This is a text book case where the supply and demand curve actually works. The mill needs wood, there is affectively little wood available due to wet weather logging conditions, therefore the price delivered to the mill goes up in an effort to build inventory for that particular mill. We have not seen continuous rains like this year in a long time and therefore have not experienced such winter-time increase in prices for several years.
It is the continued rains and wet-weather logging conditions that have led to this current spike in timber prices we are experiencing. We just went through a week or so of dry, sunny days with a good brisk wind that had the ground drying quickly and almost ready for normal harvesting again. Then we get a universal rain storm that affects all markets, keeping the demand side of that curve up, and correspondingly the price side of the curve up as well.
If you have considered selling timber recently, now may very well be the time for you to put your trees on the market. A professional forester can advise as to what markets are strongest in your area and if your timber qualifies for the high demand. If it does, you could reap the benefits of this spiked market, especially if you have hardwood or any tract loggable in wet weather conditions.
If I did not mention it in my thoughts above specifically, hardwood prices are at an extreme, like we have never seen before.