Peelers, Cutters, and Crunchers (Day 36 of 273)

Well, it seems to be easier to sell beets to Russians than timber to mills in the Pacific Northwest right now. Lumber prices have been declining for the past 2 years in parallel with the housing market, but now the Chinese (big-time raw lumber buyers) are cutting back. In late October we sold two loads of logs (30, about 16-24 ft long, mainly fir but a few cedars and alders) to a middle man that remarkets the logs to mills. We got $1230 for the wood, minus $250 for the loading and transport (100 mile roundtrip for Michael Handly trucking). So the net income from the lumber ($980) will defray about 15% of the clearing cost for the lot. Five years ago, our neighbor sold his logs for $3000, which more than paid for the clearing of his slightly smaller lot!

As I mentioned before, there could be three types of logs on our lot : Peelers, cutters and crunchers. Peelers are straight, thick, knotless firs that can be peeled for plywood veneers. Cutters are those knottier and slight crooked trees that will end up as 2x and 4x lumber. Then there are crunchers. These are basically small diameter logs that are headed for firewood or the pulp mill (crunch). We had no peelers, lots of cutters, and a few crunchers--so be it.

The process of selling the logs is interesting and all new to me (a desert guy). The logs ship to a buyers lot and he gets out his "Scribner Log Scale," which is a book of tables used to calculate the amount of board ft of lumber in a lot. Here are a couple of examples. Our biggest best log was 30 ft long and 16" in diameter: this will yield 300 bd ft of lumber. Most of the firs were 20-26 ft long, but ranged from 8-18" in diameter (logs smaller than 6" were left for firewood). Also, logs are prices by diameter and species. Firs >8" in diameter are priced at $375/1000 bd ft. So our biggest fir log came out at $112.50. As you can see, its hard to make money selling timber nowdays. The cedars (western red) are worth $800/1000 bd ft, whereas alders ranged from $100 (<6") to $600/1000 bd ft (>8"). So big cedars and big alders (for furniture) are the trees to have on your house site, if you have a choice.

We sold our better firs for 2x lumber at $375/Mbf, whereas Carls Building Supply in Port Hadlock gets $500-600/Mbf for premium 2x lumber. Not much of a margin considering that our logs still had to get to the mill in Tacoma, be cut and planed, and then shipped to a warehouse and to a lumber yard. The guy we sold our logs to (Tom French, Quilcene, WA) says he may be getting out of the timber business pretty quick. The straw that will probably break his back is the recent decline of the Canadian dollar. With decreasing oil prices, the Canadian dollar is plummeting, partly with the encouragement of the government as a way to increase exports. When I was in Canada racing Hobies last August, the Canadian dollar sold for $1.05 US, but now its around 80 cents. That means Canadian lumber can sell at a 20-25% discount to its price this past summer, when we were exporting lumber north to them. Carls buys most of its wood from Canada (better quality for the price, they say). The bottom line is the global economy effects about everything.

The question for us, as a builder, is how long do these price changes take to make it to the consumer. Inventories at all the lumber yards are high (low sales), so there might be a 3-month supply on hand. We plan to buy a lot of lumber (wood), ABS pipe (oil), PEX tubing (oil), some copper (Cu) tubing, and about 1/2 mile of copper Romex cable (Cu and oil), just to start. We'll just have to wait and see what goes up and what goes down. At least gas prices have come down, currently $1.99/gal in PT and a bit cheaper in Seattle.