First, during the recent recession, the number of hardwood loggers and hardwood sawmills dropped by at least 50 percent. Now that the demand for lumber has increased, there is a definite shortage of logs to meet this growing demand.

 

 

 

Second, the number of people buying cabinets, furniture, millwork, flooring and other wood products is increasing. In fact, we can predict the average market increase because the potential buyers are already in the “pipeline.”

 

 

 

Third, with oil fracking being a big, growing industry in the Midwest and with the lack of pipelines to carry the oil to the refineries, railroads are being used. Estimates are that 200,000 oil trains will be running this year. The number of railroad ties required to support the tracks for these huge loads is growing tremendously. In order to encourage sawmills to cut ties rather than lumber, the price of ties has increased substantially. With an oil train hauling cargo worth $750,000, there is no way that the railroads will tolerate a lack of ties, so they will pay whatever it takes to get the number of ties they need. (Further, if the U.S. develops an energy conservation policy that encourages rail transportation, the demand for ties will grow even faster.) With tie prices increasing dramatically, the value of the remaining lumber in the log will also increase. Further, with more ties, the pallet and flooring industries will have to purchase higher grades of lumber at higher prices, and both of these markets are growing. So, when the cabinet and furniture industries look for lumber for their needs, the price will be higher than ever.

 

 

 

What can you do?

 

 

 

I see three possible options to mitigate the rising prices and thereby put you ahead of the competition.

 

 

 

One option is to buy standing trees now (this usually requires a payment to the landowner immediately, even if harvest will be delayed for several years). Then contract with a sawmill to saw these trees into lumber that you can use (and probably no ties).

 

 

 

Another option is to buy and stockpile kiln-dried lumber now, lots of it, and then use this “lower cost” lumber in the coming years.

 

 

 

A third option is to learn how to be more efficient when processing lumber into products By higher efficiency, I mean less waste, higher recovery (or yield), more efficient designs, and fewer rejects during and after manufacturing. In case my crystal ball is indeed correct, why not set a manufacturing goal for your plant of a yield increase of 6 percent? I’ll bet that the opportunity for such an increase is real and that you can do it if you apply excellent processing techniques.