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CME Group Random Length Lumber Futures Price
CME Group Softwood Pulp Futures Price
CME Group Hardwood Pulp Futures Price
U.S. Imports of Softwood Lumber from Canada (U.S. Census Bureau)
Wood continues to be an important material for construction, paper making, furniture design, and various product manufacturing, and there is an international market for timber. All parts of the tree, which is a perennial woody plant, are utilized, from the outer bark to the inner heartwood. The interior heartwood of the tree is either actually dead or of rigid vascular structure. Sapwood is the younger, outermost wood, and it is the growing, living part of the tree. Transport tissues, referred to as xylem and phloem, move water and nutrients absorbed by the root system from the soil upwards through the tree to the leaves. All conifers (softwoods), and almost all broadleaf, deciduous trees (hardwoods) are exogenous trees, which mean that they grow by the addition of new wood outwards, immediately under the bark. This is why the cross section of a tree's trunk reveals concentric growth rings, which are generated annually.
Softwoods, which tend to be gymnosperms (conifers / cone-bearing, needle leaf), are grown all over the world but the most commercially viable stands are located in temperate and boreal forests. There are several hundred softwood species but only approximately 50 are used for commercial purposes. Temperate coniferous forests are located in both North America and South America, and in northern Europe.
Softwood lumber accounts for four fifths of the lumber harvested in the United States, primarily from the Pacific Northwest and the Southeast. The United States is the largest consumer of softwood lumber, with its own domestic production being supplanted by imports from Canada (the largest supplier of softwood to the United States), Brazil, Germany, Chile, Sweden and New Zealand as its major suppliers. In Europe, the major softwood producers are located in the United Kingdom, Sweden, Finland, Latvia and Russia.
Softwoods are used primarily (approximately 80% of annual harvest) in the housing market and other construction-related activites, and secondarily in the furniture and manufacturing industries.
U.S. Census Bureau - U.S. Lumber Production and Mill Stocks - 2008
U.S. Census Bureau - U.S. Lumber Production and Mill Stocks - 2009
U.S. Census Bureau - U.S. Lumber Production and Mill Stocks - 2010
U.S. Census Bureau - New Residential Building Permits / Starts
Ownership & Access to Timberlands
The United States Department of Agriculture, Forest Service, indicates that forest land in the United States covers approximately 747 million acres, of which 20.0% are on National Forest System lands, 49.0% percent are owned by non-industrial private landowners, 8.0% percent by States, 13.0% by other Federal agencies, and 10.0% percent by industrial private landowners. The amount of available timberland has always been declining in the United States due to the continuous conversion of forest to cropland.
The southeastern, coastal plain conifer forests (long-leaf pine) in the United States are located in southeastern Louisiana, southern Mississippi, southern Alabama, central and southern Georgia, and the Florida panhandle / upper peninsula. The In Oregon and Washington, the coniferous forest range is continuous from the Cascades crest west to the Pacific Ocean. Commercially harvested conifer softwood is also grows in Idaho, western and south-central Montana and western Wyoming. Hardwood species grow extensively across all regions of the continental United States.
The standing trees may be located on private land or public land thus forest ownership is very fragmented and is not dominated by any private investor or government agency. The private landowner, which includes individual / families, lumber industry companies, Timberland Investment Management Organization (TIMO), Master Limited Partnership (MLP) and Real Estate Investment Trusts (REIT), owns the right to harvest the trees on their property usually within the guidelines established by the respective state Department of Natural Resources and/or Division of Forestry.
A Timberland Investment Management Organization (TIMO) either owns a property, manages a property on the behalf of third-party investor/owners, acts as a broker for the sale of large acreage tract, investment grade timerland. The principals of the company may not only include investment managers but also professional foresters. Investors may include individual investors, family trusts, institutional investors, endowments and foundations.
Timber is a unique investment, with several characteristics that are atypical for other business situations. First, and most conspicuous, is the long growth (investment) period. Natural stands of Southern pine frequently require an investment length of 45 to 60 years from seed to harvest, a period known as the rotation. Eastern hardwoods may need 60 to 80 years to produce quality sawtimber products. Many Western species also require long rotations when managed in natural stands. On the other hand, intensive management of planted Southern pine shortens the investment horizon to approximately 25 to 35 years, depending on site productivity, cultural practices, markets (prices), and interest rates (cost of capital).
Harvest timing for timber products is more flexible than for annual crops. A harvest schedule can be accelerated or postponed by several years in most cases, giving the owner the opportunity to time a harvest to coincide with personal income needs or to wait for a more favorable price situation. Timber owners can offer different products, including firewood, pulpwood, chip-n-saw, sawtimber, and veneer logs—depending on market conditions and price relationships. Within limits, and with patience, forest land can be acquired in sizes to meet the needs of most investors. Purchases can range from a few acres to thousands of acres, with timber age classes ranging from seedlings to mature trees.
Timber investments are not, as a rule, considered tax shelters because, among other things, one cannot deduct more than your out-of-pocket investment in the activity. In fact, many expenditures must be carried in a timber account for years before they can be recovered. Likewise, long-term borrowing on forest land is limited to institutions such as the Farm Credit Ban and a few private companies that specialize in timber loans. Some commercial banks make short-term loans on forest property.
In the United States, many state forests are open for commercial logging, and pricing is usually established through a sealed bid aution process. States usually provide a timber sale schedule through mailings or on websites in the form of a "Notice To Prospective Purchaser", which will specify several weeks prior to the scheduled bidding the district(s) that have sales available, the specifc sale area and boundary lines within the district, access to the sale area, total sale acreage, volume by species, timber description, and a Cruise Report.
It is very important that individual owners and investors of / in timberland have an appraisal done prior to listing a tract for sale because given the length of time of the growth of the investment timber, a sale may actually be a once in a lifetime event and the accurate value must be known at the time the trees are cut.
A Timber Cruise Report is a report prepared by a timber appraisal company, which is prepared by sending a professional appraiser to phycially inspect the actual location of the timber and includes field GPS measurements, a profile of the specific acreage topography, soil conditions, tree clusters per plot, species inventory and quality, so that the prospective purchaser can make a determination as to what the income potential is of an offered sale and how the harvest would be planned. A tree's diameter is measured at a point 4½ feet above the ground line.
Timber sales, for veneer or saw logs, normally are the primary source of revenue for a forest investment. Timber Buyers, acting on the behalf of a logger or sawmill, contract with the landowner to cut down a specific stand of trees at a negotiated price or sealed bid price. Some states require that a timber buyer be licensed.
Stumpage value refers to what a log is worth still standing in the woods. There is a stumpage value for saw timber and a separate stumpage value for pulpwood. Stumpage is determined through a detailed appraisal of each stand or area of trees that will be harvested, and the calculations are rather complex and vary depending on location and tree quality. The actual payment of the fee can be be paid as a lump-sum payment or a "pay as cut" payment (also referred to as a unit sale, which is based on mill receipts for the sale and delivery of the cut wood).
Forest Managment
Silviculture is the science and profession of forest management in order to develop a timber resource that will obtain a top market price at harvest. Like any asset, forest timberland require strict inventory control, especially when one considers that the trees will not mature for 10 to 20 years. Thus, timberland properties require tree planting plans and implementation, timber stand improvement / thinning and culling schedules, herbicide application (vine control), burn plans and prescribed fire application, watershed protection managment, wildlife habitat management, access road location and boundary management.
The two greatest risks related to timberland ownership and management are severe wilfires and non-native insect / pathogen outbreaks.
Either the owner or the forester contractor has to engage a road construction contractor with the experience and equipment to construct the access road.
Thinning is the process of removing undesirable growth from a specific tract of timberland. A forest has a large population of various types of trees that all compete for space, moisture, nutrients and sunlight. By thinning the tract of undesirable species, diseased trees and undergrowth, competition is reduced and the health of the trees is improved, which supports further growth and will yield high quality timber. Thinning is completed by either physically pulling and cutting trees and other growth, and / or by prescribed burning, which is the controlled introduction of fire to undergrowth.
Clearing and Grinding is the process of removing leftover unwanted trees, slash and undergrowth, and the pulling of stumps, after the trees in a specific timberland tract have been harvested. The purpose of the clearing and grinding is to prepare the tract for forest regeneration by seeding or planting. The grinding process turns plant material and tree stumps into mulch in order to improve soil quality and eliminate the expense of hauling the material away by truck. This operation is completed by either the forester contractor or can also be completed by the logger at harvest.
After a forest has been cut a new forest needs to be established, which is referred to a forest regeneration. If the property has been clear cut (all trees removed) then a complete new forest can be planted, which will mean that all trees will mature simultaneously (even aged timber management ).
Afforestation is planting seeds or trees to produce a forest on land where the preceding vegetation or land use was not forest. A forest (both softwood and hardwood) can be planted by direct seeding or the planting of seedlings (direct seeding is less expensive compared to seedling planting, and is often the faster alternative in a comparison of acres covered). Competing vegetation, especially grasses, must be controlled for a minimum of 3 years.
An appropriate species of tree must be selected for the tract designated for reforestation. The There are commercial nurseries that produce seeds or seedlings for the planting of a forest. Seedling standards and requirements vary with the species and stock type being produced (stock type is a seedling of a specific size as defined by the physical characteristics of the container in which it is grown, and by its age in growing seasons).
The are a number of certifying organizations in the world regarding sustainable forest management. The key to certification is that it will verify that the timber or lumber was harvested legally from a sustainably managed forest. In the United States, the American Tree Farm System (ATFS) is one of the organizations that offer third party, environmental and social standards certification to timberland landowners that meet and maintain the ATFS eligibility requirements and submit to inspection. A second well known organization that provides third party, environmental and social standards certification to timberland landowners is the Forest Stewardship Council (FSC U.S.).
The Canadian Standards Association (CSA) also provides a forest sustainable management certification program.
What is the value for landowners and lumber companies to adhere to sustainable forest guidelines: certainty of wood supply.
Logging
Logging is the actual harvest of the timber. The harvest is done either manually or in combination with specifically designed wheeled or tracked vehicle. Some logging companies are large enough to have the experience and equipment to also construct the access road, and may also be engaged after the harvest for clearing and grinding to prepare the tract for replanting.
The tract or area that has been identified and marked for the logger to enter is known as the harvest block. A harvest may be selective, removing only specifically marked trees, or it may be a clear cut, which removes all of the commercially viable timber from the tract.
Loggers cut, buck, skid, load and haul timber from the forest to the mill. A logger can be an independent company / contrator or affiliated with the sawmill and/or the buyer. They also drive a logging tractor or wheeled vehicle equipped with one or more accessories, such as bulldozer blade, frontal shear, grapple, logging arch, cable winches, hoisting rack, or crane boom.
Falling is the cutting the tree down. Falling can be done manually or it may be done by motorized eguipment such as a wheeled or tracked feller / buncher (only for trees up to a specific diameter). A feller / buncher is a wheeled or tracked vehicle that has a driver in a cab that can direct an extendable, hydraulic felling head with a saw / cutting attachment to grab the bottom of a tree trunk, saw through the trunk, and then hydraulically tilt and direct the tree to the ground.
In the United States, the Bureau of Labor Statistics indicates that the forestry profession had one of the highest fatality rates in 2008: 115.7 per 100,000 full-time equivalent (FTE) workers, with most fatalities occurring by the person being struck by a falling object. Many State forestry and logging associations provide training sessions for fallers, whose jobs require more skill and experience than other positions on the logging team. Sessions may take place in the field, where trainees, under the supervision of an experienced logger, have the opportunity to practice various felling techniques. Fallers learn how to manually cut down extremely large or expensive trees safely and with minimal damage to the felled or surrounding trees. They also may receive training in best management practices, safety, endangered species preservation, reforestation, and business management. Some programs lead to logger certification.In British Columbia, all manual tree fallers in forestry operations must be trained and certified by the BC Forest Safety Council.
Bucking is the trimming of the limbs from the tree and the cutting of the felled tree into logs of a predetermined length. This operation can be done manually or by a a wheeled or tracked vehicle driven by an operator.
Skidding is the transportation of the log from the woods to a access road / common area / landing. This is done by attaching a cable to the log and then using a winch attached to a fixed location or to the back of a wheeled or tracked skidder to drag the log out of the cut area. A grapple skidder is a wheeled or tracked vehicle that has a hydraulic arm, which will grab the wood and haul it away from the cutting area. A forwarder is a a wheeled or tracked grappling arm with a flt bed area driven by an operator that will pick up individual logs and store them on the flat bed and then drive them out of the cutting area.
Yarding is the process of sorting and stacked the logs by species and quality at the access road / common area / landing.
Loading is the placement of the log from the access road onto a log truck, which is noramlly done by a a wheeled or tracked hydraulic loader (sometimes referred to as a knuckleboom loader).
Hauling is the transportation of the log (by truck) from the access road to the mill.
Sawmill Operations
When a delivery of cut logs arrive at a mill it is first measured and graded (called scaling, see below), and then usually goes into the mill´s holding area (referred to as a millpond but also as a sorting yard or log deck). Thus, pond value is the amount a mill will pay for a cut log delivered to the mill's location.
Stumpage value of lumber is less than pond value of lumber due to the need and cost for the tree to still be cut down and brought to the mill for cutting. Hence, one will often see two values quoted for standing trees and cut logs.
Scaling is the measurement (volume by determining log length, diameter, and taper) and grading of the logs delivered to the mill.
Decking is the sorting of logs by species, size and end use (lumber, plywood, chips).
A saw mill is the primary processor of cut logs however there are also portable saws that are brought to a logging job site. When the logs are brought into the mill area they are first debarked. The mill then produces rough sawn lumber, standard / surfaced lumber, wood chips, shavings and sawdust, and firewood (very little of the log is wasted). Sawmills have installed log scanners that can determine the most efficient usage of an individual log, and the entire process can be automated from the primary breakdown cut and all of the following passes of the log through the saw. The mill may also have a kiln drying operation (if the mill produces only green wood it is then sent to a kiln operator). Saw mill cut and surfaced / planed lumber is priced in per thousand board feet (MBFT).
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Lumber Grading
After species identification, all lumber sold in the United States is also graded for Structural Strength and Appearance. For instance, knot distribution, location and size affects both the strength and appearance of lumber.
A typical Certified Gradestamp may look something like:
In the United States, softwood lumber dimensions are traditionally referred to by nominal sizes such as a "two by four" (thickness: 2 inches x width 4 inches; length is variable). However, nominal lumber dimensions are not the same as the actual or net dimensions. For softwood lumber, the actual lumber size is always smaller than its nominal size. The lumber may actually first be cut at the nominal size but after drying (to 15% moisture content) and surfacing it will always be less than the nominal size.
| Certified Kiln Dried or S-DRY Lumber Dimensions | ||
| Nominal (inches) | Actual (inches) | Actual (Metric) |
| 1 x 2 | ¾ x 1½ | 19 x 38 mm |
| 2 x 4 | 1½ x 3½ | 38 x 89 mm |
| 2 x 6 | 1½ x 5½ | 38 x 140 mm |
| 2 x 8 | 1½ x 7¼ | 38 x 184 mm |
| 2 x 10 | 1½ x 9¼ | 38 x 235 mm |
| 2 x 12 | 1½ x 11¼ | 38 x 286 mm |
| 4 x 4 | 3½ x 3½ | 89 x 89 mm |
British Columbia, Ministry of Forests & Range - Timber Sale Notices
In British Columbia and Alberta, substantially all timberlands are publicly owned and the right to harvest timber by independent, commercial operators is acquired through provincially-granted licences, also referred to as a Tenure. The Timber Sale Licence (TSL), which has a term of 15 to 25 year and sometimes includes and option to extend, grants the holder the right to harvest up to a specified quantity of timber on an annual basis (known as an Allowable Annual Cut / AAC, and is measured in cubic metres). The fee for the license is a standard stumpage fee, which is based on what a log is worth still standing in the woods. The determination of the stumpage fee in British Columbia is substantially based on the results of publicly-auctioned timber harvesting rights. Stumpage fees in Alberta are product-price specific and varies with the sales price of the product into which the logs will be converted. In both British Columbia and Alberta, the license holder is required to carry out reforestation after harvesting. Reforestation is subject to various environmental protection laws, and are third party certified to internationally recognized, sustainable forest management standards.
The Province of British Columbia is approximately 95 million hectares / 235 million acres in size and its forested areas are divided into the Coast Forest Region, Northern Interior Forest Region, and the Southern Interior Forest Region, which, combined, accounts for approximately 66.3 million cubic metres of timber. The Northern Interior Region is the largest of the forest regions with an area of approximately 55 million hectares. The Southern Interior Forest Region is approximately 24 million hectares in size.
In British Columbia, under the terms of the The Logging Tax Act, as enacted by Chapter 33, Statutes of 1953 (2nd Session), effective October 1, 1953, a logging tax was introduced that imposes a 10.0% tax on individuals and corporations with net income derived from logging operations in British Columbia. www.rev.gov.bc.ca/individuals/Income_Taxes/Logging_Tax/logging_tax.htm
Canadian softwood lumber exports to the United States are currently subject to export duties imposed under the Softwood Lumber Agreement of 2006 (see pricing below).
The price for lumber is distorted by tariffs imposed by the United States on Canadian softwood lumber entering the U.S. The Canadian government owns approximately 90% of timerland compared to most accessible timberland being owned privately in the United States. The Canadian government does charge a logging (stumpage) fee, however U.S. lumber producers claim that this fee is below comparable market rates, thus the low fee is actually and artificial subsidy to Canadian lumber producers. The United States has imposed an import duty on Canadian softwood entering the U.S., which the Canadian governement has challenged. The World Trade Organization (WTO) ruled in favor of the United States, agreeing the Provincial below market logging fees do function as an illegal subsidy, and in a related ruling approved anti-dumping tariffs imposed by the United States.
Foreign Affairs and International Trade Canada - Softwood Lumber Agreement 2006
The Softwood Lumber Agreement of 2006 (SLA), which is a bilateral trade agreement between the United States and Canada, was negotiated to resolve the longstanding trade dispute regarding Canadian exports of softwood lumber to the United States. The United States agreed in the SLA to forgo the imposition of antidumping and countervailing duties in favor of a mechanism for Canada to impose, when certain market conditions prevail, export measures designed to avoid adverse effects to the United States from continuing Canadian lumber practices. The SLA entered into force on October 12, 2006, and is expected to remain in force for seven years, with the possibility of extension for an additional two years.
Under the terms of the SLA, Canada agreed to impose export measures on Canadian exports of softwood lumber products to the United States. When the prevailing monthly price of lumber, determined per the Agreement, is above US$355 per thousand board feet (MBF), Canadian lumber exports are unrestricted. When prices are at or below US$355 per MBF, each Canadian exporting region has chosen to be subject to either an export tax with a soft volume cap or a lower export tax with a hard volume cap. The measures become more stringent as the market price of lumber declines. In March of 2009, the prevailing monthly price of lumber is US$195 per MBF. Therefore, the Western Canadian provinces (referred to in the SLA as Option A Regions (including British Columbia and Alberta)) are subject to the maximum export charge of 15.0% and the Eastern provinces (referred to in the SLA as Option B Regions (including Ontario, Quebec, Manitoba, and Saskatchewan) face the most stringent volume restraints provided under the Agreement in addition to an export charge of 5.0% (the maximum possible for those provinces). Canada rejected the mechanism in 2007, and even after extensive discussions and formal consultations the parties did not resolve the dispute, and the United States commenced an arbitration on August 13, 2007.
On February 26, 2009, a tribunal operating under the auspices of the LCIA (formerly the London Court of International Arbitration) issued its decision on a remedy in the softwood lumber arbitration in which Canada was found to have breached the SLA by failing to calculate quotas properly during the first six months of 2007. In that decision, the tribunal determined that Canada must cure the breach by March 28, 2009.
On April 7, 2009, the United States Trade Representative announced that the United States imposed 10.0% ad valorem customs duties on imports of softwood lumber products from four Canadian provinces (Ontario, Quebec, Manitoba, and Saskatchewan). The United States indicated that is exercising its right to take this action in response to Canada's failure to cure a breach of the 2006 Softwood Lumber Agreement between the United States and Canada (SLA) and failure to impose the compensatory measures determined by the Tribunal. The duties were scheduled to remain in place until such time as the United States has collected $54.8 million. Conversely, Canada requested that the arbitration panel to rule on whether a settlement offer it made, but the United States rejected, is sufficient.
The CME Group Random Length Lumber Futures Contract price has ranged from a high of $455.6 on May 14, 2004, to a low of $142.1 on January 16, 2009. The price increased during the year, increasing to a high of $236.2 on November 27, 2009, and then closed the first quarter of 2010 at $291.3.
Softwood Lumber intended for delivery against futures market contracts in the United States is manufactured into studs (8' or 92 5/8" x 2" x 4") or Random Lengths (8' to 20' lengths x 2" x 4")
Solid hardwood is used to manufacture furniture and cabinets, and hardwood veneer is used to manufacture panels (the veneer is laminated to multi-layered substrate core).
One board foot unit of measure is defined as a piece of wood 12 inches long, 12 inches wide and 1 inch thick, or 144 cubic inches of wood.
Number of pieces x Thickness (in inches) x Width (in inches) x Length (in feet) / (divided by) 12
If all three dimensions are in inches then divide by 144.
Example: Board feet in one piece of lumber 1 inch thick, 6 inches wide and 8 feet in length.
1 x 1 x 6 x 8 / 12 = 4
In the United States, the measurement system for for estimating timber volume is expressed in cubic feet while in other countries it is expressed in cubic meters / metres.
There is a very large demand, and large market for, standard size 48 x 40 inch (1219 × 1016 mm), general purpose wooden pallets for the shipping / transport / storage of various types of goods. This market is characterized by the leasing and recycling of the pools of pallets after the pallet is manufactured. They are also RFID-enabled, but wood is difficult to tag because of the moisture content and the density of the material. This market is under some pressure from the growth of HDPE plastic, RFID-enabled pallets, which are lighter by weight than wood pallets but just as strong, duarable and versatile.
In the United States, the most common pallet is the 48" x 40" stringer pallet, also referred to as a GMA (Grocery Manufacturer Association) pallet, or standard grocery store pallet (stringers are the three long support length on edge, deckboards run across the top and bottom of the pallet). They are further identified by 2-way entry, 4-way entry, which is the direction that they are accessible by a forklift, and light duty or heavy duty. Block pallets are 4-way entry pallets. Panel deck pallets have three stringer along the bottom and then the top is a solid shhet or deck.
Within Europe, companies use the EuroPallet (CEN Pallet), which is an 800 x 1200 mm (31½ x 47¼ inch), block-style, unidirectional base pallet (accessible from all sides by a forklift).
A problem related to this market though is that wood pallets are usually recycled, if in satisfactory condition, but it is possible that pallets just used to transport pesticides, hazardous or toxic chemicals may now be rented out to the transport of food items or consumer goods.
Regardless of what position one takes on the issue of carbon gas emission and global warming, many tree species can live for several hundred years and trees absorb and sequester carbon dioxide for long periods of time. The health of forests is essential to the ecosystem of the plant. Thus, timber harvesting and wood product manufacturing operations are subject to environmental protection laws and regulations all over the world.
Lumber and forest products are a renewable resource (and is recyclable / biodegradable). Much of the harvesting and growing in the United States is conducted under the guidelines established in the Sustainable Forest Initiative (SFI). However, there is quite of bit of contorversy concerning the environmental damage that is incurred when old growth forests are harvested, and loss of habitat for specific animal species.
There has been strong efforts to promote reforestation in the United States and Canada. However, there has been a decline in tree species diversity due to preference for certain tree species and modern fire supression practices in forests (undisturbed conditions favor fast-growing, shade-tolerant tree species).
The release of data from a 52-year study (Widespread Increase of Tree Mortality Rates in the Western United States
(Phillip J. van Mantgem, Nathan L. Stephenson, John C. Byrne, Lori D. Daniels, Jerry F. Franklin, Peter Z. Fulé, Mark E. Harmon, Andrew J. Larson, Jeremy M. Smith, Alan H. Taylor, and Thomas T. Veblen (23 January 2009)
Science 323 (5913), 521.) indicates that various species of trees in
old growth forests located across the western United States have been dying off at an increasing rate. The study indicated that
the die off occurs in various forests regardless of local pollution, forest age or stand (sparse or crowded). The study
proposes that the common cause may be the increase in the average temperature (approximately 1°) across the region,
which if were to continue would lead to a rapid increase in forest mortality.
www.usgs.gov/newsroom/article.asp?ID=2115
Pests that remained in the bark of wood packaging material are known to have had negative impacts on forest health and biodiversity in the countries to where the packaging was shipped and the pest was non-native. This led to the revision of ISPM No. 15 / International Standards of Phytosanitary Measures, which was proposed by the IPPC (International Plant Protection) in order to reduce the risk of introduction and spread of quarantine pests associated with the movement in international trade of wood packaging material made from raw wood.
Forests in Canada, especially in British Columbia, are still being affected by the Mountain Pine Beetle infestation epidemic, which may have peaked in 2004 but has reduced timber availability and effected wood quality.
The forest products industry is very diversified with a wide range of large and small operators, many who also have integrated operations providing a variety of products, and who ship products internationally. The larger companies own their own timber stands (with the exception of Georgia Pacific) or license access to forests, and own mills that produce lumber, panels (plywood, MDF and LVL), pulp (NBSK and BCTMP), newsprint and wood chips, shavings and sawdust (wood by-products consumed in pulp and paper manufacture). Companies have annual log requirements depending on what capacity their facilities will be operating at, and most try to enter into long-term timber harvesting rights through ownership, licensing, independent logging contractors, and private forest / woodlot owners.
This is a capital intensive industry because companies need an uninterrupted supply source, and they also regularly need to invest in upgrading and expanding facilities and operations.
This is also a very competitive industry as different companies' products still tend to be very similar, and the only way to compete is generally based on price, quality and service.
Some mills have generation facilities which produce electricity to satisfy much of the mill's energy requirements, and can control costs by burning wood scrap. Conversely, mills that are reliant upon utility generated electricity must hedge against electricity market price fluctuations by entering into long-term power purchase agreements, which can be expensive if capacity is substantially reduced or the mill is indefinitely shut down and closed. Mill operations are also exposed to energy price fluctuations related to natural gas, gasoline, diesel fuels and fuel surcharges (on purchased transportation for log hauling and product shipping).
The North American lumber industry operated at approximately 55% of capacity in 2009 due to the substantial decline of residential construction in the United States. Canadian companies were effected by the increase in the value of the Canadian dollar relative to the U.S. dollar (the companies pay wages in Canadian dollars but sell into the U.S. market). Quite a number of sawmills were closed and the remaining mills operated well below capacity in order to reduce losses and manage inventory levels. Overall, many companies experienced lower production, lower shipments and lower prices for what was shipped, adjustments were made to log and lumber inventory valuation, and the only positive development being that the curtailment of operations reduced expenses. During 2009 some companies need to negotiate amendments to existing credit facilities with regard to the calculation of the debt to capitalization ratio and / or eliminate the requirement for the company to maintain a specified interest coverage ratio. Grant Forest Products Inc., filed for bankruptcy protection in Canada in January 2009; AbitibiBowater filed for bankruptcy court protection in Canada and the United States in April 2009.
In the United States, the forest products wholesalers sector is also a very competitive market with several thousand companies. Wholesalers purchase bulk truch and railcar loads of lumber from sawmills and then sell them to retail lumbers yards, home centers (home Depot, Lowes), manufacturers, and other outlets. Just like the primary lumber business, these companies are also significantly affected by the level of residential real estate construction in the country.
Alabama Forestry Commission www.forestry.state.al.us/
American Forest and Paper Association (AF&PA) www.afandpa.org/
American Lumber Standard Committee (ALSC) www.alsc.org/
American Wood Council www.awc.org/
California Redwood Association www.calredwood.org/
Center for International Trade of Forest Products (CINTRAFOR) www.cintrafor.org/
Engineered Wood Association (American Plywood Association) www.apawood.org/
FAO Forestry Department (Food & Agriculture Organization, United Nations) www.fao.org/forestry/index.jsp
International Triopical Timber Organization (ITTO) www.itto.or.jp/ (Japanese / Español / Français / English)
Louisiana Department of Agriculture and Forestry www.ldaf.state.la.us/
Mississippi Forestry Association www.msforestry.net/
National Hardwood Lumber Association (NHLA) www.nhla.com/
National Timber Harvesting and Transportation Safety Foundation www.loggingsafety.com/
Softwood Export Council (SEC) www.softwood.org/
Sustainable Forestry Initiative www.aboutsfi.org/
Tennessee Department of Agriculture’s Division of Forestry www.state.tn.us/agriculture/forestry/index.html
Texas Forest Service tfsfrd.tamu.edu/
Western Red Cedar Lumber Association (WRCLA) www.wrcla.org/
Certified Lumber Grading Organizations
Northeastern Lumber Manufacturer's Association (NELMA) www.nelma.org/
Pacific Lumber Inspection Bureau (PLIB) www.plib.org/
Redwood Inspection Service (RIS) www.redwoodinspection.com/
Southern Pine Inspection Bureau (SPIB) www.spib.org/
West Coast Lumber Inspection Bureau (WCLB) www.wclib.org/
Western Wood Products Association (WWPA) www.wwpa.org/
Canada
Canadian Forest Service / Service canadien des forêts cfs.nrcan.gc.ca/?lang=en
Canadian Lumberman's Association (CLA) www.cla-ca.ca/ (Français / English)
Canadian Wood Council / Conseil canadien du bois www.cwc.ca/
CANPLY (Canadian Plywood Association / Association Canadienne du Contreplaqué) www.canply.org/english/
Interior Lumber Manufacturer's Association (ILMA) www.ilma.com/
Maritime Lumber Bureau (MLB) www.mlb.ca/
National Lumber Grades Authority (NLGA / Canada) //www.nlga.org/
