The Consultant - 2018 - 31

CHANGES OF BIBLICAL PROPORTIONS

Forest products companies were selling
sawmills here and buying mills there,
positioning themselves for a future that
would result in mills dominating their
respective geographic timber supply
regions, resulting in less competition and
lower wood cost to their mills. During this
period the housing bubble burst, sending
real estate prices spiraling downward,
followed by lumber and timber prices.
During the economic depression,
many small, less efficient family-owned
mills closed, while larger, more modern mills were sold. Georgia mill sales
went mostly to Canadian sawmill operators; one Canadian company now owns
seven mills in Georgia and their Canadian
cousin recently purchased an additional
six sawmills. Five or six mills that once
competed with one another for sawtimber
are now owned by one or two sawmill
operators. As competition declined, so
did timber prices irrespective of rising
lumber prices. In Georgia, sawtimber
that in the late 1990s sold for $70/ton
now sells for $25/ton, which, coupled
with more restrictive log specifications,
effectively reduces prices even more and
generates more waste that was once
merchantable material.

REFLECTING ON THE EVENTS
First, foresters have done a tremendous
job of growing trees - some might say
too good. We now have a huge surplus
of wood; according to a recent timber
supply report, this surplus will continue
to build over the next 20 years, assuming existing mills continue to run at or
near capacity. Remember Economics 101?
Scarcity creates value. Timber is no longer
a scarce commodity, and timber prices
reflect that fact.
Second, sawmill operators have
acquired, consolidated or repositioned
so that their mills dominate a respective
timber supply area. Whether by design
or happenstance, the effect is the same:
there is little or no competition for sawlogs in many areas of Georgia. The major
sawmills set the price and the smaller
operators (if they exist) follow the major
mills' lead. Competitive bidding for a timber sale is essentially a thing of the past.
THE CONSULTANT

2018

Domestic mills have repositioned and
Canadian sawmill companies have moved
into the South and dominate their geographic timber supply areas. They control
the market, pay as little as possible for
logs and sell lumber at the highest possible price. That's the American way. No
wonder businesses love it here in America.
In the past, landowners participated in
the market. Timber prices closely tracked
the ebb and flow of lumber prices. This
relationship no longer exists. With insignificant or no competition, landowners'
timber prices are now set by the mill, not
by the ebb and flow of the marketplace for
lumber. How can this happen? It's a big
subject open to considerable discussion,
but it can be summarized in one sentence:
The "wall of wood" is now above the horizon; future timber supply far exceeds the
drain or demand.
What is the landowner's reaction?
There is a growing reluctance in the private sector to spend money for intensive
culture and expensive reforestation in
the face of today's low timber prices and
monopolistic timber sale environment.
In regions where sawlog prices are low,
but pulpwood prices are still somewhat
competitive, landowners are planning for
shorter pulpwood rotations. Meanwhile,
government continues to feed tax subsidies to landowners to encourage more tree
planting. This ill-advised, non-market
influence to plant more trees further
exacerbates the oversupply problem. It's
the classic definition of insanity: "If you
continue to do the same thing, you will
continue to get the same results," in this
case an oversupply of timber.
Does anyone remember when there
was a fear of a timber shortage? For
30 years my uninformed city friends have
been saying, "With the number of log
trucks I see going down the road, there
won't be a tree standing in 10 years!" How
about signatures at the bottom of email
messages: "Save our forest, don't print
this document"?

THE FUTURE AND BEYOND...
SEARCHING FOR A SAVIOR

we must also believe that a surplus timber supply will attract new forest product industries, and/or existing mills will
substantially increase production, probably both. This will eventually reduce the
surplus, increase competition and cause
sawlog prices to rise to a profitable and
sustainable level for both growers and processors. One thing is certain, the absence
of competitive financial returns will lead
to less investment, less forest management
and therefore less timber production. Price
is the great sustainer, the great negotiator.
Price balances supply and demand.
Enthusiasm for timberland investment
has and will continue to decline - for a
time. Money follows opportunity, and if
timber is no longer viewed as a profitable
opportunity, money will naturally flow to
alternative investments. This is especially
true for the new "investor class" (TIMO)
that currently owns/manages approximately 20 percent of the South's most
productive timberlands.
Large landowners who have historically been driven by timber revenue may
not get out of the business, but they will
change their management strategy by
reducing forest management expenditure (less intensive cultural practices)
and altering rotation lengths and target
product objectives.
In the distant future - say 2040-2050 - old
man scarcity will again appear and pressure timber prices to rise. If you are under
60 years old, you may be a witness to this
event. If you are over 60, maybe your children will "drone" you over your woods
to watch a harvest that has returned
to profitability.
No, I'm not a prophet, but I do believe
history is a good teacher, and that in a free
market economy, economic principles are
the gospel.
Billy Humphries
is founder and
former President
of Forest Resource
Consultants Inc.,
Macon, Georgia.

What will happen in the future? If we
believe in the free market system, then
31



Table of Contents for the Digital Edition of The Consultant - 2018

From the Executive Director End Notes
From the President ACF: Forestry, Fellowship and Value
Sharing the Stories of the Trees: ACF Distinguished Forester Jim Able
Maple Syrup: A Steigerwaldt Family Tradition
The South Carolina Chapter and Forestry Students
The Association of Consulting Foresters Celebrates 70 Years
Carbon Offsets: A Viable Opportunity for Forest Landowners?
Changes of Biblical Proportions
Forests for Fish In Michigan, Foresters and Anglers are Learning from Each Other
Case Study: Richland Township Woods, North Central Indiana
Invasive Species 101
Evaluating Forest Inventory Technology for Small Landowners
Choosing the Right Accountant or Tax Preparer
The History of Forestry in Ireland
The American Oak Project Midleton Distillery Creates Rare Irish Whiskey to Promote Sustainable Forestry
Products & Services Marketplace
Index of Advertisers
Why not Surround Yourself with the Best?
The Consultant - 2018 - Intro
The Consultant - 2018 - cover1
The Consultant - 2018 - cover2
The Consultant - 2018 - 3
The Consultant - 2018 - 4
The Consultant - 2018 - 5
The Consultant - 2018 - From the Executive Director End Notes
The Consultant - 2018 - From the President ACF: Forestry, Fellowship and Value
The Consultant - 2018 - Sharing the Stories of the Trees: ACF Distinguished Forester Jim Able
The Consultant - 2018 - 9
The Consultant - 2018 - 10
The Consultant - 2018 - 11
The Consultant - 2018 - Maple Syrup: A Steigerwaldt Family Tradition
The Consultant - 2018 - 13
The Consultant - 2018 - 14
The Consultant - 2018 - 15
The Consultant - 2018 - The South Carolina Chapter and Forestry Students
The Consultant - 2018 - 17
The Consultant - 2018 - 18
The Consultant - 2018 - 19
The Consultant - 2018 - The Association of Consulting Foresters Celebrates 70 Years
The Consultant - 2018 - 21
The Consultant - 2018 - Carbon Offsets: A Viable Opportunity for Forest Landowners?
The Consultant - 2018 - 23
The Consultant - 2018 - 24
The Consultant - 2018 - 25
The Consultant - 2018 - 26
The Consultant - 2018 - 27
The Consultant - 2018 - Changes of Biblical Proportions
The Consultant - 2018 - 29
The Consultant - 2018 - 30
The Consultant - 2018 - 31
The Consultant - 2018 - 32
The Consultant - 2018 - 33
The Consultant - 2018 - Forests for Fish In Michigan, Foresters and Anglers are Learning from Each Other
The Consultant - 2018 - 35
The Consultant - 2018 - 36
The Consultant - 2018 - 37
The Consultant - 2018 - Case Study: Richland Township Woods, North Central Indiana
The Consultant - 2018 - 39
The Consultant - 2018 - Invasive Species 101
The Consultant - 2018 - 41
The Consultant - 2018 - 42
The Consultant - 2018 - 43
The Consultant - 2018 - Evaluating Forest Inventory Technology for Small Landowners
The Consultant - 2018 - 45
The Consultant - 2018 - 46
The Consultant - 2018 - Choosing the Right Accountant or Tax Preparer
The Consultant - 2018 - The History of Forestry in Ireland
The Consultant - 2018 - 49
The Consultant - 2018 - 50
The Consultant - 2018 - 51
The Consultant - 2018 - The American Oak Project Midleton Distillery Creates Rare Irish Whiskey to Promote Sustainable Forestry
The Consultant - 2018 - 53
The Consultant - 2018 - 54
The Consultant - 2018 - 55
The Consultant - 2018 - Products & Services Marketplace
The Consultant - 2018 - 57
The Consultant - 2018 - 58
The Consultant - 2018 - 59
The Consultant - 2018 - Index of Advertisers
The Consultant - 2018 - 61
The Consultant - 2018 - Why not Surround Yourself with the Best?
The Consultant - 2018 - cover3
The Consultant - 2018 - cover4
The Consultant - 2018 - outsert1
The Consultant - 2018 - outsert2
The Consultant - 2018 - outsert3
The Consultant - 2018 - outsert4
The Consultant - 2018 - outsert5
The Consultant - 2018 - outsert6
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