TheHardwoodFed: President Obama recognizes forest industry- says wood is one of our Nation's most enviro-friendly building materials. http://tiny.cc/E

TheHardwoodFed: President Obama recognizes forest industry- says wood is one of our Nation's most enviro-friendly building materials. http://tiny.cc/EsFOc:

Finally! A little credit where credit is due!!

"TheHardwoodFed: President Obama recognizes forest industry- says wood is one of our Nation's most enviro-friendly building materials. http://tiny.cc/EsFOc"

Abundance and Scarcity?

The events of the last two weeks have been a virtual confirmation of what we expected to have happen (see my earlier post) as we move through the calendar towards the end of the year. It seems to have been an exceptionally wet fall in the Ohio and Mississippi Valleys. Log and lumber supplies seem to get much lower the further south you go. To say that this industry experiences wide swings would probably be an understatement as we have been notorious for over producing whenever it was possible to do so and pricing has gotten more competitive over time. When the economy went down everyone was already operating on slim margins. Since then, most companies have been operating at a loss but pursuing a “last man standing” strategy. There aren’t as many people/companies standing now and some of the survivors will fall soon as well. There probably isn’t enough producers with enough resources out there to overproduce much at this point. Inclement weather will play a big role in availability and the buying public may get a shock that they have not prepared for, little or no supply.

I wish my vision of what was going to happen had been wrong and that everything had worked out so that we have a stable, orderly market. We expected supply dislocations in the market but we also expected customers to understand the forces at work and to be pro-active. Perhaps that is happening now but it appears likely that there will be some items that will be really high in cost or just not to be available for awhile. This would truly be a new phenomenon for our industry.

Other parts of the country are not experiencing the same set of circumstances. In the East and the North East, shortages may not be as widespread but supply will be spotty due to lack of motivation by some business owners to invest in any inventory or the available funds to do it. For our industry, periods of great abundance are almost always followed by periods of great scarcity!

Thoughts about last week

In conversations late last week with customers who are larger distributors and companies who are serving the "Big Box" stores, it is fairly certain that we have had a slight trend downward again in business activity and orders. This is going to be a real paradox where we have reduced supply and reduced demand in relative lock step with one another. It certainly can be argued that supply is dropping faster in the Mississippi / Ohio Valley regions than in the East and the Northeast. It may well be the the supply in this region is dropping faster than the demand!

Domestic demand continues to be somewhat soft while export demand increases. This may well be a combination of the drop in the value of the dollar as well as a recognized threat to the Europeans of the possible further reduced supply due to bad weather associated with winter.

I frankly had expected activity to increase throughout November before tailing off once again in early December in anticipation of year end inventories and the holidays. If you have a different perspective on the market dynamics or what is going on, please feel free to offer a conflicting view.

Ethanol Refinery Turns Wood Chips Into Fuel

Ethanol Refinery Turns Wood Chips Into Fuel: "A Pennsylvania facility can produce 100 million gallons of cellulosic fuel annually, and the company wants to license the technology to others."

This is an interesting article worth a read. For those industries who are not currently recycling their own sawdust and end cuts, etc., through their own waste fired boiler, this may(?) be a better option than a contribution to the paper industry or fiberboard products.

It is definitely worth a discussion. Check and see for yourself.

Why are rates to Canada so high?

I know from past experience that there has been some friction at the border between the U.S. and Canada because of pricing differentials, tariffs, etc., on the part of softwood producers. This was not a gray area, just an out and out hot spot! I know from having to ship product across the border into Canada that life can be a little difficult for the truck driver, the dispatcher and even the one who is issuing the paperwork. I can attest to that because at times I’ve been working feverishly to get documents perfected and transmitted to the border ahead of the deadline (5 p.m.) for trucks crossing during the night. If you don’t get the paperwork there by 5 p.m. they have to spend the night at the border, costing someone(?) money and they start the process all over again at 9 in the morning. Everyone is just a little less happy at that point!

Currently, it is an extraordinary challenge to get trucks to go to into Canada from the Midwest at a reasonable rate. Reasonable in this case is a comparative judgment based on what we pay for long haul trucking here in the United States compared to what those rates are going into Canada. There are numerous reasons why this might be occurring. There was an attempt to define what the critical reasons are but I didn’t want to get involved in a debate about anti- US or Canadian sentiment nor to get involved in an obscure argument over the logistics of border crossings. The only thing that really matters is that the cost structures for going from the US into Canada versus two points in the US are significantly different. The difference is about $.60 per mile on a 500 mile run and that is prohibitive. This might be a great place to employ some useful technology to streamline the process and reduce costs.

If you think about this in a way that compares the costs of cross border traffic here to that of the costs of shipping product by container to some other country the implications are pretty scary. For just another $500(?), loads can be shipped all the way around the world!