Timber Piles

Loggers deck wood at a timber landing in the Ashland County Forest. Although loggers are finding it difficult to obtain contracts from buyers, thus far the market softness has not stopped many from continuing to cut in the hopes that the market will soon rebound.

A soft market for timber is causing many loggers to either postpone cutting or to leave logs piled up at landings until they can find buyers for their wood.

According to Ashland County Forest Administrator Chris Hoffman, the slowdown has already had an impact on Ashland County stumpage sales.

“We opened bids here three weeks ago and the money that we are getting in, the stumpage we are selling is less than it was last year at this time, but the loggers are still producing wood,” he said.

Hoffman said markets for timber cut in Wisconsin’s north woods has become “extremely soft.”

“They are having a hard time getting contracts to sell their wood, but they are still decking wood up, still producing.”

The decline in demand for wood has been going on for about the last eight months, which Hoffman noted coincides with the presidential campaign.

“In the past during presidential campaigns, there has been a market decline because of the perceived uncertainty. Now that we know, for good or bad what to expect, there should be a recovery,” he said.

Great Lakes Timber Professionals Association Executive Director Henry Schienebeck said some loggers are holding off on harvesting wood they bought under contract. He said an oversupply of raw material on the market is leading some to consider their options.

"The guys are still able to produce the wood. Now, they’re trying to adjust their production levels to what the mill requirements are right now," Schienebeck said.

Larger mills don’t have as much need for wood since they have full inventories, said Forrest Gibeault, analysis and investment operations director with the forestry-consulting firm Steigerwaldt Land Services out of Tomahawk. He said several factors are driving that.

"One of them being that the mills are probably not working at full capacity," Gibeault said. "Their product demand may not be where they would like to see it."

He added loggers likely expanded their workforce last year to produce more wood for mills that had lower inventories at the time. Now, Gibeault said larger mills could afford to pay loggers less for the wood they deliver because of adequate supplies.

While some loggers are delaying harvest, that’s increasing uncertainty for northern Wisconsin counties that aren’t paid for timber sale contracts until the wood is harvested. 

Jon Harris, director of forestry and natural resources for Douglas County, said they’re seeing a backlog of active contracts. The county's number of contracts that haven’t yet been harvested has increased by about one-third in the last decade.

"I believe we have just upwards of $13 million of stumpage on our books right now. We haven’t realized any of that obviously until it gets harvested," said Harris. "The longer you’re carrying that inventory, the more you’re at risk for losing some of that inventory."

Harris said a wildfire, windstorm or market collapse could mean a revenue loss for the county.

In Ashland County the lag in sales means that there are about 25 percent more sales remaining open than has been the case in the past. According to Hoffman, the county bids out a certain amount of land for cutting based on the maturity of the timber, market demand and other factors. Loggers then bid on the areas to be cut, with the highest bid from an acceptable logger winning the right to cut. However, loggers don’t actually pay the county until the wood is sold.

“They don’t pay for it until it actually leaves the property. It remains county property until it actually leaves, and then we use a ticket system that they then get billed for,” he said. Logs decked in the forest are technically still county property, and if the sale is delayed, so is the payment to the county.

The system has a self-enforcement element to it. If a logger delays too long in moving the logs he has cut, the county reserves the right to reject any bids from that logger until he pays up on the logs he has already cut.

Thus with loggers decking logs in the wood either in the hopes of getting a better price down the line or through an inability to find any buyer, they are running a risk that at some point they will be caught holding the bag, or in this case, the logs.

Thus loggers struggle to strike a balance.

On the other hand, Hoffman said the county has no desire to threaten the livelihood of the many small loggers with whom they do business.

“They walk a fine line, even when the markets are good, and when the markets soften up, things get even tighter for them,” he said.

Nevertheless, Hoffman noted that he represents the county’s interests.

“The county’s interest is to get the wood cut, and to keep the loggers logging, so we work with them and try to be as flexible as we can within reason with contract extensions and that kind of thing.”

This is also an issue in Douglas County where Harris said eight contractors are seeking final, fifth-year extensions on about 20 timber sale contracts this year. The county typically sells contracts on a two-year term to harvest, offering up to two extensions. Anything beyond that, loggers may see their bidding privileges suspended, he said.

Hoffman said part of the reason mills don’t need as much wood is that loggers didn’t see a slowdown in timber production during the wet summer months.

With mills experiencing higher inventories, Schienebeck said that could mean a shorter winter logging season.

"Maybe by mid-February the mills will be filled up and they’re not going to take much more," he said, noting loggers typically produce wood until the end of February through mid-March.

But, some sawmill owners say they need the surplus of wood to help drive prices down on the material they buy from loggers.

"Since my lumber prices are lowering, I need to buy cheaper material to produce my material cheaper," said Kyle Wolf, co-owner of Wolf Brothers Sawmill in Stetsonville. "If I buy expensive logs and then sell it for cheaper, I’m going backwards."

As a smaller outfit, Tyler Wolf, owner of Goodrich Sawmill in Medford, said it’s difficult to offer the kind of prices as nearby competitor mills. He said log prices are some of the highest he’s seen in the last 15 years.

"If I have to pay more money, then I have to get more money on the other end also so I can continue to make my payments and pay the wages and such," he said. 

The counties are also caught in the logging revenue pinch. The revenue brought in by timber sales form a substantial fraction of the revenues of a number of northern Wisconsin counties.

In Bayfield County’s case, that total has been over $3 million a year.

“The County depends on that timber revenue to help balance it’s budget every year,” Hoffman said. “It helps the county provide the level of services it has provided in the past. If for some reason we come up short on those timber revenues, that money obviously has to come from somewhere.”

Hoffman said that possibility hasn’t started to keep him up at night, yet.

It is however one of a number of issues like the weather that are of major concern in the logging business.

“Bad economy, soft markets, bad weather, it can stack up against all of us,” he said.

Gibeault said pricing has been changing more rapidly within the industry.

"Those price increases and price decreases are happening more frequently. If you see price plateaus or a period when prices are more stable, those periods are becoming shorter," he said.

But, Gibeault said there’s no significant shift in market trends to cause concern for any part of the industry.

(Copyright © 2019 APG Media)

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