FEATURED NEWS www.wvfa.org Spring 24 | West Virginia Forestry Association Mountain State Forestry 13 Over the entire time series (first quarter 2021 to fourth quarter 2023) No. 1 common yellow-poplar had the least volatility with a nominal price range of $330–$855 per mbf or $525 per mbf. During the same period red oak experienced a nominal price range of $460– $1,015 or $555 per mbf, white oak ranged from $450–$1,555 per mbf or $1,105 per mbf and soft maple (unselected) ranged from $525–$1,485 per mbf or $960 per mbf. Together Figures 1 and 2, create a picture of continual fluctuations in price with significant price swings from late 2020 through the end of 2023. Managing this volatility is a significant challenge for hardwood sawmills and represents an ongoing threat to their continued economic viability. This level of uncertainty places considerable pressure on stumpage pricing, where mills must try to predict lumber pricing up to two years in the future for stumpage purchases today. Rising lumber prices over time can mean relatively good returns on stumpage purchased today, but falling lumber prices can have devastating impacts on overpriced stumpage prices today. Alternatively, Figure 3 illustrates the trends in pricing for both pallet cants and railroad ties. The obvious difference is that pallet cant and tie prices, while showing some peaks and valleys, exhibit a general upward trend, with tie pricing always exceeding pallet cant pricing. The consistent upward trend was interrupted at the end of 2020 when all lumber related markets experienced wide swings in nominal pricing. One takeaway is that a degree of certainty in pallet cant and tie pricing, not seen in grade lumber, is evident. The question is how best to take advantage of this situation? When the hardwood industry is mired in another down cycle for grade lumber, can hardwood sawmills offset some of the pain by producing railroad ties? The answer lies in better understanding how tie pricing can affect profitability for various combinations of log size (diameter) and clear faces. The WVU Appalachian Hardwood Center (AHC) has, over the last decade plus, conducted over 60 sawmill studies throughout the Appalachian Region. These studies collected data on individual logs, where each log was measured and characterized according to a number of variables, including scaling diameter, length, scaling defects, as well as a number of other variables and then numbered on each end. The logs were then processed through the sawmill. Each board was graded and scaled, and the dimensions of each cant recorded, with all data being recorded by log number. The database contains over 4,600 logs of data. In collaboration with the Appalachian Hardwood Manufacturer’s Association, the AHC developed a set of Guidelines for Scaling and Grading of Hardwood Logs2 that are available for industry use. The following Grading Table (Figure 4) is contained in the aforementioned Guidelines. The grades are classified by scaling diameter and clear faces, with the proportion of Select & Better lumber used in assigning the grades. The applicable Select & Better proportions are listed at the bottom of Figure 4. For instance, a Prime grade log will have an estimated 55 percent or greater proportion of Select & Better lumber and a Grade 3 log will have less than 10 percent Select & Better lumber. METHODS For the purposes of this article a comparison will be made between sawing a pallet cant and boards versus sawing a railroad tie, for red oak and white oak logs. Five log grade combinations are used for illustration. Because the mills included in the database were more likely to saw pallet cants, the combinations selected were based in Figure 4. AHMI/AHC Hardwood Log Grading Table, with Select & Better Yields listed at the bottom of the Figure. Select & Better Yields by Log Grade Prime: ≥ 55.0% No.1: ≥ 25.0% and < 32.5% Select+: ≥ 47.5% and < 55.0% No. 2+: ≥ 17.5% and < 25.0% Select: ≥ 40.0 and < 47.5% No. 2: ≥ 10.0% and < 17.5% No. 1+: ≥ 32.5% and < 40.0% No. 3: <10.0% Figure 3. Pallet cant and railroad tie nominal pricing per mbf from the first quarter of 2001 through the fourth quarter of 2023. 0 100 200 300 400 500 600 700 800 900 1000 2001-01 2002-01 2003-01 2004-01 2005-01 2006-01 2007-01 2008-01 2009-01 2010-01 2011-01 2012-01 2013-01 2014-01 2015-01 2016-01 2017-01 2018-01 2019-01 2020-01 2021-01 2022-01 2023-01 $ per MBF Year-Quarter Cants Ties 2 Appalachian Hardwood Manufacturers, Inc. 2019. Guidelines for the Scaling and Grading of Hardwood Logs. Appalachian Hardwood Manufacturers, Inc., High Point, NC. 14pp.
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