Outlook for Forestry & Forest Products 2003+

Outlook for Forestry & Forest Products 2003+

Terry ConnersUniv. of Kentucky Dept. Of

ForestryOctober, 2003

Snapshot: KY Forest Resources

49.9% of Kentucky land area is

classified as Forestland (2002) 48.6% is Timberland

1.3% is “Reserved”/Unproductive

KY Forest Area (1630-2002)

Snapshot: KY Forest Resources

~ 12.4 Million acres in Timberland New inventory was finished recently Acreage went down a bit Timber is worth $117+ Million to

woodland owners (stumpage value) In 2001, KY harvested over 1.1 billion

board feet of timber!

KY Forest Resources Ownership

90% is privately owned 2% is owned by forest industry

98% owned by over 300,000 individual woodland owners (NIPF)

N.B.: There are only ~ 88,000 farmers in Kentucky, owning ~ 13% of this!


10% is publicly held 50% of publicly-held forest land

is in National Forest

20% is in Commonwealth holdings


Percentages of “Who Owns What”

(Private - Federal - State - Industry)

have remained pretty constant

since records started being kept in

1953.

KY Forest Area Productivity

Growth in cubic feet per acre per year

KY forests could be much more productive!


Net Volume of HW Growing Stock in KY-All Owners

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Net volume of HW Growing Stock in KY - Public

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Net Volume of HW Growing Stock in KY - Industry & NIPF

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Forest Industry

NIPF

KY Master Loggers www.masterlogger.org

KML graduates since 1992: 5,331

Active Master Loggers: 3,655

New Master Loggers in 2003: 307

Master Logger CE programs conducted

in 2003: 26

CE Attendance in 2003: 1,296

Forest Products Industry ~ 30,000 employees in primary and

secondary forest products industries 1 out of 9 manufacturing jobs

Annual payroll of $602 Million

Based on 2001 Dept. of Revenue data that include the paper and converting industries, the KY Div. of Agriculture counts a total of 38,000 employed in the forest industries.

Forest Products Industry

Value of Forest Products made in KY: $4.5 - 5.5 Billion


KY is in the top 5 nationally in the production of hardwood lumber.

KY ranks 2nd in hardwood exports. KY ranks 6th in total wood exports,

even when compared against major softwood-producing states like Oregon and California!


~ 530 Primary Industries (ex., Sawmills)

~ 540 Secondary Industries (ex., Pallet & large Cabinet makers)

Including Logging co.’s, ~ 2550 firms

Primary Manufacturing Companies in Kentucky

~ $1.6 Billion dollars value to Kentucky

Secondary Manufacturing Companies in Kentucky

~ $1.8 Billion dollars value to Kentucky

Over 1,000 Wood Industriesin Kentucky

Most of the companies are small and family-owned.

About 900 of the companies have fewer than 25 employees.

There are probably ~ 400-600 one- or two-man cabinet shops in Kentucky not included in this tally.

Forest Products Outlook

Stumpage Prices

Primary Industries

Secondary Industries

Non-Timber Forest Products

Stumpage Prices

Hardwood prices are up!

Prices compared to last year: +7% for HW Sawtimber (~

$19.60/ton)

+37% for HW Pulpwood (~ $6.50/ton)

Stumpage Trends Trends in sawtimber: Cherry and

Walnut, Red Oak up; Yellow-poplar up a little; White oak stable; Hard Maple & Ash down (continuing last year’s trend)

Cabinet design market is heading back towards darker woods (3 - 4 year cycle) Components starting to be made for KY

companies from imported wood, e.g., Chinese maple for kitchen drawers!

Stumpage Trends

Hickory is gradually moving up due to Red Oak cost (lots of hickory in KY). Hard to machine, but a potential

substitute for oak flooring, also more interest for kitchen cabinets

Yellow-poplar still strong for moulding & millwork markets. Good outlook.

Stumpage Trends

Soft maple has moved up significantly over the past several years Hard maple substitute, can also be

stained to resemble cherry Price-sensitive, Chinese maple is

replacing domestic maple in some large producers’ mills.

Stumpage Trends

Not a lot of information about Softwoods in Kentucky < 7% of the volume of standing timber in

the state (not counting Eastern red cedar)

Southern pine beetle hit our pines hard.

Trends probably similar to more southerly states, SW pulpwood is going slightly higher.

SW Stumpage Prices

Softwood prices are about the same or slightly higher than this time last year.

Prices compared to last year: -0.2% for SW Sawtimber (~ $36.40/ton)

-2% for Pine Chip-n-Saw (~ $22.30/ton)

+14% for SW Pulpwood (~ $6.60/ton)

Stumpage Trends

Kentucky harvests ~ 15-25 Million board feet (or more) of Eastern red cedar each year – use has increased by ~10% over last year.

Production goes into shavings, boards and 3.5” x 3.5” posts that compete with treated southern pine for mailbox posts. (50% or more of production!)

Most Common Species in Kentucky Sawmills

Red oak is most common (594 MM b.f.)

White oak (424 MM b.f.)

Tulipwood (Tulip poplar) (339 MM b.f.)

Other hardwoods such as maple, black walnut, hickory and cherry (339 MM b.f.)

Hardwood Sawmills 300 Sawmills in KY Div. of Forestry

database Losing small & mid-size mills (10

to15,000 bf/day) because of difficulty in getting the high-grade logs that sustained lower volume, slower producers

Factors: 1. Consolidation of mills 2. Optimization of mills through technology 3. More resaws to convert cants more

efficiently

Hardwood Sawmills ~ 1200 Portable sawmills in Kentucky

(est.)

Ave. mill longevity is 5 to 6 years 30-40% of mills sold leave the state

~ 80% of owners get out, 20% buy a bigger mill

Impossible to make a living sawing only 1,000 board feet/day! (ex., non-hydraulic mill)

Hardwood Sawmills

Portable sawmills are good for specific markets or high value-added opportunities such as: Railroad ties

Yellow-poplar siding

Restoration siding for old buildings

Specialty, local-use woods, crafts markets

Hardwood Sawmills

Likely opportunity for sawyers in Quarter-sawn lumber market, but most feel it’s “too much trouble”

Quartersawn (A) and Plainsawn (B) boards cut from a log

A B

Other Primary HW Products

Boards & Staves: Consistent, good outlook - Export

market is growing by about 10%/annum

Distillery business getting bigger - worldwide, alcohol consumption is increasing


Boards & Staves: More countries becoming

customers, ex., Cuba is purchasing some for aging rum.

CA wineries are using some Kentucky barrels too.


Poles Pine peeler poles (SE KY)

continue to have a good market, but the volume is decreasing.

Kentucky lost a lot of pine to beetles and may never fully recover this market.


RR Crossties Hot Market!

Big demand.

Prices up last two years.

Consolidators may be needed to attract small producers.


Pallet Cants 4.4 Billion board feet

of HW lumber was used in pallets in 1999

38% of total U.S. HW lumber production

48% of all KY HW lumber goes into pallets!

Very competitive market!

HW Species used in U.S. pallets, 1999. Bejune 2001.


Pallet Cants Demand is up, but the market price

has stayed about the same!

KY pallet lumber is extremely cheap. ~90 pallet producers

~ 10% cheaper than neighboring states!

Ex., $245/MBF in KY vs. $250/MBF in TN, $275/MBF in W. VA (2002 figures)

Sterilizing Wood Pallets

Pallets now need to be heat-treated to eliminate pests whenever there is a possibility they might be sent to another country.

Only have a few heat-treaters in Kentucky, will probably need more in coming years.

Sterilizing Wood Pallets

A complete listing of companies capable of sterilizing solid wood packaging material is being compiled and will be included in the Division of Forestry’s database.


Also see the web page at www.ukwoodcenter.net, under the pull down menu “Events & News, Sterilizing Wood for Pallets”.

Dry Kilns

Good value-added opportunity

~ 65 Dry kiln companies in Kentucky

Companies have continued to add dry kiln capacity, will likely continue to add more capacity.

Secondary Hardwood Products

Millwork (Residential & Commercial)

Flooring

Cabinets

Furniture

Pallets

Millwork

Increasing production in last 5 years

More/larger moulders have been added Cheaper machinery available

Yellow poplar supply is exceptional, best wood choice

Outlook: V. good, remodeling strong

Flooring Growing market, will continue to

grow

Preferred over carpeting

Species used (in order of demand): Red oak White oak Hickory Hard maple

Cabinets

Remodeling market, won’t slow down

Very competitive, lots of small firms and a few big ones (20+ employees)

Most do well with custom cabinets

Cheaper lines coming from overseas using U.S. (and recently, foreign) wood

Cabinets

Entertainment Center market is predicted to increase.

Custom Built-in market is also predicted to increase. Upgrades of older homes Maturing families mean different

demands Transition to Flat-screen TVs

Hardwood Furniture

Struggling!

Chinese have taken a bite out of the business with cheaper labor.

Higher-end companies have moved out of NC, TN, VA (with U.S. engineers!) to China. Producing good quality furniture

overseas

Hardwood Furniture

Still domestic opportunities for furniture that is expensive to ship – but losing ground to foreign competition. Ex., Entertainment Centers, BR & DR

furniture

Hardwood Furniture

Recently have seen more B-n-P workers (Breakers and Packers).

Fill drawers and empty spaces with foreign computer chips, underwear, etc. for container shipping. Load is broken apart and repacked when it arrives in U.S.

Pallets

KY is a real force in the pallet industry

Increasing number of pallet mills & repair facilities (could be either good or bad …?)

SE KY pallets are a ~little cheaper (Range ≈ $6-10 (2001)).

Industry shakeout expected – but hasn’t occurred!

Pallets Trend towards more leased pallets in

the past 5 years (30 MM CHEP pallets in 2000). (Customers include Wal-Mart, Home Depot.)

Large demand for custom products, but industry doesn’t market itself that way.

“Commodity” = Low Profits! Industry needs better marketing.

Pallets

Excess capacity in KY, room to grow Kentucky pallet plants are running at

only 75-80% capacity, most other states running at 85-90% capacity.

KY competitive advantage is due to low wood cost (esp. for customers in Chicago, etc.)

Non-Timber Forest Products Ginseng, Goldenseal, Black/Blue Cohosh Mushrooms Native fruits (persimmon, pawpaw) Nuts (black walnut, butternut, hazelnut) Christmas trees Fence posts Fuelwood

Ginseng

Ginseng

Ginseng: Wild simulation (i.e., forest-grown) is

most valuable 5 to 10 year growth optimal Typical ~ $300 or better per pound of

dry root. Price for Ginseng as of 9/25/03: $255.00 to $280.00 per pound

Vandalism, theft are biggest problems.

Ginseng

In 2002, 18% of the wild harvested Ginseng in the nation came from Kentucky. Nearly 22,000 pounds, valued at 7.5 Million Dollars. ~ 98.9% was exported.

Over 4,500 Kentuckians make an income from the harvest and sale of Ginseng.

Kentucky Department of Agriculture Certifies over 85 Ginseng Dealers Annually.

Golden Seal

Golden Seal

With a low dollar value ($18.00 to $20.00 per dry pound) the pressure on this plant is not as great as Ginseng.

Lower value, but grows in shorter time compared to Ginseng.

Blue Cohosh (shown) and Black Cohosh are both harvested in Kentucky.

Current price is $8.00 to $18.00 per pound.

Mushrooms

Shiitake (Japanese exotic) mushrooms are cultivated 3” to 8” diameter, 3’ to

4’ lengths HW stems ~$5-10/pound for fresh

shiitake wholesale

Shiitake Mushrooms

Mushrooms

Morels Mostly wild harvested,

the production cycle is difficult to manage

Value is at least $30/pound fresh

Others are cultivated Oyster Mushrooms

(~$7-12/pound)Morel Mushrooms

Black Walnuts

Kentucky sells ~ $400,000 to $700,000 of Walnuts/year, hulled but otherwise unprocessed.

Current price is $10.00 per 100 pounds of hulled nuts. (The picker is not charged for hulling.)

A Mercer County huller sold 257,000 Lbs. in 2002, and

300,000 in 2001.

Black Walnuts 3,200,000 pounds of hulled walnuts

were sold in 2002

Est. ~ 4-5,000,000 hulled pounds will be harvested in 2003

Walnut nut meat is worth $6.00/pound

224,000 pounds from Kentucky-produced nuts

$1,344,000 in value from Kentucky nuts.

Black Walnuts

$432,000 paid to the hullers in 2002; Huller receives $0.135/pound currently.

$320,000 paid to the pickers in 2002; Picker receives $0.10/pound in 2003.

Black Walnuts

Total value for Kentucky’s walnut crop in 2002 was $1,344,000.00 Meats$ 320,000.00 Shells$ 432,000.00 Pickers and Hullers$2,096,000.00 Total Value

Coppice Woods for Crafts

35 varieties of willow are being grown on one KY farm.

Other candidates: Hickory, Hazel,

locust

Christmas Trees

Marketable crop in 5 to 7 years

Currently, mostly Scots pine or white pine is grown in Kentucky, but other species are becoming more popular.

Close to 14% ROI can be expected.

Christmas Trees

Kentucky has an estimated 100 to 150 Christmas Tree Farms offering live, cut, and flocked trees each holiday in addition to balled nursery trees during the spring from many of the farms.

Value-added options during tree production: annual greens, wreaths and roping

Christmas Trees

KY Christmas Tree industry is estimated at $500,000 to $750,000 annually, although 2003 will be the first year actual sales tracking has been done in 20 years.

Recommend intercropping with annual crop (like alfalfa) because of slow production cycle.

Acknowledgements

Dr. Jeff Stringer, UK Dept. of Forestry Dr. Deborah Hill, UK Dept. of Forestry John Cotten, KY Dept. of Agriculture Dr. Billy Watson, Georgia-Pacific Larry Lowe, KY Division of Forestry Gene Parker, Hardwood Market Report Global Wood Trade Network Timber Mart South Jeff McBee, Pallet Profile Weekly Pallet Enterprise Forest Resources Association

Outlook for Forestry & Forest Products 2003+

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